Cyprus Property Crisis Looms

By Anna Hassapi Copyright © Cyprus Mail 2008

A PROTEST by Limassol developers against the increased bank interest rates this week revealed just how concerned some professionals in the real estate sector have become. Even more worrying for developers, however, is that Cypriot banks have almost stopped giving out loans to property buyers. This has reduced demand for houses, while their availability grows as a result of foreign property owners selling their holiday homes due to the global crisis.

“Jobs will be lost as we are not planning any new projects for next year. We also have problems with selling properties in current projects as the banks are not giving out loans easily any more,” confirmed Vasos Loizos, Director of Limassol-based Loizou Bros Developments Ltd.

“The main problem is the lack of liquidity, which means that banks are not giving loans. As it is not easy to buy property without getting a loan, the sector is affected. Developers will be forced to slow down with new projects and as a chain reaction other professionals, including real estate agents will be affected,” added Stavros Protopapas, Manager/Property Consultant, Fox Estate Agency in Limassol.

“Business is reduced this month compared to the same month last year, but more time has to pass before we can understand what is happening. What is negative for us is that banks have stopped lending, which has affected our clients,” agreed Andreas Kinnis, Director of the Kinnis Group of Companies.

For those lucky enough actually to get a loan from a Cypriot bank, the increased interest rates will seriously raise the cost of their property. “The increase in interest rates is also a deterring factor for those who do meet the requirements for a loan. Of course, banks cannot stop loans 100 per cent so they do give them out to people who meet requirements. These people, however, will think twice as interest rates are higher,” Protopapas explained.

The situation is further strained by the fact that the foreign buyers, who boosted Cypriot real estate to begin with, are now liquidating their Cypriot properties to deal with the economic crisis. “The global crisis has to a large extent affected Cyprus as we had a lot of buyers from the UK and Europe who bought their second residence on the island. These people are now selling these properties, which has raised the availability of properties. However, demand has been reduced,” Protopapas added.

There are, however, those who believe that the current crisis will in the long run have positive results as it will stabilise previously sky-high prices and control the number of developers. “The crisis could have good results in the long run as prices will stabilise and the solid professionals who survive it will be able to continue in the sector. Plot prices had been raised significantly, which had forced us to raise flat prices. This may stabilise with current conditions,” explained Kinnis.

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