Cyprus Real Estate News and Property Market Reviews

Despite going through a chaotic few years which has seen prices fall by as much as 40 per cent in some regions, the appeal of Cypriot properties is unlikely to fade for many Brits. However, Property prices and rents across the major urban areas of Cyprus continued to fall during the second quarter of 2011.

According to the seventh issue of the RICS (Cyprus) Property Price Index, average residential prices for houses and apartments fell by 1.0% and 2.7% respectively. Average rental values for apartments fell by 3.1%, retail units by 4.1%, warehouses by 5.4%, and offices by 2.0%. In contrast, rents for houses rose by 1.3%. Figures from the Land Registries across Cyprus reveal that the number of properties sold fell for the 16th consecutive month in October; the rate of the fall appears to be slowing. The area hit hardest by the decline is Larnaca, where sales slumped 27%. In Paphos they are down 22% and in Famagusta they have fallen 15%. Limassol seems to be weathering the crisis well with sales falling by just 0.2% over the year which has been attributed to an influx of Russian buyers.

Property experts believe the country’s favorable lifestyle and climate will continue to prove tempting to emigrating Brits. A large number of potential homeowners in the country are hoping to take advantage of the low prices which are currently on offer, as a result of the market crash.

Property valuer Polys Kourousides believes that the things will change in the next few months. He said that Limassol recorded an increase in August due to the purchase of properties by non-Cypriots, Russians mostly. Parliament’s approval of the draft law on the suspension/reduction in Property Transfer Fees will make a positive contribution to the market and it was actually one of the proposals made by the Valuers’ Association three years ago.

Meanwhile, The Vice Chairman and spokesman for the Real Estate Agents’ Association, Solomon Kourouklides, said that the biggest problem is the lack of liquidity and that the measures cannot change the market by themselves; further incentives are needed.

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The existing stock of new properties in the markets of Paphos, Larnaca and the Famagusta/Paralimni area will remain unsold in the near future as the market is oversupplied, it has been claimed.

Pavlos Loizou, the lead consultant of Leaf research said that the new properties were built for “buy-to-flip” investors and is unsuitable for permanent living. The period of frenzied investment speculation has come to an end; these properties are unlikely to be sold in the near future. As the banks have tightened their borrowing criteria and are withholding finance for almost all projects, very little construction activity is taking place. On a positive note, he said that there is a demand for city centre apartments, some holiday homes, student housing and projects related to renewable energy.

There is little demand for long term investment and Prices in secondary areas as well as the price of land are likely to reduce further. However, Prices and rents across Cyprus’ major urban areas continued to fall during the second quarter of 2011.

According to the seventh issue of the RICS (Cyprus) Property Price Index, the first quarter saw some signs of price stabilization and muted economic growth, the second quarter saw foreign investors took a “wait and see” approach which led to a low transaction turnover and to reduced interest by local buyers. The average residential prices for houses and apartments fell by 1.0% and 2.7% respectively during the second quarter of the year.

Larnaca experience the biggest drop where house prices fell by 3.2% and apartment prices by 7.2%. Average values of retail properties fell by 4.4%, whilst those of offices and warehouses fell by 2.2% and 1.7% respectively. Over the quarter, average rental values for houses rose by 1.3%, apartments fell by 3.1%, retail units by 4.1%, warehouses by 5.4%, and offices by 2.0%.

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The Central Bank of Cyprus’ latest Residential Property Price Indices stated that there is fall in residential property prices for six consecutive quarters. The fall could have been even worse if the banks had pressed developers to service their loans by reducing new property prices still further to encourage sales. However, the banks are not putting pressure on developers as they fear this would have further side effects

Economist and ex-banker Symeon Matsis speaking to the Sunday Mail, said that the fall in property prices would have been worse if the banks pressed developers to service their loans by reducing property prices still further to encourage sales. His statement confirms widely held reservations that property developers are receiving insufficient income from property sales to service their loans – and that the banks are not pursuing them for payment.

Developers arrears are on the increase and the banks are bracing themselves for a further haircut on their Greek bond holdings. Banks tentatively agreed in July to take a haircut of around 21%. However, analysts are now saying that they may have to accept losses of between 50% and 60%.

Mr. Matsis commented: “If the companies were pressed into selling their assets, this would cause a drop in the value of collaterals”.

The Cyprus cabinet has approved three draft bills designed to shore up the banks that are heavily exposed to Greek government bonds and to establish an independent financial stability fund as well as immediate action to ensure stability for the management of the financial crisis. Government spokesman Stephanos Stephanou, based on recent developments said that the three bills approved by the Council of Ministers offer the required institutional and legal framework enabling Cyprus to mediate and back the financial system, should the necessity arise.

