REAL estate prices have hit rock bottom over the past year and should now start moving upwards, a major property reseller has said.
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 per cent 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 per cent 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 prescri ption 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 per cent deposit for a mortgage.
That changed when former Central Bank governor Athanasios Orphanides, seeing the danger, instructed banks to raise the requirement to 30 per cent down.
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.
Says Hajikyriacou: “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 per cent in the next 12 months.”