Cyprus property values likely to continue decline
Photo: Sergey Yeliseev
The island's economy appears to be stabilising, with GDP decreases reported as smaller than expected, but the downturn in house prices is forecast to continue, according to Leaf Research (via Cyprus Property News).
The valuers' report says that the improvement in GDP "disguises the uneven
allocation of the effects of the economic crisis", noting that the gap between rich and poor has increased. Tension between locals and foreigns in the labour market have also increased, as government schemes are implemented to try and reduce unempoyment - a major factor in weakening demand from local buyers for real estate.
Prices will remain low, thanks to locals buyers' low purchasing power, accompanied by an increase in real estate supply, especially secondary residential units and commercial space for rent.
"It is estimated that in the near term real estate prices, especially that of land, will decrease further as no substantial uplift in the price of the end product is expected, the rate of sale is likely to remain slow, and no debt-finance will be available," says Leaf Research.
The gap between asking price, valuation and transacted price will grow further, due to increased uncertainty in the marketplace caused by a lack of sales. Indeed, even though prices for many ‘mass production’ real estate developments are below construction costs, there is no interest.
In 2013, the highest movement in total volume (31 per cent or 1.164 sale and
purchase agreements) and purchases by foreigners (38 per cent or 445 sale and
purchase agreements) were recorded in Paphos district .
27 per cent of sale and purchase agreements in Cyprus (1.017 sale and purchase agreements) involved foreign buyers.
The smallest number of sale and purchase agreements (583) was recorded in Famagusta district (6 per cent of total), whilst lowest percentage of transactions to foreigners was recorded in Nicosia (13 per cent of total transactions, 92 properties).
Prices decreased across all cities and for all types of real estate. The largest decrease was recorded in Nicosia, where prices are decreasing at a fast pace since the capital was the last city to be affected by the crisis and its economy is largely reliant on the public and on the banking sectors.