A lack of property investment from the UK is regarded as one reason for the fall, especially in around Paphos, one of the most popular areas for foreign property investors.
The decline in property sales will affect the island's revenue as it means a reduction in Capital Gains Tax. The country's finance minster has announced that it may have to take measures to correct this.
'The downturn in the market is expected to affect public revenues. The government is taking this into account and if recession continues it will take additional measures,' said Charilaos Stavrakis.
He said the income from capital gains tax had fallen by 18% this year. 'This has been expected due to the dependence of the property market on the British market which is experiencing an economic crisis due to the drop in the value of Sterling,' he added.
The government expects activity in the property sector to continue shrinking in 2009. As well as lack of foreign investors the property market is also suffering from more lending restrictions. Banks, who already screen property investors, developers and non-Cypriots who want to borrow, have raised the level of collateral required and changed payment terms.
The lenders are also taking risk into account and the popular coastal resorts are regarded as more of a risk at present as that is where the steepest price falls are being found. Location and whether or not a property is in a tourist area are now taken into account.
According to Andreas Christidoulou, Land Registry manager, it could take three to four years for the property market in Cyprus to recover. His office's figures show sales have dropped by an average of 40% with Famagusta experiencing the highest fall at 50% and Limassol the lowest at 12%.
He believes developers could ease the situation by dropping prices.
