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Predictions – Cyprus Property Market 2007

Antonis Loizou FRICS
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We wish we had a God sent talent to predict “dead right” the developments in the Cyprus real estate market for the year 2007. We can only submit our predictions based on our under experience, especially with regard to the year 2006 bearing in mind the trends that exist. We welcome any other opinions on the subject, but which must be based on professional data and not on personal wishes and feelings.

The year 2007 is expected to have the following general picture regarding property prices:

• General upward movement of property prices by around 10%.

• Building plots and development land within the towns are expected to increase by 12% and for the suburbs by 15%.

• New apartments will increase by 10% and older ones by 15%.

• Offices, especially in Nicosia, due to the existing shortage, an increase by 20% (high tech offices).

• Seaside land to increase by 20% and near the beach by 15%.

• For the Paralimni, Sotira and in general for eastern Cyprus, prices will increase by 20%, whereas in the Larnaca region by 15%.

• High cost houses within residential areas an increase of 5% and medium cost by 10%.

• Stores/workshops of an average cost/size by approximately 15%.

• Holiday homes not on the beach by 15% on average.

• Land outside the tourist areas 15%-20% increase.

• Agricultural speculative land with prospects of being included in the future in a development zone 20% (due to the change of the previous regulations of the local plans).

We must also bear in mind that the V.A.T. on some buildings, as well as the added V.A.T. on land purchases after 1.1.08, will cause by themselves an upward movement of costs, most of which will be passed on to the buyers. Of course, this constant upward movement of building costs/prices, reduces all the time their financial attraction and the number of able/willing buyers (reducing, thus, the rate of sale), whereas demand will be directed more and more towards the lower priced areas/units. For this reason we note that for areas away from urban centres, the property values are expected to increase by a faster rate than urban properties. At the same time the serious interest that we see now in the Cyprus property market forthcoming from local, as well as foreign investment funds (many millions of Cyprus pounds) have affected the supply of land and prices. It is also worth noting the sharp increase in the acquisitions of hotel/hotel apartments which are capable for conversion into residential units (despite the fact that this measure is pending approval).

We will publish by March 2007 our Property Index within which we will discuss in detail not only prices, past and future, but also comparative prices in our competitive countries. The index will also stipulate the going ons and a general information/uncertainties of the Cyprus property market. We published our first Property Index in April 2006 and we expect that our second one will be much more comprehensive and detailed. Regrettably our invitation towards other professional Offices, including the Governmental Lands Office, to cooperate with us, in order to have a more spherical approach, did not receive any positive response. What is clear however, that the past prediction of a “property bubble” came to nothing and quite to the contrary the prices continue their upward movement.

A most interesting report published last week by the Economist, provides a formula in order to check if prices are a bubble or not. Based on this formula, property prices in Cyprus are quite reasonable based on a yield of 4%-6%, plus the expected general appreciation of 4%-8%. Regrettably Cyprus does not invest in research and we find that as an Office, we are alone in our constant research and reporting. Our only encouragement comes from the Central Bank Governor, Mr Chr. Christodoulou, who in a letter to us, encourages us to go on (and for which we thank him publicly).

Download: Property Index 2005 (PDF 1MB – 40 Pages)

By Antonis Loizou, FRICS

View the original article on the Antonis Loizou web site

Copyright © 2006 Antonis Loizou & Associates Ltd. All rights reserved.

 

Buying Mortgaged Property in Cyprus

Nigel Howarth
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Question

I am in the process of buying an off-plan Cyprus property from a developer and the lawyer acting on my behalf has advised me that:

“The bank which has a mortgage on the project will issue a declaration confirming that the separate Title Deed issued for the property will not be burdened with the existing mortgage which is currently filed on site.”

Is this OK? I have read accounts of people having their homes sold to pay back the bank and I’m concerned this may happen to me.

Answer

It’s a common practice for developers to mortgage the land on which they’re building to ‘kick start’ the development.

You need to proceed with caution. As the bank will not issue a declaration until separate Title Deeds are issued, you are at risk if the developer goes bankrupt or if the bank calls in the loan in the meantime. Bear in mind that it can take many years to get your Title Deeds in Cyprus; I know of people who have been waiting more than 20!

Your lawyer needs to obtain a “release” from the bank stating that the part of the property you’re thinking of buying is free of a mortgage. In addition, you must ensure that the “release” is given when you sign of the Contract of Sale, or you may find it’s not issued.

If your lawyer is unable to obtain a “release”, do not proceed with the purchase.

Is It Possible – £3,000/

Antonis Loizou FRICS
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Where are the property prices going dear readers? Are we aiming for the equivalent of the Kolonaki area in Athens, the Marble Arch in London, or even the N. York’s Central Park?

We have noted in the past the fast rising of prices in property, but in this article we would like to concentrate on the seaside areas of the free Republic’s lands. We could offer some form of excuse for the high prices as far as Limassol is concerned, where there is a large concentration of offshore business and wealthy Russian buyers. Could it be that, us locals, have not appreciated yet the value of our beaches? Should we perhaps carry out a survey of comparable beach properties in the Med, so that we will come to know the comparative prices? These, mainly foreign buyers, who buy beach property, must have examined comparative localities elsewhere and we expect that they then compare us with our competitors, such as Spain, South of France, Italy, Portugal, Greece etc, since we cannot understand why the sudden influx of top income buyers (beach property is sold in terms of millions for beach housing properties, who they themselves (the buyers) are quite delighted for their buys”).

