The Cyprus Property Market

This article can help a Cyprus property buyer decide if a price asked is realistic and guides new Cyprus property buyers to the Re-Sale Market and what to pay. It also looks at the position of Cyprus property sellers and how they can price to sell.

The problems for The Brits with the Cyprus property market are not solely to do with the euro/gbp exchange rate.  Nor is it just to do with the over supply of houses in the market.  Where did the figure of 11,000 unsold houses come from that is quoted on the Cyprus forums? In my view it has also a lot to do with pricing. I know, rather obvious really but there are some interesting pointers in what Antonis Loizou had to say………and also some condundrums.

Starting with the conundrum.  If the developers have such deep land banks then why has development land increased by the 30/50% figure that he mentions. Surely if the developers have this position then they can effectively control the market price by simply staying out of the land market.  Tesco manages this in their supplier market so why can’t developers in Cyprus?  In short I don’t believe that development land has increased 30/50% as Loizou says.  The evidence is in the market.  Just Google and see just how much land is on offer and what appears to be steady prices.

When he says “high development land cost, converts now to around 40% of the total development cost of any house/apartment, whereas a couple of years ago, the land cost on a building sales price amounted to 20% – 22% only” then this is just price hiking.

Add to that he says that “the introduction of VAT on building land from 1st August, 2008” but at least he recognises that “This unhealthy state of affairs will get worse.”

This is a little gem, “So, when it will end and more importantly are we heading for a real estate crash? I doubt it. Since so far these substantial increases in property prices, have been absorbed by the public…..…….” The public might have so far Mr. Loizou but with the fall in sterling with UK Investors making up such a big proportion of the market then they will by now have left the Cyprus property market.

If a full crash is not here right now then it will be as early as 2010 as Loizou says “the supply will surpass demand in the year 2010 -2015 with possible negative affects on the holiday home market prices“. If the 11,000 quoted is true then this will be a crash point.

And when you come to sell in Cyprus.  Yes, the improvement in the euro helps you if you intend to go back into sterling.  And with a 10% fall in UK house prices predicted by 2010 the smart answer for investors in Cyprus is to sell now.  But your pricing must be realistic.

And as Loizou says “it has affected the rate of sale mainly for the less competitive projects making in part, the market, rather unpredictable and somewhat uncertain” which means that location, location, location is still the watchword.

As Loizou says with regard to selling commissions “well connected developers, well organised estate agents [some of which charge in excess of the legal 3% -5% - rates reaching upto 15%]“  I agree with this.  Estate Agents tend to price off the current Off Plan market which includes huge commissions and currently 15% VAT.  People who wish to sell in the Re-Sale Market also tend to look at the current Off Plan price and then some seek to add on the selling commissions and the kitchen sink of all other costs !! Bearing in mind that the offplan price includes large chunks of tax and commission then a re-sale should be discounted by at least 20%.  That is why you can’t get back what you paid.

Off Plan still more popular despite the Title Deed issue.  I am sure that the current campaigns have put many Off Plan buyers “off” Cyprus.

The Re-Sale Market could be very vibrant if only sellers would be realistic. They have to market well below the offplan price to compete with that market by persuading buyers out of off plan.  Title Deeds will help. So realistically you would have to have purchased at least two years ago and probably 5 years ago. So you will have equity from the market improvement over that time. But you need to absorb the costs in your marketing price.  So Re-Sales should be priced 20/30% below Off Plan. That might be your equity. Depends if you want to sell.

The cartel of Cyprus estate agents would not adopt such a pricing policy because it would upset their developer clients.

So your best bet is self marketing or advertising at a realistic price.  You can’t compete on even terms with the developers and agents but you can create your own pitch on “priced to sell”.

Better to do this than wait for the crash and burn scenario which will happen if price doesn’t become the driver of the Re-Sale Market.

Cyprus Property Help & Advice Centre™ ® ©
The Black Art of Buying Property in Cyprus™ ®
The Cyprus Informer™ ® ©
http://cyprusinformer.eu

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