The Cyprus property market suffers from two major issues in that it is relatively small compared to the worldwide market and is often associated with Greece, an area of the world in major financial trouble. As a consequence there are some very mixed views on the Cyprus real estate market with prices continuing to fall but many estate agents reporting an increase in sales numbers. So, if demand is increasing why are property prices still falling?
The Royal Institute of Chartered Surveyors (RICS) index confirms what we already know, the fact that Cyprus has suffered a significant fall in property prices since the worldwide economic downturn of 2007. Indeed since 2010 the average fall in house prices is reported at 30% with apartments falling by 40%. So why do some people believe the market is starting to bottom out?
Strict lending regime holds market back
There have been concerns about fairly lax regulation of the Cyprus property market in years gone by which attracted more than its fair share of rogue traders. The authorities have acted over the last couple of years to tighten regulations introducing increased property taxes and a far stricter lending regime. Indeed we also have relatively high interest rates across Cyprus compared to many other areas of the world which is not assisting the property market in the short to medium term.
Is the market stabilising?
As we touched on above, some agents are reporting an increase in sales numbers in the region of 20% year-on-year. This comes at a time when prices are still expected to experience downward pressure in 2015 but it would appear to indicate a possible turn in the market is not too far away. There is also significant interest from overseas investors looking to take advantage of recent property price falls with a long-term investment strategy in mind. Once we see domestic buyers show interest again then we may actually see prices start to stabilise and then move higher.
Unemployment at record high
If we tell you that unemployment in Cyprus is currently at a record high of 17% this does not seem like a positive indicator in the short to medium term? However, the fact is that the Cyprus economy is stabilising and showing signs of improvement, oil and gas discoveries off the coast of Cyprus will soon filter into the economy and unemployment historically lags any economic upturn. Therefore, with unemployment stabilising at around 17%, the economy showing signs of life and significant investment expected in the Cyprus oil and gas industry, perhaps things aren’t as bad as they first look?
On the surface it does look as though the Cyprus property market is struggling, investors have little appetite and there is further downside in the short to medium term. However, if we dig a little deeper, indicators seem to suggest the economy stabilising, buyers are returning to the property market and slowly but surely there is a growing confidence. We are not suggesting a short-term boom time across the Cyprus real estate market but there may be reasons to be optimistic?