The saying “Cash is King” is a worldwide one and indeed, we thought that up to now this is so true. Other than health (to an extent) and personal happiness, cash can be exchanged for just about everything. Are we then to assume that those who have cash today should be happy? We will say not necessarily and we suspect that those who have the cash must be quite worried. With the various substantial Banks outside Cyprus, in trouble, there is a general/worldwide worry that those with cash, might lose their deposits. This has happened and now the Governments are running after to save the Banks and the depositors. It is no wonder why in the U.K. and France the sale of home safes has increased by 40% over the last months. Are we then going to keep our hard earned cash under the mattress until the better days come?

Without being necessarily clever, one alternative is to buy real estate with some few exemptions in shares, whereas others might prefer gold (the last two having an increasing risk). There was an interesting add in the Greek press (Greece) saying, “buy property you will not lose it”. This is not far from being wrong, since real state, especially if it is well chosen, might temporarily go down in value, but the circle of the economy will cause it to appreciate in the future. If you are of this philosophy (keeping some money in the Bank, other at home and the rest in real estate – income producing or capital growth investments) there is, for the latter, now, an abundance of investment opportunities. If we are to take U.K. commercial properties with a drop in value of 20%-25% approximately, this will show now yields in the region of 7%-7.50% p.a. Romania with a higher risk in terms of value reduction, has yields of around 8% with long term leases and with good tenants. Of course what is a good tenant today, may not be “good” tomorrow, since if consumption continues to go down, these tenants might not be in a position to pay the rent. The HSBC office building in London is a case in hand how things can go wrong – sold to a Spanish group for ½ of the price, the Spanish group paid a substantial down payment using its own funds and now it cannot pay the balance since it cannot raise the capital for the remainder – thus the building goes back to HSBC.

If you are in two minds what to do with respect to real estate investment, the decision must be made with the most crucial part being that of timing. Shall we buy now or later? No one knows how this global economic situation will continue and to what extent its affect will be, since circumstances change from day to day. So it is more a matter of estimation by experts and others. There is a general belief that this situation will continue over the whole of the year 2009 plus. So, perhaps the best time to buy is after 6 months from today when prices will be at their “lowest”, but early enough before all best buys are sold. The danger of waiting is that the better opportunities will be the first to go and the positive is whether prices will go down by even further. If we are to refer to Cyprus, land may be the best option at this point of time (not much reduction in value expected) as well as apartments in the residential areas (not touristic) where there is a steady demands to let. Places near colleges and universities especially at Nicosia, or Neapolis Quarter at Limassol, are areas to be targeted. Even at reduced prices however the yield is no more than 4%-5%, far less the present day deposit rates offered by most of the Cyprus Banks, which have reached the figure of 6.50% p.a. plus.

Cyprus Banks do not appear to have/will be affected and their problem (if any) is more the available liquidity than secured loans. Looking at Spain, with its 1.000.000 homes unsold, with unemployment rising to 8% and the economy looking as it is entering into a recession, property prices have been reduced (according to Sunday Times) “only” by 20%. So if this is an example that we will follow (although we doubt that we will reach this state of affairs) we can project that even at the worst level and as circumstances stand at present, property prices will not exceed the 20% reduction (overall). So as a conclusion if you believe that it is better for you to keep your money in Cyprus Real estate and you get a discounted price now around the 15%-20%, we suspect that it is a good near the tops reduction – Bear always in mind that during difficult times it is easy to buy and difficult to sell. So if you invest in real estate at this point of time, don’t expect that you can make a “kill” next year.

As we have said what we are discussing in this paper is an alternative to keep part of your money relatively safe in the real estate field.

In ending, we must tell you about this client of ours, who, while building his beach home, asked us to enlarge his basement to accommodate his gold and Euro stock!!! He wanted literally to sleep on his money!!

We wonder what else we will experience in this worldwide phenomenon.

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