Cyprus Investment Property Market News

There was a significant increase in the number of property transactions in Cyprus in the first six months of 2007 with the number up almost 30% compared to the same period last year – this resulted in deals concluded exceeding a billion Cyprus pounds.

As a result of this dramatic increase the Central Bank of Cyprus has decided to take direct action to curb the property price rise fire by placing restrictions on the mortgage loans now available to residents and non-residents.  This is our latest Cyprus investment property market news…

It is expected by many that the action taken by the Central Bank of Cyprus will have a negative effect on the success of the housing market in Cyprus next year and that it will create an environment where it becomes more difficult for developers and vendors to sell their real estate. 

However, at the same time it is predicted that the action will bring some stability into a market which has been accused of heading for boiling point and it should mean that instead of facing a situation in the near future when the market could crash, it will instead level off to more sustainable levels in terms of property price appreciation.

The action taken will include reducing the new margin for loans to buy land, holiday homes or second homes from 70% to 60% of the value of the land or property, and what’s more, banks are being ‘urged’ not to extend loans to non-residents on the 80% margin for first time buyers.

In addition to this action there are efforts underway to stop a widely abused banking practice whereby higher valuations are taken as the benchmark for lending.  From the 22nd of August it is now the law that banks lend on the lower estimate and valuation of any property under consideration for a loan.

This tidying up, tightening up and general overhaul of the lending market in Cyprus will of course have a strong effect on the future success of the housing market – but in our opinion it will not restrict the overall appeal of investment property in Cyprus for many because the demand fundamentals remain the same.

Now, if you don’t want to just take our word for it, consider the opinions of Citigroup which are in line with our own!  In its latest comprehensive review of Cyprus banks and their attraction in terms of Buy rating, Citigroup maintains that the environment for Cypriot banks remains good even in spite of action to reduce the availability and attraction of mortgage related products. 

While Citigroup are aware that loan growth will not continue to expand so strongly in 2008, they remain confident in the property sector supporting the positive Buy ratings for banks like the Bank of Cyprus because, as they put it “we believe that the Cypriot property market is still attractively valued by European standards and sources of demand remain strong.”

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