Presumably this article should have been written with foreign potential residents in mind in the foreign press as opposed to a local newspaper. The drop in demand both by locals, as well as by the foreign market has started to have an effect on local property prices and in particular for apartments of the “routine” nature and with no special facilities and location. At the same time developers, who were used to speedy sales in numbers and as a result of vested speed, are still producing such apartments and now they have got the initial shock of the drop. Foreign agents who have the capability to sell units by the hundreds, are abandoning the island, [some of them have gone into voluntary liquidation in order to avoid numerous claims against them by their clients], whereas the greatest fear of the developers, the re-sales are increasing in numbers. There are now such good resales for sale that their prices are indeed competitive. As an indication and for routine projects, we have experienced a general drop of values as follows over the last 6 months.

What is more worrying is the fact that the drop is increasing and it appears also that this summer season has not helped towards the revival of demand. So, what will happen during the winter period until the new summer-sales period of 2009 comes? Regrettably the word property markets’ active buyers (the Russians) have specific requirements, which are specified in terms of location and type of property. The Russian demand directs itself towards villas, either on the beach, or those close to the beach, but with sea views. At the same time their interest is directed towards Limassol (by approximately 80%) and the rest in other towns, with Paphos getting only a small share of this lucrative demand.

The fast reducing demand from the U.K. (which represents approximately 70% of the total foreign demand in Cyprus) has many explanations and the main reasons for this are recorded below. This is in addition to the situation of the real estate market in the U.K. and the uncertainties of the U.K. economy in the future.

In addition to the general real estate market (worldwide) situation, Cyprus has had added taxes on real estate, as well as other burdens which are recorded below (main causes) and which have added to the increase in the acquisition costs:

 Notes: Interest rates:

* : The base rate is the rate the Central Bank lends to the banks there is an extra margin on top of 1.75%-2% by the banks to their customers.
*² : Expectation on our part
*3 : Against the Euro, sterling has lost its value [2008/2007] by 14.5% . It is expected by economic circles that this will stabilize in 2009 around 8-10% loss in value.
*4 : The year 2008 had the most increase in construction costs due to the oil increases. In the first 6 months costs rose by 20% on materials and 6% on labour. Normal increase, in construction costs, [up to 2006], were around 10% on overall costs. In the year 2007 the increase was 4%.

As can be seen, from the above table of costs, there are four basic reasons for the increase in price, of property in 2008, for the UK orientated buyer:
a. The increase in the lending base rate from 3.75% - 5.25%
b. The increase in the contribution [deposit] from 20% - 30%
c. The difference in the sterling value which lost about 14.5% of its value against the Euro.
d. The increase in construction costs, which ultimately is passed on to the sales price.
However, no increases in costs are expected in 2009, bearing in mind present conditions and trends, in the economies of UK and Cyprus as well as the oil prices we can expect a reduction in construction costs compare with the year 2008.

So for those who are in search for property, value for money, now is the time to start looking. Of course the more one waits our expectation is that the more apartments and other accommodation will appear in the market, but on the other hand, the good units will be the first to go. Looking at the same subject on the owners/developers side, we will suggest to be as much accommodating, regarding prices, as you can. For example, if you are charged a 7% p.a. cost on your loan, it is better to drop the price by 7%, rather than expect a better price in the future, since the future is not certain (the cost of maintenance, taxes etc apart).

Dear readers we are sure that we have made some of you happy and some of you unhappy, but for those who might rush to buy property in Cyprus without titles, please follow our 10 Commandments in buying and with the special reference to the Bank release and resale clause being on top of your requirements

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