Large numbers of properties remain unsold and the market is oversupplied. Many properties were holiday homes built for “buy-to-flip” investors and are unsuitable for permanent living. Now that the period of frenzied investment speculation has come to an end, these properties are unlikely to be sold in the near future.
Very little construction activity is taking place as the banks have tightened their borrowing criteria and are withholding finance for almost all projects. However, there is a demand for city centre apartments, some holiday homes, student housing and projects related to renewable energy.
This situation adds to the reputation created by Cyprus abroad as an unsafe place to buy a holiday home or even permanent home, unless its Title Deed has been issued and is readily available.
Mr Loizou referred to the bank’s exposure due to the fact that property is used as the main collateral to raise finance. He noted that takes a bank 9 to 12 years get control over a mortgaged property – and even then, it is unlikely that it can be sold if it is the defaulter’s main residence.
Summing up the situation on the state of the market and where it is heading, Mr Loizou said that:
- Local buyers are taking advantage some “special cases” to acquire properties in central/prime areas, but there is little demand for long term investment and almost no demand for land in the countryside.
- As long as overseas buyers continue to face problems in their own markets, the local economy and property market will continue to suffer. Even when things stabilise, the market will never return to the same level of transaction volume.
- Banks are pressurising valuers not to reduce prices in order that their loans appear to be adequately secured.
- Prices in secondary areas and the price of land are likely to reduce further and will take a considerable time to recover.
- Financial institutions will find themselves under additional pressure due to non-performing loans and they will need to come up with more “imaginative ways” to recover their money,
- There is further pressure on the economy and the structure of society due to the changes in the public sector and the banks.
- The property market’s parameters have changed but most refuse to acknowledge it!