PROPERTY prices in Cyprus, Ireland and Spain suffered the largest falls during 2011 out of 23 European countries according to the latest European Housing Review from RICS (the Royal Institution of Chartered Surveyors).
Reporting on the situation with the Cyprus housing market, the review says:
“The housing market decline is now three years old, after an earlier boom. The RICS Cyprus index reported that apartment prices were -11% down in the first nine months of 2011 and house prices lower by -6%, with the overall fall expected to be -12% for the year. Since the inception of the index in the last quarter of 2009, prices have dropped by -19% for apartments and -11% for houses (in real terms by -23% and -15% respectively).
The housing market is actually made up of a series of sub-markets. The biggest division is between the holiday/ second home areas and the five main towns where most Cypriots live, to which the prices above refer. Price declines had been greater in the coastal areas but in 2011 economic problems caught up with the domestic market and price falls were more problematic there.
A noticeable change in 2011 was a considerable tightening of mortgage availability, resulting from financial turmoil as Cyprus’ banks were drawn into the Greek sovereign debt crisis.
Little mortgage credit was available from the banks, especially in the second half of the year. This and the weak economy drew even the best residential areas into the housing price downswing.
As the economic and financial situation is likely to get worse before getting better, prospects for 2012 are for continued housing market weakness and a further softening of prices.
The earlier housing boom was driven both by domestic and foreign demand and easier credit conditions following accession to the euro. Traditionally, overseas buyers are mainly from the UK, attracted by the climate, cheap lifestyle, good public facilities and widespread use of English. During the boom, however, a wider group was attracted, most notably from Russia.
While many sales take place smoothly, there have unfortunately been a series of problems with regard to property purchase, including misleading advertising, failure to complete off-plan bought properties and illegal construction.
Around 100,000 national and foreign owners are also unable to obtain title deeds. In some cases, they have been trying for 30 years and without possession of title purchasers find it difficult to sell. Under Cypriot law, title remains with developers until transferred after mortgages are fully paid off.
While still holding title to dwellings they have ostensibly sold, they can take out further mortgages, impose fees and charges, and if they default, the mortgage holder can take possession over the head of the unfortunate owner.
The UK Foreign Office urges potential buyers to proceed with caution and take qualified legal advice. This well publicised issue weakens overseas interest in the country; although the government says reforms are to be introduced.”