Central bank reports property price falls intensifying

Stefanos Evripidou
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10

THE RESIDENTIAL property market is showing no sign of recovery after statistics released by the Central Bank yesterday revealed that the fall in prices continued and intensified during the last quarter of 2011.

The latest stats reveal that residential prices in coastal towns continue to be the hardest hit while the capital Nicosia is also showing signs of vulnerability to the ongoing economic crisis.

Overall, residential property prices recorded a decrease of 1.8 per cent, doubling the price fall observed during the third quarter of 2011. The latest decline was slightly larger for house prices (1.9 per cent) compared with apartment prices (1.6 per cent).

The largest quarterly decline in house prices was registered in Famagusta (4.5 per cent), while the largest quarterly decline in apartment prices was in Larnaca (4.2 per cent).

In contrast, Nicosia registered the smallest decline in house prices (0.9 per cent) while a marginal increase in apartment prices was recorded in Famagusta (0.3 per cent).

Despite this, apartment prices in Famagusta have registered the second largest decline (after Paphos) since the first quarter of 2010. On the other hand, residential property prices in Nicosia, although relatively stable at the end of 2010, have also begun to retreat following, to a lesser extent, the downward trend recorded in the residential property prices of other districts.

On a year-on-year basis, residential property prices in Cyprus declined by 5.6 per cent when compared to the fourth quarter of 2010. Apartment prices registered the biggest annual decline since 2010 (7.2 per cent). The reduction was smaller for house prices, which in the fourth quarter of 2011 shrank by 4.7 per cent.

The annual decline in prices was recorded in all districts, with the largest registered in Famagusta (10.7 per cent), followed by Larnaca (8.8 per cent). The smallest reduction in residential property prices was registered in Nicosia (2.0 per cent), which recorded the smallest decline in both house and apartment prices (1.2 per cent and 3.1 per cent respectively).

However, these annual reductions were the largest registered in Nicosia since 2010, suggesting that residential property prices in the capital have also started to be affected by weak market conditions.

Larnaca recorded the largest annual decline in apartment prices (13.9 per cent), while the largest decrease in house prices was registered in Famagusta (8.3 per cent).

Overseas property sales continue to shrink

Nigel Howarth
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8

THE dramatic fall in overseas demand for property in Cyprus continued in March with just five properties in Famagusta sold to overseas buyers during the month.

During the first three months of 2012, overseas sales have fallen more than a quarter compared with the corresponding period last year. Of the 563 contracts of sale deposited at Land Registries across Cyprus last month, 129 (23%) were in favour of overseas buyers.

Although both Larnaca and Paphos saw a small increase in sales last month, these were more that offset by falling sales in Famagusta, Nicosia and Limassol.

Source: Department of Lands and Surveys

Domestic demand

Domestic demand for property remains subdued with overall sales falling again in March, with just 434 contracts of sale deposited last month compared with the 465 deposited in March last year.

The first three months have seen a 14% rise in sales compared with the same period last year, due to an almost doubling of sales in January.

But there are signs that the decline in sales is getting smaller and sales may be about to reach their worst point.

Source: Department of Lands and Surveys

Home sales continue slide despite incentives

Nigel Howarth
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6

FIGURES released on Friday by the Department of Lands and Surveys show that the number of properties being sold in Cyprus is continuing to fall despite tax incentives introduced by the government late last year.

A total of 563 contracts for the sale of property were deposited at Land Registries across Cyprus in March compared with the 625 deposited in March 2011; a fall of 9.9% – and a drop of more than 70% on the 1,903 contracts deposited in March during the boom year of 2007.

In January sales climbed 54%, hitting an 18-month high, as people waiting to deposit their contracts of sale until after tax reductions had been introduced by the government. But with the exception of January, sales have continued to slide following a brief recovery during the first half of 2010.

Uncertainty in the market, liquidity problems and record levels of unemployment continue to push sales down. Local commentators believe that crunch time will come in July, when the bank’s recapitalisation projects will be completed. Until then the market will progressively slow down and there will be very little activity.

