Worsening economic outlook taking its toll on Cyprus property markets, says RICS

Nicholas Wallwork

Nicholas Wallwork

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Local and overseas buyers are shunning the Cyprus property markets with unemployment and worsening prospects for the island’s economy having an affect, according to the Royal Institution of Chartered Surveyors (RICS). In its latest quarterly price and rental index it says that the first half of 2012 saw investors postpone their decision making and look [...]

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Yet strangely enough we have had a far better year than last year for sales and one developer we know well also tells us they have had a good year.


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Building sector hits rock bottom
Published on September 21, 2012

CURRENT construction projects will run out in seven months with nothing lined up past that time, a survey released yesterday showed.

The construction business, one of the main engines driving the economy, is in freefall and the outlook appears extremely bleak, according to research by the Federation of Associations of Building Contractors (OSEOK).

The federation yesterday released data gathered so far this year indicating that construction has been hit hard by the ongoing credit crunch.

Low demand, the lack of liquidity and loans, and the general economic crisis are identified as the main culprits for the ongoing slump.

The federation said its most disturbing finding was that, on average across the island, there remain an estimated seven months for pending construction projects, after which no contracts are lined up.

OSEOK said this index of contracts has been dropping steadily over the past two years and is currently at its lowest ever point.

“The index confirms the great crisis experienced by the construction sector,” the federation said. The research, conducted with RAI Consultants, covers all the districts.

“The data shows that activity in the construction industry remained close to its lowest levels during the period April to August 2012, while chronic trends do not in the least point to recovery; on the contrary, activity is expected to continue dropping,” the federation said.

It said the problem had worsened over the past four months for contractors across the island, with more and more layoffs being recorded during this period.

At the same time consumer demand is likewise going from bad to worse. According to the contractors, its ‘Purchase-Building Index’ for a 12-month period is currently at an all-time low since it began gathering data, and demand for renovation is likewise extremely poor.

The percentage of contractors stating that their business has increased over the past four months has decreased by 56 per cent for the period April to August, according to OSEOK’s research.

The data was gathered from contractors who were asked to fill out questionnaires.

“It would appear that this index has hit rock-bottom, since many contractors cannot afford to lose more business given that they have very few, or zero, projects to work with; at the same time, government statistics show that a large number of contractors are closing shop or have already done so.”

The federation said moreover that the gloomy numbers apply to all the districts, including Nicosia and Limassol which until recently appeared to be holding up better to the financial squeeze.

The crisis in the construction industry began manifesting as early as 2010, when according to the federation as many as 10,000 workers lost their jobs.

Building sector hits rock bottom - Cyprus Mail


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Paphos property market stabilising but overall outlook still bleak
By Poly Pantelides
Published on September 26, 2012

THE INTEREST from Chinese buyers may partly explain signs that the residential property market in Paphos is stabilising, according to the Central Bank’s residential property price index released yesterday.

But despite good news for Paphos, residential prices fell by 5.9 per cent islandwide compared to last year, the biggest drop in two years.

And Famagusta and Larnaca had record price falls, with Famagusta prices dropping by 11 per cent and Larnaca by 8.0 per cent compared to last year, the Central Bank said.

However, “there were signs of a relative price stabilisation in Paphos” which saw the smallest quarterly drop in prices amounting to 0.4 per cent for houses and 0.5 per cent for apartments.

“Perhaps this is because of the interest that Chinese buyers showed in the district in question over the second quarter,” the report said.

The largest quarterly price drop was in Famagusta with house prices dropping by 4.4 per cent and apartments by 3.7 per cent in three months.

Larnaca followed with quarterly price reductions of 3.5 per cent for houses and 2.8 per cent for apartments.

Limassol’s prices dropped by 1.5 per cent for houses and 2 per cent for apartments, while Nicosia –which up until 2011 had the smallest residential price drops – had its house prices drop by 1.1 per cent and apartments by 1.9 per cent.

The property price index also showed for the second consecutive quarter an increasing amount of transactions, e.g. contracts lodged at the department of lands and surveys with a year-on-year increase of 1.6 per cent.

“Just as in the previous quarter, the increase is entirely attributable to a raised interest in buying from local investors,” the report said. Transactions involving foreign nationals dropped by 11.4 per cent, from 507 to 449 while local buyers’ transactions rose from 1,321 to 1,409, an increase of 6.7 per cent.

