FINDINGS of an investigation conducted by Leaf Research into the property market in Larnaca show that there has been a significant decrease in the number of land transactions over the past few years along with falling prices.
Leaf Research’s survey results are based on an analysis of 23,394 transactions registered at the Land Registry office in Larnaca between 2006 and 2011. These transactions relate to properties whose ownership has been transferred to the name of the buyer, as well as sale and purchase agreements where a contract has been deposited against a given property.
This analysis forms part of a much larger analysis of Land Registry data being undertaken by Leaf Research known as ‘Project RED‘ (Real Estate Dynamics).
Larnaca was chosen for the analysis because of its size and the relatively balanced nature of its property market compared with other parts of Cyprus. Although Larnaca has a significant proportion of overseas buyers, it does not have as high a proportion as Paphos or Famagusta – and it also lacks any ‘special factors’ that could affect prices; for example the lack of overseas demand in Nicosia and the high density of Russian speaking buyers in Limassol.
The main conclusions resulting from the analysis show that there has been:
- a much higher reduction in land transactions (building sites and fields) than other types of property. Between 2007 and 2011 the number of land transactions fell by 80% compared with a 71% fall in the overall number of property transactions;
- a higher reduction in apartment transactions than those involving other types of residential property. Since 2007 the number of apartment transactions has fallen 86%, while the number of transactions involving other types of residential property has fallen by approximately 60%;
- a significant drop in property prices. Although all types of property have been affected by the fall in prices, the price of fields has declined the most.
The price table below shows the median price of various classifications of property declared to the Land Registry.
Since prices peaked in 2008, the median declared prices for fields has fallen 67%; those for building plots are down 31%, while those of apartments and houses are down 20% and 11% respectively. It is also clear that prices of fields started to decline much earlier.
Millions lost to government coffers
LEAF Research has also calculated the loss of revenue to the government resulting from its inability to transfer title (ownership) of a property to its purchaser at the time of delivery.
This loss in revenue amounts to the taxes paid by purchasers (Property Transfer Fees) and sellers (Capital Gains Tax) on the legal completion of a sales transaction.
Over the period analysed by Leaf Research, the delayed payments amount to €30,171,000 from Property Transfer Fees and €90,745,000 from Capital Gains Tax.
That amounts to approximately €121,000,000 to be received by government only when (and if) the Title Deeds are issued and when (and if) both the purchaser and seller agree to carry out the transfer.