Real es­tate sec­tor well into sta­bil­ity mode

Financial Mirror (Cyprus) - - FRONT PAGE -

The num­ber of real es­tate trans­ac­tions, as well as price in­dices, shows that the real es­tate sec­tor in Cyprus has shifted into a sta­bil­ity mode.

The num­ber of sales doc­u­ments sub­mit­ted dur­ing the first six months of 2016 shows a 28% in­crease com­pared to the same pe­riod in 2015. If the trend con­tin­ues through­out 2016 we should ex­pect a to­tal of around 6,400 sales for the year. A nor­mal year for the real es­tate sec­tor should reg­is­ter around 10,000-12,000 sales. So, if the 2016 pro­jec­tion holds true, sales should be around 53-64% of the nor­mal. It is prefer­able that we ex­pe­ri­ence a grad­ual sales in­crease so that the mar­ket can maintain it­self, avoid­ing the ‘bub­bles’ of the past.

The grad­ual in­crease of sales is sup­ported by the marginally im­proved fi­nan­cial stand­ing of Cypriot house­holds. The Cypriot fam­ily be­came heav­ily in­debted dur­ing the 2000-2008 pe­riod, which con­trib­uted to the cre­ation of the real es­tate bub­ble at the time. The re­duc­tion of the level of loans is a pro­ce­dure to be con­tin­ued for a few more years. There are of course for­eign buy­ers, about 25% of the to­tal sales, who con­tinue to show in­ter­est in Cyprus prop­er­ties for a va­ri­ety of reasons.

Prices have been steady for the past nine months. Ac­cord­ing to the RICS in­dex there was a price in­crease of 1.2% in apart­ment prices com­pared to the pre­vi­ous three months. Houses reg­is­tered a 1.5% in­crease, while shops de­creased by 0.5%. Trends, as re­ported by RICS, are very sim­i­lar to those of the Cen­tral Bank of Cyprus.

A new in­dex, re­cently re­leased by the Sta­tis­ti­cal Ser­vice (CYSTAT), deals with houses and apart­ments and draws its data from the Lands and Sur­veys De­part­ment, based on prices of trans­ac­tions. While mon­i­tor­ing the in­dex on a longterm ba­sis, we avoid study­ing it on a 3-month ba­sis as it reg­is­ters con­sid­er­able de­vi­a­tions be­tween 3-month terms. The in­dex showed a 1.2% an­nual drop be­tween the first 3 months of 2015 and the first in­di­cat­ing a sta­bil­i­sa­tion trend.

Prop­erty fore­clo­sures are un­der­way, but have not been very suc­cess­ful, as we had pre­dicted. They do not seem to be af­fect­ing prop­erty prices a whole lot.

Based on th­ese facts I think we can ex­press guarded optimism for price trends as well as the vol­ume of trans­ac­tions. We are led to be­lieve that they will move on a course re­lated to the im­prov­ing of bank fi­nances and the Cypriot econ­omy.

3 months




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