Real es­tate ex­pec­ta­tions – fail­ing to strike a bal­ance

Financial Mirror (Cyprus) - - FRONT PAGE -

Since the middle of 2008 real es­tate prices took a plunge, till about six months ago, when the process sta­bilised and it is ex­pected that prices will re­main un­changed dur­ing 2016. No pro­jec­tions be­yond that can be made as a lot of unknowns, af­fect­ing prices, come into the equa­tion.

The vol­ume of trans­ac­tions hit rock bot­tom in 2013, reach­ing a low of 3,767, fol­low­ing a record year in 2007 with 21,245 sales. Based on that, 2014 and 2015 recorded in­creases of 20% and 9% re­spec­tively, reach­ing 4,952 in 2015.

The up­ward trend is ex­pected to con­tinue in 2016 and is es­ti­mated at a 10-15% in­crease.

A sales vol­ume in the real es­tate sec­tor dur­ing a ‘nor­mal’ year should amount to about 10,000-12,000 trans­ac­tions, based on which it is eas­ily un­der­stood that we have some dis­tance to cover to ar­rive at a nor­malised mar­ket, but the prospects are pos­i­tive.

De­spite th­ese facts and fig­ures, we now have the sellers ar­gu­ing that mar­ket con­di­tions have sud­denly im­proved im­mensely and higher ask­ing prices are jus­ti­fied.

Buy­ers at the same time opt to walk down the pes­simistic path, sug­gest­ing that the eco­nomic cri­sis is still to hit bot­tom and prices will fur­ther de­cline.

It is clear that the two groups live and op­er­ate in two dif­fer­ent and dis­tant worlds and will never achieve what both should be aim­ing for, that is to set up and fi­nalise a prop­erty trans­ac­tion.

Be­ing Cypri­ots, we are known to have dif­fi­culty strik­ing a bal­ance be­tween two ex­tremes, on many is­sues. In­stead of walk­ing a straight line, many a time we’ll ei­ther jump off the cliff or take off to the skies.

There are a lot of in­di­ca­tions that the real es­tate mar­ket will grow at a slow but steady pace. It will also prob­a­bly be below the nor­mal vol­ume of trans­ac­tions and prices.

There are of course fac­tors which may af­fect th­ese pro­jec­tions. Namely, the progress of set­tling non-per­form­ing loans and fore­clo­sures, the rate of new bank loans, eco­nomic growth, un­em­ploy­ment rates, buy­ers’ psy­chol­ogy and much more.

Th­ese are unknowns which could shift the mar­ket ei­ther way.

The pos­si­bil­ity of a so­lu­tion to the Cyprus prob­lem was not men­tioned on pur­pose, as such a de­vel­op­ment would gen­er­ate a whole new dy­namic for the real es­tate sec­tor.

Sum­ming up, I would ex­pect that prices will re­main sta­ble for a pe­riod of time while sales are ex­pected to grad­u­ally rise but re­main below nor­mal lev­els for quite some time. Both sellers and buy­ers should ex­er­cise com­mon sense and eval­u­ate all fac­tors in their true di­men­sions rather than be­ing led into mak­ing wrong de­ci­sions ei­ther by over-op­ti­mism or over-pes­simism.

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