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Article by: Mr. Christos Calogirou chris@bestcyprusproperties.com Published: 15/10/2008

Although it is a hard time for predictions and an even harder time for optimistic statements, after dozens of reports received weekly from clients by www.bestcyprusproperties.com , our feeling is that the property market in Cyprus will find its way, probably sooner than expected. The intention to leave the UK is stronger than ever and as soon as people “digest” the new exchange rates and accept the new realities, traffic from the UK will return to normal.

The Cyprus Property Market and the Global Recession

Chris Calogirou (MBA)

www.bestcyprusproperties.com

People keep talking about the hard times in the Property Market internationally. How far was Cyprus affected? How far is this going to go in terms of time? What will happen if the Sterling Pound does not recover soon? The answer is simple. When the whole world is suffering, Cyprus will also be affected. But what are the consequences…

In a geographically small market like Cyprus, it is amazing how much each area can be different than the rest. Take for example Nicosia. The capital of Cyprus has never been a popular destination among foreign buyers, retirees, holiday home buyers or investors. Its market has always relied on the locals. Local demand showed a marginal reduction but the market remains relatively active and stable.

Limassol traditionally relies on clients from 3 markets, the local, the British and the Russian. The market there was affected by the recession in the U.K., but most of the loss was covered by a relative increase in the sales to the Russians. Local demand also showed a marginal reduction but the overall picture remains positive.

Larnaca was “discovered” by the British buyers during the last decade or so. Although it is the base of the island’s main airport, it has always had lower prices than the rest of the coastal areas. The drop in the demand from the U.K. has affected Larnaca. The same applies on nearby Famagusta. Both areas are trying to cover the reduced demand by promoting their product to Nicosia investors.

Paphos has been affected more than the rest of the island. Traditionally relying on the British second home buyers and the British retirees, the market there is now slower than before.

Prices…

According to www.bestcyprusproperties.com observations, little reduction has been observed during 2008.

Property prices in Cyprus are relatively inelastic. In the past, the contribution of land on the total cost of villas was around 25-30% and on apartments around 15-20%. The increase in the cost of land throughout the island has changed this. In 2008 the contribution of land on the total cost of villas is around 30-40% and on apartments around 20-30%.

This shows three things:

1. The profit of the developers has been reduced. It is dangerous to expect a real reduction in prices, although in some cases a marginal reduction is possible, especially among individual sellers.

2. Because of the size of the island and because availability of “building” land is limited, one cannot expect a reduction in the price of land.

3. Unless the recession in the international markets continues for more than another 12 months, a dramatic reduction in property prices are not expect. It is possible however, to see private sellers who wish to sell quickly, lowing their prices. But this will most likely be a minority.

Although it is a hard time for predictions and an even harder time for optimistic statements, after dozens of reports received weekly from clients by www.bestcyprusproperties.com , our feeling is that the property market in Cyprus will find its way, probably sooner than expected. The intention to leave the UK is stronger than ever and as soon as people “digest” the new exchange rates and accept the new realities, traffic from the UK will return to normal.

 

External Article Link: http://www.property-partnership.com/overseas-property-guides/overseas-property-guide.cfm?id=186

Article Link: http://www.property-partnership.com/overseas-property-guides/overseas-property-guide.cfm?id=186

Please contact the author at chris@bestcyprusproperties.com for more information.

 

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