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Central Bank of Cyprus reports housing price falls

Residential housing prices in Cyprus have dropped for the sixth consecutive quarter according to the latest ‘Residential Property Price Indices’ report produced by the Real Estate Unit of the Island’s Central Bank.

RESIDENTIAL property prices have fallen for the sixth consecutive quarter, with apartment prices in the coastal resorts losing 18% of their value over the past year, according to the latest quarterly report from the Central Bank of Cyprus.

The Bank’s report, for the second quarter of 2011, shows that the crisis in the real estate market is continuing; a recovery is not expected before 2013.

During April, May and June of this year (before the devastating Mari blast that killed 13 people and destroyed the Vasilikos Power Station) house and apartment prices fell by 0.9%.

House prices in Paphos fell by 2.3% during the second quarter, while those in Nicosia fell by 0.2%. Apartment prices in the seaside towns also fell, with Famagusta being the worst hit area, while those in the Island’s capital, Nicosia, appear to have stabilised.

On an annual basis, prices have fallen by 4.9%, according to the Central Bank. These falls are mainly attributable to the drop in apartment prices of 6.5%, while house prices have fallen by 3.7%.

Over the past twelve months, Paphos has suffered the biggest fall in apartment prices (-18.4%) followed by Larnaca (-10.8%).

Property valuer Polys Kourousides believes that property prices will continue to fall. He said “I believe that the drop in property prices will continue in the next one and a half years unless something drastic changes things. There seems no positive sign”.

In his statements to StockWatch Lakis Tofarides, the chairman of the Cyprus Land and Building Developers Association, questioned the validity of the figures and stressed that it is about isolated data which does reflect the reality of the situation. “The game with the price declines hit a record low, there is no other decline”, he concluded.

Further reading

Residential Property Price Indices – second quarter 2011 (Greek)

Residential Property Price Indices – second quarter 2011 (English)

Further information and explanations on the methodology used for the construction of the various price indices can be found in the Central Bank’s methodology report (English)

(The seventh issue of the RICS Cyprus Property Price Index, which tracks property prices and rents across 46 locations in Cyprus, is due to be published in the next few weeks).

Readers' comments

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  • @Louis Ryan – Residential property prices in Limassol have not fallen as much as in other towns. The Residential Property Price Index has the numbers.

  • Louis Ryan says:

    Why no mention of the drop in property prices in Limassol?

  • Odd_Job_Bob says:

    Richard. ALL of your points are completely true and I agree with them.
    However (of course there’s always a “however”)…

    If someone promises all this stuff, there has GOT to be a catch. Again, if something is too good to be true etc…

    Hey, I’ve done stupid things as well (boy, do I have examples!) such as failing to do due dilligence as that attractive salesman, or rather saleslady, seemed SOOOOO nice, so I have no problem with stupid and making mistakes being the human condition.

    But as another saying goes: “It’s not possible to make the same mistake twice. The second time, it’s a choice”.

    After getting into the Cyprus property Ponzi scheme, we’re presented with a load of different options. The most unclever of these is to keep on giving the same people money in the hope that the system will “see sense” and give us back what we’ve already paid for (see Einstein’s definition of madness).

    I understand the emotional attachment and the sense of right and wrong and a whole load of other things which could have an effect on our judgement. If this is all about the money though (as at the end of the day, if someone said “Here, take your money and go”, most people would jump at it), then NONE of the other feelings matter.

    As an investment person, I very often had people who’d come in to see me and after only a few minutes of me asking the right questions and making the appropriate listening noises, were quite prepared to hand over ALL (well, at least a sizeable chunk) of their money to me. Wow. Obviously, for me (not so much the companies I worked for at the time, but that’s another story), such trust had to be repaid by trying to do the right thing by them as much as possible. Many other bankers/ investment people don’t do that.

