RICS: Cyprus property market shows weak signs of growth

Signs of recovery are visible in some European housing markets, especially in sales levels and prices, but not so in Cyprus, according to the latest Royal Institution of Chartered Surveyors (RICS) European Housing Review.
According to the study, the Cyprus market is depressed and shows weak signs of growth. The building permits, a forward indicator of house building, showed a relatively moderate fall to September 2009 of 9% year-on-year. Transactions data from the Cyprus Property registries are the starkest indicator of a sharp decline. In 2009, excluding December, sales were down 47% on the previous year, which itself had seen marked falls from 2007 levels. The biggest declines were related to foreign buyers. This fall reflects the general bursting of the holiday homes bubble around the Mediterranean as a whole and Cyprus-specific aspects as well.
Towards the end of 2009, some buyers entered the market giving signs of some growth, but the flat or contracting economy, the risk of higher euro zone interest rates and the supply overhang don’t give much hope for 2010.
“In 2009, the residential market in Cyprus experienced price declines between 10-15% in Nicosia and the other cities, 25% to 30% in the tourist areas and between 10-20% in permanent residence areas,” explained Pavlos Loizou MRICS, executive board member of RICS Cyprus.
“There are limited signs of recovery within 2010, and Cyprus will continue to experience a depressed market,” Loizou said, adding that, “big declines in the Cyprus market are related to foreign buyers and their intention to buy holiday homes (the revival of their domestic economy is essential before proceeding with buying a holiday home in Cyprus).”
“In addition, the economic instability of the island, the increase of the budgetary deficit and the strict loan policies that were imposed by the banks limit the local demand and hold back the housing market in Cyprus.”
In contrast to the findings on Cyprus, the RICS study found that a significant number of European residential markets were starting to revive from spring/summer 2009 and further revival is expected in 2010. Low interest rates and reviving economies helped to avoid housing market meltdown across much of Europe. Consequently, this looks like it is going to be more limited than the last major one in the 1990s. However countries with vulnerable economies will continue to experience depressed markets and falling prices.
Some countries have experienced sharp price increases. In 2009, prices in Norway rose by 12%, in Finland by 8% and in Sweden by 7%. In the UK, prices rose by 1% in 2009 overall, but by 10% since their lowest point in April. In Germany, Italy, Netherlands and France, last year’s falls were relatively moderate (between -4% to -6%) and though today markets are still fragile, they are starting to stabilise and to see some price growth.
The worst performing markets of 2009 were Ireland, Spain, Greece, most central and eastern European countries, and especially the Baltic States where prices declined between -27% to -53% in 2009. Geographically, together they form an unlucky horseshoe around the edges of Europe.