Cyprus Property Bubble on Verge of Bursting

 

A new Cyprus Law is proposed making any mortgage rank behind a registered contract for sale will mean that banks will want their money back. Once the mortgage is out of the way then Title Deeds can be issued doing away with waits for legal ownership of 10 years or more becoming a thing of the past.

Also Contracts with false sale prices to evade Property Transfer Taxes will be challenged and the Law enforced.

It looks like a complete success for the Cyprus Property Buyers Action Group (CPAG) whose campaigns are winning.

It is about time that the purchaser in the Cyprus Property Market was properly protected by Cyprus Laws. Well done CPAG. All those visits to Ministers in Nicosia have paid off at last.

But watch out for the Cyprus Property Market Bubble bursting. Given the state of affairs in the USA which steadily deteriorated over a year or so and now the same position in the UK and Europe growing, the credit problems in the UK both for banks and consumers, falling equities, higher interest rates in the UK to protect inflation, credit tightening in Cyprus and the removal of the developers title deeds/mortgage fiddles then all I can see is the bubble bursting.

Cyprus Property Market conditions have changed very significantly since the last, let us say, adjustment in Cyprus. We have seen nothing yet.

Who would have predicted a “run” on a major UK Bank 3 months ago? And there will be more bad news round the corner when the global banking market discovers who has bought large chunks of non performing US sub prime property mortgages/loans. If the UK Banks have been heavy buyers then the round of banks not wishing to lend to each other will start again. And the BoE will have to take more money from the market to lend on to restore LIBID/LIBOR markets.

In Cyprus the Central Bank has reduced the lending ratio to both purchasers and developers. The Cyprus Press has heard the Cyprus Land Developers Association is whimpering already. Title Deeds are pivotal to developers credit in the Cyprus Property Market. If they have to issue these to purchasers they will have to pay back the banks. And if even pre sale mortgages rank after the purchaser then even more credit is reduced as banks want their loans back.

Just a few pointers to support my view that the Cyprus Property Bubble is about to burst. From a letter in the Cyprus Press from Denis O’Hare (CPAG) it is evident that he warns against the changes in available credit.

Because of the raft of changes Cyprus property developers could soon become short of liquidity (cash) because the Cyprus banks have to be paid back. And when they go to the Cyprus bank for the next development they have to put up more cash. If any were already strapped for cash because of the previous adjustment then they might find it difficult to continue. In a position where we are aware that there is a large stock of new built properties which are already in a dead market then the only option is to discount to get sales and cash in. But does it go straight to the bank? If it does then still in trouble. But we are aware that there is not much building land available because the developers hold that in huge land banks. Property prices fall.

CPAG are running a great campaign and they have the ear of the senior ministers who are taking this action on title deeds and mortgages.

Personally, I think that “The Cyprus Government” have to take action under EU Law anyway so it will happen.

It has to commercially for protection of “Cyprus Inc” because publicity about the problems are reaching UK Television in the property programmes.

The timing could not be worse because of worldwide credit issues and the associated property markets.

The Cyprus Property Market is dead, so steep price falls are needed to create some demand. Developers have to sell because they will soon have to give up deeds and repay mortgages. Because they have already spent the money from the purchasers it goes to the bank.

So bubble will burst in near time. A prophecy of a burst does not create one unless the conditions make it inevitable. Then it happens anyway. Like a Run on a Bank – it happened with Northern Rock.  

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The Black Art of Buying Property in Cyprus™ ®
The Cyprus Informer™ ® ©
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