What does the current global Economic Crisis Mean for Cyprus?

With banks collapsing, property values plummeting and a global recession looming, it is the general consensus that challenging times lie ahead.  What does it all mean for the Cyprus property market and what does the future hold?                         

Christiana Alexandrou, Managing Director for Cyprus Dream Homes, recognizes the global situation has impacted the Cyprus property market but states that it is not all doom and gloom and that the future remains bright

Christiana comments: “Business has certainly been quieter here than in previous years due to a number of factors, such as Cyprus joining the Euro in January 2008, the strength of the Euro against the sterling and, of course, the increasing global economic crisis.                                                         

 “We were extremely busy during 2007 as buyers were keen to purchase before Cyprus joined the single currency.  Although we have since seen that switching to the Euro hasn't affected prices and that they have remained consistent, many people were hesitant to buy in the early part of the year as they were uncertain as to the effect the Euro would have on the property market.                                   

 “Of course the dip in the UK property market has affected the Cyprus market.  Traditionally,
75% - 80% of our clients came from the UK; this percentage has reduced in recent months and, as well as Cypriots, we are now selling more to Middle Eastern and Russian clients.  With UK prices dropping, those needing to sell their homes there before purchasing a property in Cyprus have a lower budget which of course restricts what they can buy.

 “This has been compounded by the strength of the Euro against the pound.  Whilst buyers may have a high sterling budget, at present it doesn't convert so well into Euros and therefore reduces further the number and type of properties they can afford. Having said that, purchasers from other single currency countries aren't affected by this and so they are helping to keep the market consistent.”            

Christiana continues: “People expect that prices will automatically drop here as they have done elsewhere, such as in the UK and US, but the markets in these countries really can't be compared to ours.  Individual countries property markets can be quite different and what is true of one isn't necessarily true of another.  Whilst prices may not increase at the same rate as in previous years, I believe they will not drop.  As long as purchasers choose the right property in the right location where demand is high rather than buy in an area where there are an excessive number of properties, they will be making very sound investments.                             O

 “It is also important to remember that Cyprus is a very small island and therefore only a certain number of properties can be built.  Although it may seem as though construction is taking place everywhere, the government has strict regulations as to what can be built and where.                              

 “The number of people moving to Cyprus hasn't decreased; in fact we have more people than ever wishing to come here partly due to the high cost of living in their own countries.  Rental properties are becoming increasingly popular and so demand for homes in Cyprus in general remains high.                O
 “Another major differentiating factor between Cyprus and other countries which is contributing to the success of our market and the lack of repossessions is our mortgaging system.  Buyers must pay a minimum deposit of 30% in order to be eligible for a mortgage.  Furthermore, they must prove that their monthly salary is at least three times the amount of the monthly repayment.  As a result, buyers can only purchase homes they can truly afford, rather than relying on such things as 100% mortgages and interest-only mortgages that are prevalent in other countries.”                                                      

Christiana concludes: “I have been an estate agent since 1981 and, without exception, prices have continued to rise year-on-year.  Cyprus' property market has proven to be more consistent and less volatile that the UK's as we did not suffer in the early 1990s with a recession and mass repossessions as the UK did.  Certainly while people are attracted to Cyprus and all that it has to offer in terms of the climate, lower cost of living and relaxed way of life, demand for homes here will remain high and the market will stay strong and continue to grow.”