“Now is the time to buy, otherwise you’re going to miss the boat,” said Chris Hajikyriacou, sales director at BuySell Cyprus. Hajikyriacou, upbeat about the market’s prospects despite the depression, told the press that demand is about to outstrip supply. That could only drive prices up, he predicted, but added that the process would be a gradual one – six months to a year.

He was commenting on the latest property price index issued by the Royal Institution of Chartered Surveyors (RICS) this week. The RICS Cyprus metrics showed that, compared to Q4 2012, prices dipped 13.3% for apartments and 10.5% for houses. Meanwhile, for the same period rents fell 13.3% for flats and 12.3% for houses.

Central Bank data shows that since Q4 2008 there’s been a 23 per cent decline in the residential property price index (flats and houses). The index peaked just before Q4 2008. The downward path kicked off in the last quarter of 2008 after the collapse of Lehman Brothers in the United States and the ensuing global credit crisis. And during 2013, the Central Bank’s index shrank by 7.2%.

The figures cited both by RICS and the Central Bank sync appear to be accurate, Hajikyriacou said. “Given inflated prices during the 2007 to 2008 housing bubble, a price correction of approximately 25% sounds just about right.” By way of example, a three-bedroom property, with swimming pool, in Peyia recently went for €155,000 – a bargain considering prevailing prices in previous years. According to Hajikyriacou, the market picked up steam during the first quarter of 2014, during which BuySell has seen a 600% sales increase compared to the corresponding period last year. Buyers include Russians, Britons, investors from the Middle East (Lebanon and Egypt) and Scandinavia, and even Cypriot expatriates. Britons in particular have been taking advantage of the sterling’s rise against the euro in recent months. The increase in both inquiries and actual purchases extends to the off-plan property market, where primarily Chinese nationals and Russians are buying.

The boost has been encouraged through the government’s citizenship-for-investment scheme, where foreign nationals buying new property units see their paperwork come through faster than those who shop on the resale market. As demand eventually catches up with supply, prices are set to go up.

On the flipside, high mortgage loans – due to banks’ cash-flow woes – as well as the title deeds mess are scaring away many would-be buyers. From Hajikyriacou’s experience, however, the title deeds situation is somewhat improving. In Paphos, he claims, perhaps as much as 95 per cent of pending title deeds have been issued. But Paralimni and Protaras remain problem areas. Banks, with massive non-performing loans (many tied to property) on their books, are being extremely stingy with new loans. “They’re making it extremely difficult for borrowers. The screening process is now so severe, I’ve even heard of cases where a bank asked clients how much they spend monthly on booze or prescription drugs to get a feel for their financial situation.”

That’s a far cry from the halcyon days when lenders carelessly dished out loans relying on unrealistic property valuations from property developers. Moreover, banks had required only a 10% deposit for a mortgage. That changed when former Central Bank governor Athanasios Orphanides, seeing the danger, instructed banks to raise the requirement to a 30% downpayment.

Banks have recorded hundreds of millions of losses from bad loans in the industry. According to an earlier estimate by Pimco, Bank of Cyprus suffered losses of €0.8bn from loans to developers. Though substantial, the property price correction in Cyprus has been milder compared to what has taken place in other “memorandum” countries, such as Greece or Spain. Hajikyriacou says: “Property in Nicosia and Limassol is still slightly overpriced, though not in the other districts. But overall, I’d say that nationwide the price correction has gone too far, and as people start getting over the shock of the haircut, values should rise by at least 10% in the next 12 months.”

Source: Cyprus Mail