Cyprus-Forum.com

[Johnson&Johnson]

Properties: The non-Cypriot buyers
First Published: 05/05/2008 08:21:41
Stockwatch News

According to Land Register figures released recently, eight thousand properties in Cyprus have been sold to non-Cypriots in the past five years. The figures give details on external demand and reflect the size of foreign capital inflow in the island’s property market. However, external demand is only one tenth of the total demand.

The highest foreign capital inflow comes from the United Kingdom (60%). The dependence on British buyers is exceptionally important this year, since the British property market faces the biggest problems in the past decade and the sterling has been devaluated by 20% in the past three months.

40% of the properties sold to non-Cypriots are flats, 24% are houses, 19% are fields and 13% plots.

When Cyprus joined the European Union in 2004, purchases by non Cypriots dropped to 1121 properties, most of which concerned flats, houses and fields. They were only 6.5% of the 17,379 voluntary property sales in 2004.

After the EU accession, purchases neared 10% of the total property sales, reaching 1856 properties in 2005, 2198 properties in 2006 and 2354 in 2007. By mid April 2008, the non-Cypriots bought 508 properties, flats and houses mostly.

Almost 60% of the buyers were British and 14.5% were Greeks.

Despite the impression for a strong presence of Russian buyers in the market, the Russians persist in depositing their funds to banks at the current stage. In the past four years, the Russians bought 9.1% of the total 8037 properties transferred to non-Cypriots, followed by the Germans (2.3%) and the Ukrainians (0.9%). The remaining 14.8% was bought by citizens from a hundred countries.

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What does this article tell us ?

1) The external market is 60% British buyers. This suggests that the fortunes of the Cyprus property market it will rise and fall in tandem with those of the British property market.

2) The Russian buyer with suitcases full of money is a myth. Russians prefer to stay liquid, keeping their money in the bank for easy access in case they have to make a run for it to Serbia or Armenia or somewhere else where they don't ask too many questions.

I find it interesting that external buyers are only one tenth of demand. That means the Cypriots make up the other 90%. How do they afford to buy all this overpriced property ? DEBT !

A wise man once told me, a property is only worth 12x12 it's rental income. This is the formula I use when investing in property. for example, a newbuild 2 bedroom flat in Cyprus rent for about £300-350 per month. 350x12=4200 pounds a year. 4200 x 12 = £50,400 is the REAL value of the property, once the speculative froth is blown away.

This looks much more realistic to me, than the going rate of 100-120k for such an apartment. Crazy money. If you buy a flat as an investment for the current price of 100k, you are actually losing money. Think about it. Even if you manage the central-bank stipulated deposit of 30%, you still gotta borrow 60k, which at 5% over 25 years is 350.75 pounds a month - exactly the maximum rental price you can extract for this sort of property. factor in void period, repairs and maintenence and future interest rate rises and you are haemorraghing money, unless the property continues to appreciate and you make capital gains (highly unlikely - if we are not at the peak, we are past it)

I think the value of flats will be hardest hit during the coming crash. mainly because a) they are the most overvalued, and b) they are still building them like crazy

[DT.]

Properties: The non-Cypriot buyers
First Published: 05/05/2008 08:21:41
Stockwatch News

According to Land Register figures released recently, eight thousand properties in Cyprus have been sold to non-Cypriots in the past five years. The figures give details on external demand and reflect the size of foreign capital inflow in the island’s property market. However, external demand is only one tenth of the total demand.

The highest foreign capital inflow comes from the United Kingdom (60%). The dependence on British buyers is exceptionally important this year, since the British property market faces the biggest problems in the past decade and the sterling has been devaluated by 20% in the past three months.

40% of the properties sold to non-Cypriots are flats, 24% are houses, 19% are fields and 13% plots.

When Cyprus joined the European Union in 2004, purchases by non Cypriots dropped to 1121 properties, most of which concerned flats, houses and fields. They were only 6.5% of the 17,379 voluntary property sales in 2004.

After the EU accession, purchases neared 10% of the total property sales, reaching 1856 properties in 2005, 2198 properties in 2006 and 2354 in 2007. By mid April 2008, the non-Cypriots bought 508 properties, flats and houses mostly.

Almost 60% of the buyers were British and 14.5% were Greeks.

Despite the impression for a strong presence of Russian buyers in the market, the Russians persist in depositing their funds to banks at the current stage. In the past four years, the Russians bought 9.1% of the total 8037 properties transferred to non-Cypriots, followed by the Germans (2.3%) and the Ukrainians (0.9%). The remaining 14.8% was bought by citizens from a hundred countries.

