Real es­tate – sta­bil­i­sa­tion with a scent of growth

Financial Mirror (Cyprus) - - FRONT PAGE -

The Lands and Sur­veys Dept. re­cently an­nounced the re­sults of real es­tate sales in Cyprus for the month of Oc­to­ber. As ex­pected, a steady re­cov­ery in sales has been main­tained. It is ex­pected that the growth in sales will con­tinue un­til it reaches the nor­mal lev­els of 10,000-12,000 sales an­nu­ally.

The 2014 sales were 4,527 prop­er­ties, rose to 4,952 in 2015 and are ex­pected to reach 6,200 in 2016. The up­ward trend is sup­ported by the fact that there was con­sid­er­able 32% in­crease dur­ing the first ten months of 2016 com­pared with the same pe­riod in 2015. The an­nual in­crease be­tween 2014 and 2015 was a mere 9%. This shows that eco­nomic ac­tiv­ity is ris­ing as time goes by, also boosted by a bet­ter buyer psy­chol­ogy and re­sult­ing in a higher sales vol­ume.

In ac­tual num­bers, sales con­tracts de­posited at the land reg­istry in the first ten months rose by 1,285. Prop­er­ties bought by for­eign­ers dur­ing the same pe­riod rose by 18% to 195 prop­er­ties.

For­eign­ers bought 24.1% of prop­er­ties sold in 2016. Thus, 85% of the in­crease in prop­er­ties sold in 2016 were pur­chased by Cypri­ots and 15% was at­trib­ut­able to for­eign­ers.

Th­ese per­cent­ages do not sup­port the no­tion that the main rea­son be­hind the sales in­crease was due to for­eign in­vestors. It is true that for­eign­ers buy higher value prop­er­ties on av­er­age, to serve the pur­pose of ob­tain­ing ei­ther cit­i­zen­ship or a per­ma­nent stay per­mit.

The RICS or­gan­i­sa­tion re­cently pub­lished their real es­tate sales in­dex for the April-June pe­riod. The prices for the year end­ing on 30/06/2016 in com­par­i­son to those of 30/06/2015 show a 0.50% for flats and 1,1% for houses. Th­ese were bor­der­line in­creases, but it is the first time since 2008 we reg­is­ter an an­nual in­crease.

In con­clu­sion, it is un­der­stood that the ac­qui­si­tion of many prop­er­ties by banks (through debt-to-as­set swap) and their sub­se­quent place­ment into the real es­tate mar­ket will ex­ert pres­sure on prices. Prop­erty auc­tions will also have a sim­i­lar ef­fect. It is es­ti­mated that this pres­sure will not re­verse the up­ward trend de­scribed above but rather con­tain it into a more grad­ual but steady growth.

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