A DRAMATIC slump in property sales over the past few years has left thousands of unsold villas and apartments littering the Island’s once popular hot-spots with some developers offering 30 percent price reductions in their attempts to attract buyers.
The monthly statistics published by the Department of Lands and Surveys reveal the extent of the problem:
In 2006, sales of property to overseas buyers accounted for 49.3 percent of the total market; and in 2007, more than half the number of properties sold were bought by buyers from overseas. As well as keeping the construction industry humming, overseas sales brought in billions of Euros of revenue to Cyprus, adding significantly to the Island’s economic well-being.
But during the first quarter of 2008, property sales to both local and overseas buyers started to decline. And in 2009, overseas sales had dwindled to a mere 1,761 compared to the 11,281 sold during the heady days of 2007.
So what has caused the spectacular decline in Cyprus’ once prosperous and thriving overseas property market?
- The fall in the value of Sterling against the Euro over the past two years means that British buyers, who account for some 50% of foreign buyers, have less equity at their disposal. At the beginning of 2007 a pound Sterling would buy you €1.47; today it will buy you around €1.20, making investments in the eurozone that much more expensive.
- The worldwide economic turmoil has also changed the characteristics of the ‘typical’ overseas property buyer. British buyers are now being much more cautious about their investment decisions. Many have little confidence in the sales brochure marketing hype and developers’ off-plan deals and have all but deserted Cyprus in favour of safer places to invest their money.
- Reports about the potential problems faced by buyers have become more widely publicised. Details of the Title Deed fiasco and developers abusing the island’s antiquated property laws have appeared on UK national television and made headlines in the press and elsewhere around the globe.
- Having been contacted by many disgruntled buyers, MEPs and the European Commission are focussing their attention onto the goings-on in the Cyprus property industry and the government’s attempts to rectify the situation.
- Where some other countries have lowered their mortgage interest rates and property taxes to encourage overseas investors, mortgage interest rates in Cyprus are amongst the highest in Europe and the government is talking about increasing property taxes it charges large land owners; a charge that will no doubt be passed on to those buying property. This approach is an anathema in other countries where governments have taken steps to reduce the costs associated with property ownership to encourage investment.
A major factor in reversing the collapse in the overseas property market is the ability of the Cyprus Government to develop, introduce and enforce effective legislation to deal with the many problems in the Island’s real eastate, banking and legal sectors.
Although the Cyprus parliament is discussing legislation, pundits believe that its scope is too limited and that it suffers from inherent defects.
In the meantime Chairman of the Estate Agents Association of Cyprus, Solomon Kourouklides, has stressed the need to find new markets for Cyprus, such as China, the Arabic countries and Iran.