    So, as harsh as it sounds, we were ALL stupid (once) to get into where we now find ourselves. The important thing is that we accept that (as it’s done now), move on and try to do NOT stupid stuff so we can extricate ourselves.

  • Richard says:

    @Oddjob Bob

    As you know I’m a big fan of uncle Albert (and his quotes).

    I think this one however may be a little misplaced here if you are aiming it at investors.

    To imply that thousands of people investing in Cyprus that they are all stupid – is a bit harsh.

    If we wind the clock back to 2005 – Blair and Brown in charge of the shop in the UK – spending money they didn’t have to do (really) stupid things they couldn’t afford. Their leaving legacy – £192bn a year spent on social welfare – up to and including paying child benefit to women in Poland who’d got pregnant in the UK and were now living back in Warsaw. Dear God – only the UK!

    The € was worth 0.6 of a £ then – the sun shone a lot here – it didn’t much in the UK and people worked really hard to have really little left in the bank at the end of the month (even the retired).

    Now – someone who is bright (but unscrupulous) comes along beside you and tells you that for the same money as your damp semi on the South Circular – you can have a villa in a country who’s “laws are based on ours”, where the sun shines 300 days a year and cost of living is cheap. Your kids can swim in the sea in the holidays every day – crime is very low – and standard of living is rising as Cyprus isn’t a poor country. You can “even buy your socks in M&S – just like at home”..

    Now – let’s say this person isn’t a lawyer – or worked in banking – or a senior civil servant with access to data the person in the street doesn’t get to see.

    Can you honestly say – that based on the above – they were stupid to consider buying in Cyprus?

    Honestly?

    Bit uncharitable if you still think that way..

  • Odd_Job_Bob says:

    “Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.”

    -Albert Einstein

  • Mike says:

    Richard

    You are right. Generally, people are not stupid, sometimes just a little too trusting. They know when something is rotten no matter how the Government tries to show it in a favourable light. As you infer, it needs a review of some magnitude and legislation to ensure protection and transparency with harsh penalties for non compliance.

    The foreign buying public is still there, with vast quantities of cash to purchase with but they are not stupid enough to risk it now that the ‘system’ in Cyprus has been exposed for what it is. They are finding safer destinations to buy into in spite of Cyprus still being a preferential choice for many. We must have sympathy for those struggling to sell up their homes & leave what to many has become a nightmare.

  • Richard says:

    “Information or documents in the public register of titles connected with the ownership of immovable properties, as well as charges or encumbrances over immovable property, are treated as confidential.”

    @Nigel – this represents an excellent opportunity for the Government to re-examine that stance.

    PICAS maybe should consider lobbying for transparency.

    When anything (from a small squabble between two people – right up to the woes of an entire continent) goes wrong there is only one way to rectify it.

    Shine a light on the whole problem – leaving no omissions – that way and only that way can solutions be found.

    In my experience – most folks have a sixth sense of anything that looks worse than it is. Pointless sugar coating anything now – we all know it’s a mess on a big scale and will require a big shovel to clean up.

  • @Alex – unfortunately the law here is such that it prevents the Land Registry providing this information:

    “Information or documents in the public register of titles connected with the ownership of immovable properties, as well as charges or encumbrances over immovable property, are treated as confidential.”

    The statistics provided by the Department of Lands & Surveys on the number of property sales contracts deposited includes those for land and commercial property as well as residential property, such as apartments and houses. Furthermore, those contracts could have been signed many years ago as there is currently a sixth-month window running that allows people who ‘forgot’ to deposit their contracts of sale to do so – regardless of how long ago they were signed.

    It would be very useful if Lands & Surveys were to produce more detailed statistics containing the number of contracts deposited for the sale of off-plan and resale residential property – and list those separately from sales of commercial property and land.

    The publically available figures from RICS Cyprus, the Central Bank and the Department of Lands & Surveys give a good indication of what is happening in the market – and whether prices and sales are going up or going down.

    We could discuss all day how accurate the figures are and the models used to generate them.

