Our six month experience of drop in property demand, has guided us to observe the reduction in sales prices. In developed countries demand and supply is paramount and price adjustments are immediate/responsive to the market forces. This is not so in Cyprus, mainly due to the:

1. Local attitudes - People, including developers, prefer to hold on for better times than respond immediately to a fall in demand.

2. Financiers - are not pushing to any noticeable extent. To this end the archaic system that we have on recoveries/forced sales, provides the debtors with a cushion period which could be extended for years.

3. The economic situation in Cyprus is not as bad as in other countries, with local unemployment reached 5%, whereas there is always some relative somewhere to help out.

4. There is the hope that recovery will commence mid year 2010, interest rates are going down, financiers’ liquidity is improving and numerous Governmental projects are coming in the market. All these provide a certain confidence, which, again, encourages distressed people to hold on their properties.

5. Foreign sales demand has been reduced by 75% and local demand by 58%. Both percentages are very large and under normal circumstances the market could have collapsed (e.g. if the Banks place in the market thousands of properties, prices will be reduced further, but this will backfire on the Banks themselves, since their security value will be reduced). This sort of market situation has been addressed by the Irish Government, who has decided to buy mortgaged property with a budget of €60 billions, in order to assist the Banks with their liquidity/security of capital (the Government will manage the properties “on behalf of the people”, meaning that it will sell gradually at discounted prices), whereas the Spanish Central Bank has changed the regulations of measuring non performing loans, in order for the Banks to present a better balance sheet.

Holiday Homes
Reasonably attractive units of a somewhat competitive nature, have shown a reduction of 20%. We have tested this percentage on 3 separate occasions, by reducing the price by 10%, then again by 15% and lastly by 20% on which point we concluded a sale – and all 3 units were sold. So this is the magic number should you want to sell at this point of time. Of course the percentage increases the less competitive the project is. Voroklini and Paphos projects have met with an increased reduction reaching 25%-27% and that if there are clients at all, whereas at the Famagusta area, developers are advertising at 25% discounts (a Pafian developer at 30%!!). Holiday homes which are popular with locals, such as eastern Cyprus, Larnaca area west etc have attracted Nicosia buyers, mainly of the middle income groups and for prices around €200.000-€300.000. Foreign buyers are still around, but they are few and in between, whereas the choice offered is so much that the success (conversion) rate is no more 1 to 10.

Permanent Units
For permanent residential units the situation is not so bad, but, again, a 15% reduction offers better sales chances. The market is there but buyers (locals) are holding back expecting further price cuts. We doubt however that this reduction will reach this 20% level and if so, it will be for a short period of time.

New permanent housing units are being gradually absorbed, whereas new developments are rate. As such we expect that mid 2010 prices will stabilize and for the better quality projects, prices will show some signs of upward movement.

Shops/Offices
This nature of property is local demand based and as a general comment we can say that such properties in good (not necessarily top) locations have a market and prices have not experienced any reduction. Nicosia and Limassol have even shown appreciation signs for high tech offices and for commercial units of the +10% range.

Residential plots/fields
Everybody is selling, investors, developers and others and we, as any Office, never experienced so many offers with eager sellers. Prices have decreased by around 8%-10% although in some cases it has reached 12%-15% depending on how desperate the seller is. Prime plots however of a commercial nature hold their value with an upward tendency.

Fields
Agricultural land especially that with no particular attraction has had a big hit. Prices have been reduced by around 20%-25% and even then you might not find a buyer.

Now it is the time to buy in terms of investment funds especially residential plots/ land. Everybody is suffering from this situation, but if we are to adopt the saying “there is nothing bad that does not lead to good”, we will learn by our experience (at least for a time, until we forget the past again) for better use in the future.

We feel that we must repeat our advice to those people who might have received a “threatening” letter from financiers regarding their delayed payments not to panic. This is not Spain where the Banks can take possession within 30 days, neither Dubai, where you can end up in prison. You must weigh your added interest charges, to a possible value loss vis-à-vis, recovery period - Also bear in mind that you will find financiers being very accommodating in offering discounts on interest charges in case you decide to sell/pay off the loan.

Sometimes it is good to live in an “undeveloped” economy since it has its good aspects!!

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