Source: Department of Lands and Surveys

Property transactions examined under microscope

Nigel Howarth
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22

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.

Property prices

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.

Protest at ‘A Place in the Sun Live’ property exhibition

Nigel Howarth
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43

THOUSANDS of visitors to the ‘A Place in the Sun Live’ exhibition at Earls Court in London over the weekend were greeted by a group of protesters who were raising awareness of the potential problems associated with buying property in the Republic of Cyprus.

Many of those protesting believe they have been defrauded or mis-sold property and are exasperated by the unacceptable delays in the Island’s judicial system; some of their cases have been dragging on in the courts for many years.

Carrying placards reading ‘Shame on Cyprus’, ‘Cyprus Island of fraud’ and ‘South Cyprus buyer beware’ the protesters discussed the potential pitfalls of buying off-plan properties with visitors to the exhibition and handed out leaflets warning of the dangers.

Stelios Kyriakides from the Consular Directorate in London and part Foreign Office’s ‘Know Before You Go Team’, which had a stand at the exhibition, came out and talked with the protesters.

Organised in conjunction with the popular Channel 4 TV programme, ‘A Place in the Sun Live’ claims to be ‘the UK’s biggest and best-attended overseas property exhibition’.

Exhibitors at the exhibition from Cyprus included: Aristo Developers, Cyprus Property & Home, Kanika Developments and Leptos.

The protest passed without incident.

Cyprus moves up three places in Top of the Props chart

Alan Lawton
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6

THE popularity of Cyprus as a destination for overseas property investors improved three places in the March issue of the ‘Top of the Props’ chart published by TheMoveChannel.com.

The most sought out destination for overseas property investors in March was Spain, with the USA in second place. Brazil and France came in third and fourth, followed by Portugal, Italy, Turkey and Greece, with Germany and Bulgaria at numbers nine and ten respectively.

Commenting on Brazil’s performance TheMoveChannel.com Director Dan Johnson said:

“It may be Brazil’s first time in the top three, but it has been one of the big property players for months. While other struggling markets are attracting buyers with low prices, Brazil’s strength comes from its economy and potential for investment before the World Cup and Olympics.”

The full breakdown of the March 2012 Top 40 is as follows:

RankCountryShareChange
1Spain15.23Non-mover
2USA12.04Non-mover
3Brazil10.57Up 8
4France9.93Down 1
5Portugal7.21Down 1
6Italy3.86Down 1
7Turkey2.91Up 1
8Greece2.68Up 2
9Germany1.97Up 4
10Bulgaria1.96Down 4
11Cyprus1.91Up 3
12Barbados1.88Up 3
13Malta1.78Up 5
14India1.74Up 3
15Cape Verde1.72Down 8
16Thailand1.35Non-mover
17Morocco1.2Down 8
18Canada0.99Up 2
19Croatia0.95Non-mover
20UAE0.81Up 2
21Czech Republic0.73Up 22
22Indonesia0.71Up 6
23Hungary0.6Non-mover
24Australia0.57Down 12
25Egypt0.56Down 4
26Poland0.39Up 3
27Slovenia0.36Down 1
28Cayman Islands0.34Up 8
29Switzerland0.29Down 2
30Montenegro0.28Non-mover
31St Lucia0.28Up 10
32St Kitts and Nevis0.26Up 2
33South Africa0.22Up 7
34Mexico0.21Down 10
35Belize0.18Down 4
36Philippines0.15Down 4
37Mauritius0.15Up 10
38Kenya0.12Up 8
39Cambodia0.1Down 1
40Bahamas0.1Up 4

TheMoveChannel.com is an overseas property search portal and its ‘Top of the Props’ chart is based on the number of on-line enquiries for property in different countries around the world.

We expect that the Cyprus sales statistics for March will be available by the end of next week and we shall see whether the Island’s increased popularity is reflected in the number of sales. Anecdotal evidence leads us to believe that sales in Paphos are improving after many months of decline.

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