  • Alex says:

    The funny thing is, the real figures do exist. For all the years. Yet Land Registry only publishes the NUMBER of properties sold, not their PRICE.

    If they ever bothered to sum up two columns in their records instead of just one, we would need neither Central Bank nor RICS to establish artificial indices. We would simply have the real picture. I suspect the reason of Land Registry’s reluctance to publish the prices is the fear that the actual picture is so alarming, it may cause panic. (Have you ever seen a weather forecast in local news showing more than 38C in August? The same thing here.)

    The figures of Central Bank are misleading. The apartments in Nicosia with asking price of 170,000 in October 2010 now are on sale for 150. What is 6.5% they are talking about? And Nicosia always fares better than other districts, except maybe Limassol.

  • Costas Afortune says:

    Banks and developers thoroughly deserve what’s happening to them today. They try to squeeze and use bully boy tactics to extract as much money as possible out of unsuspecting Brits. The tide is turning and the worm is biting back. This will now affect all Cypriots with less money coming into there country. Should we have tears? NO .

  • Robert Briggs says:

    If the banks wish to sell any repossessed property, full genuine and immediate Title Deeds will have to be available for the buyer at point of sale, no matter how cheap they are going for. With all the problems, scandals & horror stories being available online and in the media, anyone now considering purchasing anything here (or elsewhere), without these Title Deeds must be totally brain dead!

  • @dimitri – unfortunately we cannot compare the old BuySell index with those of today from the Central Bank and RICS Cyprus (which should be out soon).

    I can see this ending in disaster. Because there so few new properties being sold, developers cannot repay their loans. I have heard that the banks are adding unpaid interest to the outstanding balance of those loans and that developers in this situation are being charged a massive 14% interest!

    There will come a point where property prices cannot drop any further – because if they do, developers will get less for them than the price it cost to build and the outstanding loan amount.

    So if developers were to see below a certain price, they would be losing more money and be in an even worse financial mess than they are today.

    The banks must be very worried. If they do nothing, developers will get deeper and deeper into debt – and more of them will file for bankruptcy or be forced into bankruptcy by their creditors.

    If the banks force developers into bankruptcy, the chances are that (a) the value of the property they recover will be lower than the amount developers owe and (b) no-one wants to buy the property they recover.

    Furthermore, it looks as if the banks are going to take a hit on their Greek bond holdings.

    The banks could possibly stall the inevitable by selling off some of their more valuable assets – or possibly sell their bad debts at a heavy discount to a third party.

    Another possibility is for the state to benefit from the experience of the Irish Republic where the government set up the ‘National Asset Management Agency’ (NAMA) to address the serious problems that arose in Ireland’s banking sector as the result of excessive property lending.

    In 2009 NAMA acquired 11,500 loans with a total nominal value of €72.3 billion for which they paid €30.5.

    (This suggestion has already been made).

  • dimitri says:

    Also what will banks do to re-coup their losses on foreclosed properties whose values now are much lower than when the bank agreed to loan a now bankrupt developer, will they write these losses off or sit and wait till prices move up, or sell up at rock bottom prices and hope they get that at least? whole system is a mess…..and stinks

  • dimitri says:

    Hmmm so this 18% drop comes on top of other annual drops, what would be good to know, is where prices have gone since the boom days? How much have they fallen since say 2006-2008 for example 30-40%?50%?, and if the downward trend goes on surely prices will hit a point where homes have no value.

  • @Costas Apacket – Property Transfer Fees are calculated on the assessed market value of a property at its date of sale – not at today’s market value.

    So if you bought a property five years ago, its market value will be assessed as it was then (which is almost certainly more than its valuation today).

  • Costas Apacket says:

    Tell this to the Government Officials who continue to overvalue properties in order to extract more Title Deed transfer taxes from hapless property owners.

  • The views expressed in readers' comments are not necessarily shared by the Cyprus Property News.

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