Of course the problem that this foreign demand has/is creating is that the locals will have no beach land of their own, since, with a mathematical precision, it will be bought by the foreign market. This high property beach prices push upwards near the beach prices and it has a domino effect. Another indicative craze, is the 30 years old Dhasaki refugee housing estate, next to St. Nicolas British Base, which sells now mainly to the British market at £800/m²!!

Of course we will not suggest a restriction in the foreign buyers, but we are worried on the effects that this will have on the house prices for the locals and especially for the younger generation, as well as for the lower income groups. At the Kolonaki area in Athens (top expensive residential spot) sales apartment prices are now at £3,500/m² (we have recently heard of a unique spacious apartment project for sale at £7,000/m²!!), whereas Marble Arch prices are in the region of £5,000/m² gross. A British client of ours told us that “I cannot understand why your beach units should not reach the £5.000/m² figure, since Cyprus is so much nicer” – he just bought a beach front flat at the Phoenicoudhes area of Larnaca from us, for £1,100,000 (or £3,200/m²). It did not surprise us then, when a Russian lady bought, again, from us, a house on the Dhekelia road for £2.0 million (or £5,700/m²) despite our advice to the contrary. In fact we were “told off”, since for her it was a “dream house” and we should learn how others look at Cyprus and not judge local prices by our own local standards!! She may be quite right since, who are we to know, being part of a minute country of only 700,000 people, as compared with a country of endless wealth, of 250 million people.

Should we then all rush towards these “golden” beach areas and make our fortune in the near future? What can we say, we don’t know, because we are lost somewhere between local reality and foreign/imported facts.

By Antonis Loizou, FRICS

View the original article at: Is It Possible – £3,000/m²?

Copyright © 2006 Antonis Loizou & Associates Ltd. All rights reserved

Property in Cyprus – Building Permits

Nigel Howarth
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The Cyprus Statistical Service has announced that the number of building permits authorised by the Municipal Authorities and the District Administration offices during December 2006 was 772. These permits provided for the construction of 1,258 dwelling units.

During 2006, 9,794 building permits were issued of which 7,415 were for dwelling units.

Historical figures for Building Permits & Dwelling Units

2006 – 7,415 building permits for 18,915 dwelling units.
2005 – 7,205 building permits for 18,770 dwelling units.
2004 – 6,575 building permits for 15,783 dwelling units.
2003 – 5,964 building permits for 11,955 dwelling units.
2002 – 5,131 building permits for 7,535 dwelling units.

Building permits form a leading indicator of future activity in the construction sector.

Property Prices Move Upwards in January 2007

Nigel Howarth
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After four successive months of falls, the Cyprus home price index recorded a rise of 2.6% in January 2007.

The Cyprus property price index is published monthly by BuySell Cyprus Real Estate, a real estate advertiser.

The company started to produce its property price index in 2004. It shows the movement of prices at which residential properties in Cyprus are sold and is based on an average of around 400 to 500 home sales/month.

When the index started in January 2004, the average residential property price was CYP 77,910. By the end of January 2007, it had reached CYP 93,288 – an increase of 19.74% over the 37 months since its introduction. This equates to an approximate annual growth of 6.40%.

For the whole of 2006, the Home Price Index rose by 5.9%, after a rise of 2.5% in 2005.

Website Helps Cyprus Property Buyers

Sarah Fenwick
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People thinking of buying Cyprus property can now refer to a website that provides independent information and advice.

Nigel Howarth started www.cyprus-property-buyers.com to help guide new property buyers.

A business consultant who previously lived and worked in Hong Kong, Australia, South Africa and the Netherlands, he bought his first bought property in Cyprus in 1992 and designed and built his current home outside Limassol in 2002. He is the Daily Telegraph’s mentor for Cyprus, features in a number of TV & radio programs about buying property and writes articles for two Cyprus-based English language magazines.

As well as his website and blog, he runs three Internet property forums answering questions from those who have bought or who are planning to buy property in Cyprus. The second edition of his critically acclaimed eBook “Buying a Home in Cyprus: A Practical Guide to Successful Real Estate Purchase” was published in 2006.

“Many British buyers make the mistake of believing that buying property in Cyprus is the same as buying property in the UK; nothing could be further from the truth! The laws are different, the ways of working are different and there isn’t a ‘nanny state’ to protect them. As a consequence, buyers need to be much more ‘street-wise’ before committing themselves otherwise they could end up with severe headaches,” he says.

“I hear horror stories of poorly built & poorly finished houses where the windows and doors don’t fit, cracks appear in the walls and properties are draughty, damp and musty with mould growing on the walls. In more serious cases properties have partly collapsed or have had their foundations undermined by burst water pipes or washed away by the winter rains,” added Mr. Howarth.

Other cases involve unscrupulous developers taking large sums of money from buyers and then skipping the country, or mortgaging the property to the bank leaving the buyers with little chance of ever getting their Title Deeds or finding a buyer if they wished to sell.

The good news is that many, if not all of these issues can be avoided if people take proper independent legal advice and take the time to check out the credentials of the developer and his past performance.

Perhaps his most significant success was saving one buyer more than £14,000 by making some simple changes to their contract.

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