Update on the Cyprus Property Market | Issue 3 | June 2009

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Company Profile

Antonis Loizou & Associates is a professional firm of Chartered Surveyors offering valuation, agency and project management services. The firm was set up in 1980 and is now the largest and most comprehensive professional firm of Chartered Surveyors in Cyprus and the Eastern Mediterranean. The firm employs 75 members of staff across 8 offices in Cyprus, Romania, and Russia and is one of the leading real estate advisors for corporations, finance houses, as well as the local government and individual members of the public. More about us

Issue 3, June 2009

Cyprus Economy

● The number of registered unemployed rose by more than 5,000 in April and the unemployment rate now stands at 5.4% (unemployment in the Euro area stands at 9.2% and in the EU27 at 8.6%).
● According to the Inland Revenue Department (IRD) tax revenue collected during the first four months of 2009 fell by 10.5% year on year to €487m from €544m in the same period in 2008.
● The Cyprus economy grew by 0.01% over the first quarter. This was weaker than the 0.5% recorded in the fourth quarter of 2008 and the year on year growth rate of 1.6% (seasonally adjusted) is much lower than the growth rates Cyprus is used to, which normally range from 3.5% to 4%.
● Cyprus based banks announced their willingness to expand lending, especially towards acquisition of property and major infrastructure projects. However, as a sign of the ongoing credit squeeze total loans granted were down from €55,96bn to €44,51bn year on year according to the Cyprus Central Bank.
● The Cyprus stock market continued its bullish upward trend, becoming the fastest rising stock market in the world for May 2009 (it has risen by 150% since March). It was also the fastest rising stock market in the world in 1999/2000.

Cyprus Property Market

● The downward pressure on property prices continued, as pessimism about falling property prices persisted. Whilst there are some signs of activity in the market, mainly by locals looking to take advantage of lower prices, banks are continuing to refuse to lend meaningful amounts or are only willing to lend at very high interest rates (do not be duped by the low rates during the grace period).
● The Cyprus Central Bank announced that the average cost of lending for property acquisition increased by 1.35% in March year on year to 6.82%.
● Vendors have generally refused to lower asking prices or their expectations. With Cypriots having one of the highest borrowing/indebtedness rates in Europe and property compiling a large percentage of Banks’ exposure, it is only a matter of time until the balance tilts and banks begin to add pressure on lenders resulting in lower prices in order to achieve a sale and thus repay their loans.
● The property market in Cyprus is very seasonal with transaction activity being at its highest from March until end July. With a number of projects still under construction and due to be delivered this year and a large number of properties already on the market, one wonders how much pressure will be put on property prices from September onwards.
● According to Land Registry data the cumulative decrease in transaction activity for the first five months of 2009 amounts 61%.
● The reduction in activity in the construction industry was shown in the release of the quarterly results of Vasilikos cement company. Total quarterly sales of cement were down from 506,000 tones to 367,000 tones; a decrease of 27.5% year on year.
● Antonis Loizou & Associates has carried out an in-depth analysis of affordability of housing by locals (Read Article or Download PDF in Greek). Using data from the Cyprus Statistical Service and the Nicosia Land Registry for the years 1998-2008, the study concluded that the ratio of income to housing currently stands at 11 times compared to a long term average of 7 times. The main reason for this increase, and hence decrease in affordability, is that land prices have risen by more than 576% over the past 10 years.

Global Property Market

● Eurostat announced that Euro area inflation was 0.0% in May 2009. The looming danger of deflation (i.e. the persistent reduction in prices) is causing major concern amongst central bankers. If expectations of price decreases materialise, then consumers and entrepreneurs are likely to postpone purchase decisions thus stifling demand and growth moving forward.
● The “fun and games” in the UK housing market continued with residential asking prices rising for the second consecutive month according to Halifax Bank. At the same time activity in the market has remained at an all time low, as the decrease in interest rates on existing loans (caused by the low base rate set by the bank of England, currently at 0.5%) is reducing the pressure on existing owners to sell their properties and banks continue to be unwilling to lend with mortgage lending remaining at an all time low.
●The proportion of prime UK residential mortgages that are three months or more in arrears has more than doubled in the past year. The rise is significant because it shows that the economic downturn is now starting to push up mortgage arrears among mainstream borrowers – as opposed to riskier subprime customers with patchy credit histories.
● Recently released data show that average UK commercial property values have tanked 43% since peaking in June 2007 and the worst may not be over. Rents are in freefall, compromising cash flows and putting landlords' ability to pay interest on their debts in jeopardy. The drop in values is causing a huge burden on the UK banking sector; unless there is a bottoming-out of banks' exposure to the sector, no-one will start lending again.
● A number of developing economies are under increased pressure due to the outflow of foreign investment (flight to safety). Apartment prices in the Latvian capital Riga fell 50% over the year; prices in Dubai were down 35% over the year.
● Buyers in Ireland are struggling to secure property finance as building societies are rejecting four out of five mortgage applications because they have tightened their lending criteria so much. The majority of mortgage applications were rejected because of fears about the applicant's job security and constantly changing lender acceptance criteria.