In general, interest in buying property was more pronounced in Paphos and the least pronounced in Famagusta.

“Despite these positive developments in the property market, the construction industry is still in recession,” the Central Bank said.

Unemployment in construction is 43.1 per cent higher than last year while cement sales fell by 29.4 per cent in a year, translating to a reduction in the demand for concrete.

Paphos, which had been dominated by buyers from the UK, was the first area to be hit when the property bubble burst in 2009 after four years when prices skyrocketed.

This past summer, Paphos-based developer George Leptos said that property sales in the district were growing because of Chinese buyers.

Because they are non-Europeans, Chinese buyers need to make a minimum property purchase of €300,000 and prove they can financially provide for themselves in order to stay in Cyprus. As property owners, they can then reside in Cyprus.

The Royal Institute of Chartered Surveyors also said recently that Paphos was beginning to stabilise.

One of its members, Pavlos Loizou said the market was rebalancing and prices were adjusting to a long-term average. Paphos and Famagusta are expected to recover faster because both had prices drop for longer.

The Central Bank said in its report it expected “the real estate sector to continue the market correction that has been recorded since the last quarter of 2008”.

It harnesses data from banks, including co-ops, who have information available on value estimates made by property evaluators advising banks in relation to prospective loans.

Paphos property market stabilising but overall outlook still bleak - Cyprus Mail


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House prices slump even more
By Poly Pantelides
Published on December 22, 2012

PROPERTY prices and rents have been falling island-wide in the third quarter (Q3) of the year with Nicosia and Limassol faring the worst, the Royal Institute of Chartered Surveyors (RICS) Cyprus index has shown.
“The worsening state of the Cyprus economy and the growing political and economic uncertainty across the eurozone led to a pronounced slowdown in mortgage and corporate lending and a further rise in the rate of unemployment,” the report said.
With the exception of selling “prime homes in the Limassol area,” there were no notable transactions with property being “increasingly viewed as a risky asset and one with negative prospects in the near to medium term,” RICS said.
Nicosia and Limassol have been hit the most, because they were the least affected markets until recently. Across Cyprus, rental values in Q3 decreased by 0.3 per cent for apartments, 3.1 per cent for houses, 5.3 per cent for retail units, 1.9 per cent for warehouses, and 0.1 per cent for offices, RICS said.
Compared to Q3 2011, rents have dropped by 3.1 per cent for apartments, 5.8 per cent for houses, 12.6 per cent for retail units, 9.8 per cent for warehouses, and 13.1 per cent for offices, the report said.
Residential prices in Q3 for houses fell by 1.1 per cent, and fell by 0.4 per cent for apartments with Larnaca marking the biggest drop with 2.1 per cent for apartments and 4.6 per cent for houses. Compared to Q3 2011, prices dropped by 6.4 per cent for apartments, 6.7 per cent for houses, 15.1 per cent for retail units, 10.8 per cent for offices, and 10.8 per cent for warehouses, the report said.
All around, transaction volume up to October 1 decreased by 9.0 per cent compared to the same period last year.
Transaction volume was reduced by 21 per cent in Limassol and 19 per cent in Nicosia, while Paphos saw an increase of 16 per cent and Larnaca of 7 per cent, said member of RICS and consultant, Pavlos Loizou.
“With activity and prices in the main commercial centres of Nicosia and Limassol only beginning to experience significant declines, the repricing in these markets is expected to accelerate in the coming months,” Loizou said referring to anticipated hikes in unemployment and wage cuts for civil servants.
“The other cities will continue to experience low levels of demand, as they are heavily reliant on overseas markets,” he added.

House prices slump even more - Cyprus Mail


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Sharp fall in demand for property
Published on May 17, 2013

THERE has been a sharp drop in the demand for property in all towns except Paphos it emerged yesterday.
According to data released by the land registry, 285 sale deeds were filed in April compared to 461 filed in April 2012. This shows an annual decline of 38 per cent.
Nicosia had the largest decrease at 65 per cent, with sales falling from 628 last year to 222 this year. Famagusta had the second largest decrease of 61 per cent, with sales reduced from 201 last year to 78 this year.
Limassol had a 54 per cent decrease and Larnaca had a 42 per cent decrease.
Paphos had an increase of six per cent in sales and reached 480 sales compared to 452 last year. This is due to Russian and Chinese investors, the registry said.

Sharp fall in demand for property - Cyprus Mail