by Johnson&Johnson » Tue Sep 02, 2008 9:39 am
Dinos is absolutely right, some property markets have boomed, crashed and never recovered, or at least not recovered for decades.
the adage that 'property always goes up in the long run' is untrue. it may APPEAR to only go up in the long run due to inflation. when you strip inflation out of the price then it looks very different.
saw this today:
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Housing properties in the red
First Published: 01/09/2008 08:05:59
Last Updated: 02/09/2008 08:01:18
According to a survey carried out and presented by StockWatch, the house and flat prices have dropped while property prices have stabilized. The survey, which includes real estate agents from all municipalities, shows that the crisis that started in Paphos has spread to the other seaside cities too except for Limassol, where the Russian purchases interest keep prices at last year’s level. The real estate agents talk about a significant decline in prices in non-seaside cities too.
The real estate agents noted that slump in sales to non-Cypriots expanded top domestic market too, exercising huge pressure on the property prices, which must be restrained so as not to decline further.
According to their statements to StockWatch, the house and flat prices have dropped, especially those destined to non-Cypriots. However, domestic demand faces problems too, since prices in non-tourist areas fall as well. On the other hand, it is quite impressing that the price of plots, fields, offices and shops has stabilized.
“Under the table” sales
StockWatch’s survey reflects the size of the crisis and the concerns for the prospects of the property market since the sellers have already admitted that they dropped their profits from 20% to 30% “under the table”.
For the time being, however, the advertising spots have not changed.
“If someone advertises in lower prices, the system will collapse”, one of the real estate agents said.
Sharp increase in the previous years
On the question whether there has been a drop or an increase in property prices, 11 of the 12 real estate agents replied that prices will drop or stabilize, while 1 said that prices will increase as a result of the increased construction cost.
The vast majority admitted that the price hikes in the past few years were unrealistic.
“We expect a depression just like in the CSE, where only the big funds survived”, an agent stated.
Another agent referred to a “tsunami that hits property market”, especially in external demand. “The sharp increase in property prices as a result of the huge demand by non-Cypriots and the uncertain future of economy make the investments in properties unfeasible for the Cypriots”, he noted.
According to latest Central Bank figures, the price of housing properties grew by 15% in 2007 against 10% in 2006, 12% in 2005, 20% in 2004 and 8% in 2003.
Reasons
Almost all real estate agents said that the drop in the domestic market is attributable to the bank interest rates, the inflationary pressures, and the increase in the deposits’ interest rate.
Part of them believes that the sales by the non-Cypriots, especially the British who cover 85% of the market, hit the stability of the property market.
“In order to take advantage of the difference between the sterling and the euro, the British sell their flats and houses either to buy in their country or in some other country such as Spain, where unsold houses and flats reach one million”.
Sharp drop of activity
The problem with the prices starts with the slump in demand. All 12 agents support that the in the seaside areas of Paphos, Larnaca and Ayia Napa the real estate agents are inactive.
“They beg us to sell them even a flat so as to give us 8% additional commission”, an agent from Nicosia said, while another from Larnaca stated that if the sales index stood at 100 in 2007, today fell to 5.
Limassol is the exception to the rule due to the Russians. “The Russians push sales up in Limassol and the city does not have to deal with the same problem”, the real estate agents concluded.