Cost of Debt

GBP LIBOR EURIBOR

28/05/2009 Previous day 28/05/2009 Previous day

1 year 1.29% 1.27% 1.53% 1.51%

2 year 1.96% 1.92% 1.82% 1.79%

3 year 2.56% 2.51% 2.23% 2.20%

5 year 3.29% 3.25% 2.87% 2.84%

10 year 3.97% 3.93% 3.70% 3.70%

15 year 4.28% 4.27% 4.07% 4.08%

20 year 4.29% 4.29% 4.16% 4.19%

Articles

Household Insurance	Antonis Loizou, FRICS 12/04/2009
Household Insurance provides insurance against accidental loss or damage or destruction that may occur to you house or apartment, furniture or personal belongings, from a certain number of perils which are defined in your insurance policy. Household insurance is provided under various insurance policies names such as, fire policy, comprehensive policy and certain other types, which provide various covers. Read Article

We are not so Bad by Comparison	Antonis Loizou, FRICS 10/05/2009
We have studied a most interesting article in the Sunday Times of the 26.4.09, which refers to British who buy permanent/holiday homes abroad in search of a better life. We will report some aspects of this report not so much to rest our Cypriot market anxieties, but so as not to feel alone in this global situation regarding the real estate market in Cyprus and its attraction to the British market. Far from it, Cyprus, it appears, that by comparison... Read Article

The Abolition of the Nicosia Local Plan	Antonis Loizou, FRICS 03/05/2009
It has come as a shock the abolition of the town planning Nicosia Local Plan, set as at 2003 and altered up to 2006. This 2006 plan included new agricultural areas into residential/ development areas, existing building density was increased in certain cases and in other cases it introduced for the first time protection from development zones. It has introduced incentives to build public parking, higher storey heights etc etc. Read Article

Valuations for Finance

Antonis Loizou, FRICS 26/04/2009

Most people, when buying real estate, require finance and the financial institutions carry out a valuation, most usually by registered valuers, in order to ascertain the property’s value. Based on the Central Bank instructions to the Banks, the borrower must contribute a minimum 30% of the value of the property and the financier the other 70%. Usually the 30% (in case of permanent residences it is reduced to 20%-25%)... Read Article

Our News

Cyprus Real Estate Index | Fourth Issue | 2008-2009
25/04/2009

The Fourth Issue of our Index covers the period 1.1.2008 up to 31.12.2009. It provides prices for various types of real estate and for various locations (including building plots, houses, flats, land, shops, offices, hotels, factories etc). The Index provides returns, rental income, expected capital growth etc, for the various types of real estate. The Index provides also market trends and expectations and it discusses the various factors, which affect the Cyprus Property Market and the local building industry in general. It refers to the industry’s problems and the firm’s anxiety as to the state of the market and suggests several corrective measures. The Index, published is a compact 102 page booklet, is revised every 12 months and each publication will be upgraded with more and varied information. Download PDF (in Greek)

In the News

Ο Παύλος Λοΐζου ήταν φιλοξενούμενος του κ. Μαυρίδη στην εκπομπή του ΡΙΚ-1 "Τηλεοικονομία" στις 27 Μαΐου 2009 σε μια συζήτηση για την μελέτη που έγινε από το Γραφείο μας με θέμα την προσιτότητα κατοικίας σε σχέση με τους μισθούς ενός ζευγαριού.

Watch Video

Ο Παύλος Λοΐζου ήταν φιλοξενούμενος του κ. Μαυρίδη στην εκπομπή του ΡΙΚ "Τηλεοικονομία"

Ο Παύλος Λοΐζου ήταν φιλοξενούμενος του κ. Μαυρίδη στην εκπομπή του ΡΙΚ-1 "Τηλεοικονομία".

Property for Sale in Cyprus

Houses

Nicosia | Limassol | Larnaca
Paphos | Paralimni - Ag. Napa

Apartments

Nicosia | Limassol | Larnaca
Paphos | Paralimni - Ag. Napa

Land

Nicosia | Limassol | Larnaca Paphos | Paralimni - Ag. Napa

The aim of this newsletter is to provide a brief analysis on the current state of the economy, as well as an indication on the real estate market both locally and globally. This newsletter should be considered as an advisory one; the aim is just to provide monthly information regarding the aforementioned issues. Our newsletter will also provide a list of articles and questions and answers as well as news and exhibitions of the company.

Newsletter archive:
Issue 1 - April 2009 | Issue 2 - May 2009