Cyprus property prices likely to fall even further due to banking crisis
Cash buyers interested in bargain properties could start looking to Cyprus where the prices of homes have been falling for years and are likely to continue downwards due to the island’s banking crisis.
Property valuers in Cyprus have suspended work as they come to terms with the financial bailout which they say will increase the price falls of recent years.
The country's Property Valuers Association, which represents about 90% of valuers in the country, advised its members last week not to carry out valuations for banks or individuals until the terms of a financial bailout become clear.
A €10 billion rescue deal was agreed between Cyprus and the European Union earlier this week and banks which have been closed for almost two weeks are due to open tomorrow (Thursday 28 March).
The association’s chairman Charalambos Petrides, said that valuers are likely to resume work once the banks re-open. Prices in Cyprus have already fallen by half for residential property in some parts of Cyprus and by 35% for some commercial real estate since the last peak of the market at the start of 2009, Charalambos told Reuters, adding that it was too early to how large the falls might be.
He added that any further falls will magnify the pain felt by the Cypriot economy as a whole, which has relied heavily on the second home market among British and Russian buyers.
‘This is a very big shock for Cyprus that could lead to double digit price drops in some areas,’ said Eri Mitsostergiou, a director of European research at property consultant Savills who has advised on development deals in Cyprus.
In addition to Russian and British buyers who have dominated the Cyprus residential market, the island has seen emerging interest from the Chinese in the western coastal town of Paphos and in Limmasol.
The bailout deal mans that people with savings of over €100,000 in Cypriot banks face losing 25% of their deposits. This could prompt Russians who have invested in property and moved their business headquarter to Cyprus due to its low tax regime, to leave.
‘This is the end of an era for Cyprus. It is another real estate driven economy that faces falling demand,’ Mitsostergiou said.
While some Cypriots may now choose to invest in London or Athens real estate, bargain hunters are lining up for Cyprus property, according to Kostas Kazolides, a London based investor who has been buying property and advising on deals in Cyprus since the 1970s.
‘There will be some great deals. People that are stuck may need to sell up their land very quickly,’ he said.
