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Drop in UK buyers severely impacts Cyprus property market

Aristo, the biggest homebuilder in Cyprus, has reported a 41% decline in sales during the first 10 months of 2008 as demand from UK buyers fell by about 75%.

While at Michael Cartwright, salesman at Leptos's office in north London explained that dozens of potential customers planning to retire to the Mediterranean island have been unable to sell their homes to finance a move to Cyprus and investors seeking a holiday home or rental property have similar problems.

'Business isn't good, but we're surviving. The biggest problem is the value of the pound and the weak UK housing market,' said Cartwright.

Second-home buyers will keep their money back in their wallets for the next two years or so, according to said Dominic Farrell, founder of Jet to Let Investments.

Cyprus, a British colony until 1960, depends more on UK buyers than any European property market. In the past five years, the British accounted for about 10% of new-home sales on the island and two-thirds of all foreign purchases, according to brokers on the island. That's proportionately higher than for larger holiday-home markets, like Spain or France.

Developers and contractors from the Paphos area are in dire straits as a result of the downturn in the property market. Many companies are on the brink of bankruptcy as hundreds of their properties are unsold and the banks are refusing to help them out with new loans.

Some company bosses complained that they cannot even cover basic running expenses, which would make lay-offs inevitable, sooner rather than later.

Many are slashing prices in a desperate attempt to boost sales with some areas seeing price drops of up to 30%.