The first bill will allow the government to step in and reinforce a bank’s liquidity if required. The second bill would create a fund to help steady the banking system due to heavy exposure to Greek sovereign debt (estimated at some €4.2 billions) and with a high risk of default. The third bill extends the existing special tax for credit institutions. Although there is no money to put into the fund, a package of austerity measures has been approved by the government which includes such stalwarts as cutting 1,100 already vacant positions in the civil service and reducing entry-level salaries for civil servants by 10%.

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Prices on investment property in Cyprus have fallen with some developers offering 30% price reductions since the market peaked back in 2007.

THE INVESTORS Chronicle reports that overseas home ownership has rocketed over the last 10 years with an estimated 500,000 Brits has purchased property overseas and it has been estimated that the value of their purchases increased from £10 billion in 2000 to a peak of £58 billion last year. According to property consultancy Savills, The price decline due to the credit crunch in many of the once popular foreign property hot spots means that the majority of the Britons who bought property in 2007 and 2008 will be in negative equity.

Monica Antoniades of Capital homes in Paphos said that the Cyprus property market is steadily reovering although there is massive reduction in the number of house purchases being completed. She said that People are still eager to buy in Cyprus, but they’re exercising caution, and waiting for the situation to stabilise before taking the plunge.

She commented: “I’m hoping things will improve, There are still people who can’t afford to buy in the UK, and they’re moving out here. People are just taking a more sensible approach.”

There has been some good news from the Cyprus land registry with sales figures for Cyprus from foreign buyers being relativity unchanged at roughly half their heights of 2006 with 10,766 purchases in 2006 and till August there has been 4709 purchses already this year. With the prices decline in tourist hotspots, buyers are currently faced with the dilemma of holding on for longer to get a better deal or want to buy it as an investment for long term. However, there is no denying that there are some great properties to be had at very reasonable prices in Cyprus currently.

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Cyprus is the ninth most popular destination for British overseas property investors, according to a survey published recently by themovechannel.com.

TheMoveChannel.com is the important independent website for international property in over 100 countries with more than 400,000 listings around the world. Spain was the most popular investment destination for British overseas property investors. France is in second place and the USA bagged number three spot. These were followed by Portugal and Italy, in fourth and fifth places respectively.

‘A Place in the sun’ has reported that the number of foreign buyers active in the Cypriot housing market last year increased compared to 2009. Altogether, 2,030 homes were bought by foreign buyers during 2010, up 15 per cent compared to the previous year. However, the volume of properties in Cyprus sold to overseas buyers at the height of the market in 2007 was 11,281.

Nicosia has seen the greatest improvement in property sales with a 46 per cent increase which was followed by Famagusta, where sales increased 16.5 per cent, Paphos, up 16.3 per cent and Limassol with 12 per cent.

Maria McLaren, spokesperson for the Pafilia Property Commented: “Cyprus attracts everybody from the holiday home crowd to the retirees because it has the infrastructure.”

She added that it is geared up for anybody who wants to go to Cyprus and live there very happily. The developers have dropped their property prices by between ten and 20 per cent on the island due to oversupply.

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The construction of Cyprus new marina at Limassol is progressing well and is expected to be ready to receive yachts in October 2012. With Limassol Marina, Cyprus is destined to become the most exclusive waterfront development in the Mediterranean and one of the finest in the world.

Famous for its happening atmosphere and welcoming hospitality, the sparkling city of Limassol is only a few hours flight from most European cities. The new marina will be a collection of well-designed residences and state-of-the-art marina with top class restaurants and shops, creating a lifestyle exclusively coined by the term living on the sea.

Demetris Christofias, The President of the Republic of Cyprus has laid the foundation stone of the new Limassol marina which was attended by the town’s officials and other dignitaries. Construction work on the Limassol Marina is already is on the move and progressing rapidly. The marina project is one of the largest in Cyprus and aims to promote Cyprus position on the map as a quality tourist destination and should be ready to accept its first vessels in the autumn of 2012.

Despite the general slump in the property market, sales are excellent. The first units to be delivered in about 2 years time will be the nine blocks of apartments known as the Nerieds (sea nymphs). Prices for one bedroom apartments start at €450,000 and two bedroom €800,000 and many of them already have been sold to Russian, European and Arab investors.

With an estimated cost of €350 million, other plans for the marina complex include boutiques, restaurants, cafes, shops and conference space, all with the aim of attracting more high-end tourists to the island and a bigger share of the Mediterranean yachting market. The marina will be expected to be ready by 21st October 2012 and will able to accommodate around 600 craft of various sizes.

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Cyprus is still a good place to invest despite the plummeting property prices, according to a property agency.

