Cyprus Investment Properties – Has the Market Bottomed Out?

As we are all too painfully aware, property prices across the world have taken a tumble, with the only variable being the degree. Some countries, such as Greece and Australia, have emerged from the crisis relatively unscathed, with property prices stagnating but not falling. Other nations, notably the US, the UK and Spain have suffered something of a meltdown in the property market.

In Cyprus, the property market split into two and, whilst property in tourist areas plummeted in value, residential property outside these areas remained fairly buoyant. As the effects of the crisis become more apparent, the 40% decline in the price of holiday properties became too large an effect to ignore and the ripples have now affected property prices across the whole island. Experts estimate that the price for residential homes has fallen by up to 10% and that the market is extremely sluggish.

Lakis Tofarides, president on the Cyprus Land and Building Developers Association stated,

“The price of a main residence in the centres of Nicosia, Larnaca, Limassol, Paphos and Famagusta has dropped by over 10% while prices of summer residences have fallen between 30 and 40%,” He added that land prices have remained steady and hopes that this will act as a brake to any further decreases.

Tofarides is confident that the market has bottomed out and that residential values will not fall any lower. Stable land prices should help to underpin values, although it is unclear if this will include the coastal Cyprus investment properties. ‘The value of land, which once represented 18% of the total value and now represents 45%, will not drop,’ added Tofarides

Cyprus Investment Properties - Growth Amongst the Stagnation

Cyprus Property Investment – Stagnation and Solutions

However, despite lower prices, which should encourage first time buyers, the market is still extremely stagnant, and the number of transactions has fallen by 80%. The government has offered loans and incentives to first time buyers, but the money earmarked for this lies largely untouched.

Amongst a raft of suggestions designed to drag the market from its stagnancy, Tofarides suggests a number of measures, one of which will be of potential interest to foreigners interested in Cyprus investment properties.

One of his proposals involves reducing the tax burden for buying properties. Whilst the taxes on low-end properties are reasonable, at 4% for properties less than €100 000, this percentage rises steepl. An investor purchasing a property of half a million Euros will pay €60 000 in duties, an extortionate amount at the best of times but even more so when the world is in crisis. Cyprus also adds VAT onto these duties, further deterring potential property investors.

Certainly, reducing the tax burden may be one way of stimulating the market and luring back foreign investors, especially if the government delivers on its promise to sort out the numerous issues with the new rules for Cyprus title deeds. If demand in the tourist areas increases and prices rise, there is a chance that this will positively impact values across the whole island. For a nation that relies upon the property market as a major source of income, overcoming governmental inertia and offering incentives may yet reap dividends. Cyprus property investments may, once again, become an attractive preposition.

Photo Courtesy of Vasantdave: sxc.hu/photo/751976