After a promising start to the year property sales in Cyprus are now falling further and are expected to going moving down for the rest of 2010.
In the first six months of the year sales had moved up as prices fell. Sales to non-foreign buyers increased by 26.8% compared to the first six months of 2009 but the latest figures show they are declining again.
In September, the number of sales fell 13.2%, making it the third consecutive month that domestic sales have declined in spite of falling prices, other sales incentives and distressed sales.
The decline has more than halved the overall increase this year, which by the end of September had fallen to 11.4%.
The worst hit district was Larnaca, where sales fell by 27.8%, followed by Paphos that was down 19.6%, Famagusta down 19.3%, Limassol down 7.2% and Nicosia down 6.3%.
Domestic economic woes are putting people off buying and foreign property buyers have all but disappeared. Experts point out that if the downward trend continues it is possible that domestic sales for this year will only be marginally better than those achieved 2009, which was the poorest year for sales on record since 2002.
Finance Minister Charilaos Stavrakis has said that the state’s 2011 budget will be the hardest for 30 years and a property tax is being considered. It is estimated that a property tax could bring in an extra €10 million in revenue. Plans to increase VAT to 16% would also hit buyers it is feared.
Confidence is low with developers and builders simply not looking at bringing new projects to market. The number of building permits issued has dropped dramatically. In the first six months of the year 6,496 permits for residential properties were issued compared with 7,110 in the same period last year, a drop of 8.7%.
According to the Cyprus Statistical Service, building permits constitute a leading indicator of future activity in the construction sector.
Other parts of the property industry are also in crisis. Currently it can take as much as five or six years for a land survey to be carried out and some 26,000 cases have piled up at Land Registry offices throughout Cyprus.
Now the Interior Minister is looking to bring in foreign firms to deal with the backlog. Initially the Minister appointed 60 permanent staff in the hope that this would help clear the backlog of applications. Since then he has outsourced some of the surveying work to private individuals.
However, the volume of outstanding work is massive, and Interior Minister, Neoclis Sylikiotis said they will look to putting the work up for tender to overseas firms as local land surveyors did not have the necessary experience and know how to deal with such a large number of cases in such a short period of time.
According to official figures, 14,405 cases were pending in January 2005. By 2010 this number had risen to 24,238.
Sources used for this article:
- Domestic property sales decline in September
- Slowdown in construction continued in July
- Foreign firms to survey land