Real estate expectations – failing to strike a balance
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.