According to data from the Land Registry Department the number of property sold to foreign buyers fell to less than 1,100 in the first seven months of 2009 compared with 4,552 during the same period of 2008.
Areas like Larnaca and Famagusta which have always been popular with foreign buyers saw an astounding 80% fall in purchases by non nationals.
The Mediterranean islands property market is also being battered by falling property prices and the on-going row over title deeds and the resulting bad publicity may also be putting buyers off.
This year residential property prices in Cyprus have fallen for the first time since 2005. The average cost of a property fell by 2.2% in the first quarter of 2009, according to the BuySell Home Price Index.
The Land Registry Department is predicting that prices will fall further during the second half of the year. The lack of property sales together with the large debts owed by developers to the banks will result in property prices plunging further from September, it says.
According to Solomon Kourouklides, chairman of the Association of Real Estate Agents, developers in Cyprus tried to attract buyers with incentives such as free air conditioning earlier this year. But now they have no option but to drop prices if they want to sell.
Those selling property are hopeful that bargain prices will mean a return of foreign buyers. Serge Cowan of Unique Living, which specialises in luxury properties around the world, said that high end real estate in Cyprus represents a good buy for those with the money to spend.
He cites the example of a four bedroom villa in Souni, Limassol which is currently for sale at €895,000 having been reduced from €1 million, a drop of 10.5%.
'The market is certainly giving all the appearances of being ready to bottom out. Now is a good time to buy while there are some distressed sales and good prices,' said Cowan.
Some are even predicting that developers will offer discounts of up to 30%. According to Antonis Loizou, managing director of Antonis Loizou & Associates, the largest licensed Estate Agents and Chartered Surveyors in Cyprus, areas such as free Famagusta, Avgorou, Dasaki Achnas, Xylofagou, Tersefanou and the seaside areas of Paphos might see considerable discounts because of low demand and developers needing to pay off their debts.