Univac Estate Agents have taken the Cypriot license for Guild Global & Fine & Country enabling them to promote Cyprus Properties using a registered trademark that people trust and have confidence in. This strategy will enlighten and bring the world to Cyprus, as Guild & Global & Fine and Country offices are spread out world wide. They have already held meetings to establish relations with reputable developers in each major city in Cyprus.

The press release from the company stated that Cyprus is on the up and up and investors are with out doubt enjoying their new found confidence in the Cyprus Property Market. The country has endured an strenuous period due to the Global Financial Collapse, but with everybody pulling together and so much going on for example, new Marinas in each city, new Golf courses, and most importantly the Government coming down hard on the Title Deeds Process.

Meanwhile, Business Life magazine reports that People seeking property in Cyprus must always use an independent lawyer and ensure they obtain title deeds. Buyers must tread with caution when purchasing in the country and be skeptical of claims from developers.

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The tourism sector in Cyprus was marking a sound recovery following a dip during the global economic downturn.

Lefkos Phylactides, Acting Director General of the Cyprus Tourism Organization (CTO) has said that the environment of the tourism industry is as intensively competitive as ever and the continuous improvement and renewal of the whole spectrum of Cyprus’s tourist product is, respectively, an uncompromising necessity. He said that he is an avid supporter of the integrated, systemic approach and he will put all effort so that the foundation of this approach lies in their new national tourism strategy.

Since Cyprus, as an island destination, is inevitably highly dependent on air transport, CTO also determined to improve its accessibility and are focusing on the introduction of new flights from the target markets, the increase of flight frequency and the improvement of the relevant time schedules.

CTO also takes into consideration about the impact of seasonal variation in demand and are ready to implement additional, structured plans in order to specifically address the issue of seasonality and successfully extend the tourist season. Mr. Lefkos Phylactides said that Cyprus has all the potential to be gradually established as a top-performing destination for all four seasons.

Meanwhile, Travel and Tourism News stated that Cyprus is proving to be very popular with holiday home buyers from overseas as the Mediterranean island is increasingly being seen as a year-round holiday destination. This has led to growing interest in the Cypriot property market among lifestyle buyers, as many want their own permanent base in the country.

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Cyprus property prices fell at a slower pace during the third quarter of 2010 with Cypriot buyers starting to return to the market.

The third RICS Cyprus property Index is a quarterly price and rental index which is based on methodology of the University of Reading, UK. The RICS index is produced by the Cyprus department on the Royal Institution of Chartered Surveyors and Cypriot chartered quantity surveyors. There was a significant reduction in property transactions, particularly from overseas buyers during the first half of 2010 with the economy slowing down and the government’s income decreasing.

Towards the end of the second quarter, there were some early signs of stabilization, with buyers returning to the market taking advantage of lower prices for holiday homes. Also, some landmark projects received planning permission (Tersefanou Golf Course) or started construction (Limassol Marina).

The Property Price Index has recorded a speckled behavior in property prices across Cyprus major urban areas, with residential prices dropping across all districts and commercial prices fluctuating. Prices for both houses and flats fell by an average of 2.5%, with the biggest drop for houses taking place in Paphos (-4.0%) and for flats in Paralimni (-3.3%). Values of commercial properties generally fell across all cities by an average of 0.5% for retail and 2.1% for offices.

Meanwhile, Professor Patrick McAllister of University of reading (UK) said that yields on commercial property are quite low by European standards, but also hugely variable, even within Cyprus. The high prices of property in Cyprus especially houses compared to apartments are caused by a range of distortions in the local market.

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There is slight recovery in the Cyprus overseas property market and estate agents are looking for new markets as a result of the drop in demand.

The figures released by the Department of Lands and Surveys stated that 127 contracts of sale in favor of overseas buyers were deposited at Land Registries throughout Cyprus during August compared to the 167 deposited during July 2010 and 93 in August 2009. 1,222 properties were being sold compared in the first 8 months of 2010 whereas 1,222 properties being sold in the same period last year. This increase of 2.7% is very small considering last year’s exceptionally low sales figures.

In general, sales have increased by 12% this year, from 5,135 during the first eight months of 2009 to 5,759 during the same period in 2010. The largest increase in sales to non-Cypriot buyers has been in Nicosia, where sales have risen by almost 55%. Solomon Kourouklides, Chairman of the Estate Agents Association of Cyprus, said that the negative economic condition in the United Kingdom, Cyprus’ main market, does not allow the purchase of properties by the British, while the drop in the property prices in the UK contributes negatively too.

Mr. Kourouklides pointed out that the figures stress the need to find new markets for Cyprus apart from the UK and Russia, such as China, the Arabic countries and Iran.

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