-----------

What does this article tell us ?

1) The external market is 60% British buyers. This suggests that the fortunes of the Cyprus property market it will rise and fall in tandem with those of the British property market.

2) The Russian buyer with suitcases full of money is a myth. Russians prefer to stay liquid, keeping their money in the bank for easy access in case they have to make a run for it to Serbia or Armenia or somewhere else where they don't ask too many questions.

I find it interesting that external buyers are only one tenth of demand. That means the Cypriots make up the other 90%. How do they afford to buy all this overpriced property ? DEBT !

A wise man once told me, a property is only worth 12x12 it's rental income. This is the formula I use when investing in property. for example, a newbuild 2 bedroom flat in Cyprus rent for about £300-350 per month. 350x12=4200 pounds a year. 4200 x 12 = £50,400 is the REAL value of the property, once the speculative froth is blown away.

This looks much more realistic to me, than the going rate of 100-120k for such an apartment. Crazy money. If you buy a flat as an investment for the current price of 100k, you are actually losing money. Think about it. Even if you manage the central-bank stipulated deposit of 30%, you still gotta borrow 60k, which at 5% over 25 years is 350.75 pounds a month - exactly the maximum rental price you can extract for this sort of property. factor in void period, repairs and maintenence and future interest rate rises and you are haemorraghing money, unless the property continues to appreciate and you make capital gains (highly unlikely - if we are not at the peak, we are past it)

I think the value of flats will be hardest hit during the coming crash. mainly because a) they are the most overvalued, and b) they are still building them like crazy

SOrry mate but this is rubbish...I suggest you try and dig up some stats that explain the purchases in money terms and not number of properties.

One Russian tends to buy a property valued north of 1m Euros. A Brit will usually go for 100-300k.

[Johnson&Johnson]

sorry should read : Even if you manage the central-bank stipulated deposit of 30%, you still gotta borrow 70k

70k @ 5% over 25 years = 409.21 per month

you cant even cover that with the rent

[Johnson&Johnson]

Why is it rubbish ?

Do you dispute the figures ?

[Johnson&Johnson]

this is a good site

http://www.propertysnake.co.uk/

and

http://www.property-bee.com/

lots of big price drops in the UK. and things are just getting started.

[DT.]

Why is it rubbish ?

Do you dispute the figures ?

I am not disputing the figures

all i'm saying is that saying a russian buys one property and a Brit buys 10 properties is not a fair assessment of the investment they've put in.

The RUssians property might be worth 10,000,000Euros and the Brits properties might be worth 100,000 Euros each.

Its the size of investment you should be looking to as well.

[Naeel]

The Russian buyer with suitcases full of money is a myth. Russians prefer to stay liquid, keeping their money in the bank for easy access in case they have to make a run for it to Serbia or Armenia or somewhere else where they don't ask too many questions.


'liquid' - yes
but show me any crazy russian who deals with Serbia, Armenia, etc !
noone

[Oracle]

I think the majority of property sold in Cyprus to Brits goes to the retirement market .... and they don't usually put off retirement because they may have to accept £300,000 pounds for their house instead of £350,000 when they probably bought it for £30,000 in the first place ....

[Sotos]

The important thing is that the market from the UK is only about 6% of the total. Also you have to consider than in value terms that percentage is even smaller because most Brits that come to Cyprus are retired couples and they do not buy large properties in very expensive locations. Also most of them are concentrated in certain areas. So maybe Paphos could be affected a bit and maybe the Famagusta area, but Limassol and Larnaca will not see anything noticeable and Nicosia will not be affected at all. At most what can be expected is a less rabid increase in prices. Those that hope that the prices will come down will be disappointed!

[Jerry]

The important thing is that the market from the UK is only about 6% of the total. Also you have to consider than in value terms that percentage is even smaller because most Brits that come to Cyprus are retired couples and they do not buy large properties in very expensive locations. Also most of them are concentrated in certain areas. So maybe Paphos could be affected a bit and maybe the Famagusta area, but Limassol and Larnaca will not see anything noticeable and Nicosia will not be affected at all. At most what can be expected is a less rabid increase in prices. Those that hope that the prices will come down will be disappointed!

Who is British? Do the thousands of GCs based in the UK who buy in Cyprus count as British or Cypriot? A number of my relatives who moved to UK after 1974 are now buying in Cyprus for their retirement.
My belief is that apartments bought as holiday homes and as investments on credit will be the worst affected and the resale market may be flooded with such properties as the UK owners struggle to make payments. In the main these "estate" properties at the lower end of the market are not where Cypriots live.