Tales From The Coffeeshop
The Cyprus Mail
25th October 2007

Defying the laws of economics

DURING the stock market bubble, half our compatriots became investors, while a big number became stockbrokers, agents of stockbroker offices, market analysts and financial gurus in order to cash in on the national craze, financed by the investment loans given out like bargain warehouse flyers by our banks and other lending houses.

It all ended in tears.

For the last few years, we have been witnessing the development of another bubble – the property market – which has turned every Costis/Yiannis into estate agents, middlemen, developers, contractors and land speculators. This latest craze has also been financed by our socially responsible banks, which have been offering housing loans to anyone who walked into their branches on condition they had not been declared bankrupt.

Thanks to the banks’ eagerness to give loans, property prices have gone through the roof, particularly in Nicosia, where prices for houses and land have more than doubled in the last few years. A big new house with swimming pool in Ayios Andreas is currently for sale for £1.5 million, while someone recently bought a similarly palatial home in Archangelos, which is not exactly Manhattan, for 850 grand.

You have to be a special kind of nut-case or a Russian to pay this kind of silly money for a house in Archangelos, unless it was built with gold rather than concrete. Sellers are quoting loony prices, in the hope that some schmuck comes along.

One Coffeeshop customer was recently asked for £450,000 for a house in a particularly unattractive Makedonitissa neighbourhood, with a pool and paved garden that was a little like the Larnaca promenade.

The house was sold this week at 70 grand below the asking price, so who is taking the piss? The sellers, the estate agents or the banks, which are over-valuing properties in order to justify their irrational lending policies?

THE LAW of demand and supply injected a small dose of economic sanity in the above instance, but this is not always the case, as one person looking for a building plot recently found out.

About a year ago, he had enquired about buying a plot in the unfashionable suburb of Kaimakli and was offered a rather small plot for £60,000, but decided not to go ahead with the purchase. A couple of weeks ago, he received a telephone call from the estate agent to whom he had initially spoken and was asked if he was still interested in the plot.

The estate agent informed him that as a result of the rising property market, the plot was now for sale for £120,000 and that he had to give an answer by the end of the day! The potential buyer did not wait until the end of the day to do a Tassos and respond with a resounding ‘NO’. We Cypriots are so smart we can even defy laws of economics. The owner could not sell his crappy plot for 60 grand, so a year later he decided to double the price in the hope of a quick sale.

The LSE’s distinguished economist Professor Pissarides may have narrowly missed out on the Nobel prize for economics last week, but it will not be long before a Cypriot wins this award for re-inventing the law of demand and supply.

Copyright © Cyprus Mail 2007

Given that much of Cyprus' speculative boom has been driven by British ex-pats/investors, it'll be interesting to see what happens over the next year or so when the UK crash has started to bite...
who'll buy those homogenous white-washed villas in Paphos then?

Especially, when they ask where the Title Deeds are!

I think Cyprus is turning out to be a great investment for both resale and rental. Everyone I speak to recently seems to have been/going to Cyprus this year. Last month the prices rose by 3.2% according to the buy sell index! 12% last year was nice en all.`The new legislation will help the resale market without a doubt.

It's still developing as a country but still I reckon 20% growth over the next year fuelled by the Euro switch.

Cheers

"According to the Buy Sell Index..."

Of course, you know that the BSI is prepared by the biggest vested interest on the island - Buy/Sell Cyprus. Are there any other indices published on the Cyprus market to act as a check against the BSI? I'm not aware of any.

Where is the money coming from to fund this 20% increase? The UK property market will be in meltdown for several years starting next year, and nobody will be moving or MEWing to pay for their little concrete boxes in Paphos.

I think Cyprus prices will be flat or declining for at least 5 years - in my humble opinion. I just moved from Limassol, by the way, so know a bit about the market over there.

I seem to recall in the 1970's that there was a rather savage little war in Cyprus and that large numbers of people may yet have claims on land subsequently 'sold' and re-developed as they were forced to flee at the time.

I wonder how many people who've have identikit properties are aware that they may not own the property which they've 'bought'.

always wondered how the cyprus market can trust these buysell figures ! i mean, they are an estate agent for f$cks sake ! they always say the same thing: steady rise upwards, buy now before it moves up further.

idiots.

not really, the figures are the only official figures...in '05 and '06 they reported modest 5-8% growth. Last year was a more attractive 12%. The future? Well the country's investment in golf courses will prove to be a good bet, the Euro accession, the cheap flights finally arriving...Jet2.com, a local budget airline in Durham and, most significant, Easyjet acquired GB airways last week who, incidentally, provide budget flights to Paphos.

Add to all this tourism figures North as always with emerging tourism coming from Sweden, Norway and Germany.

All this points to a positive outlook for the right developments in Cyprus.

Contributions to a site entitled housepricecrash.co.uk wouldn;t expect to fly the flag for rising property prices!!! Ha!!

Cheers
YeboC

i live in cyprus and have done for over 10 years

the reality is very far from your synopsis

good for you.
The majority of detail in my last post was factual information - impossible to argue against.

You may feel it matters not one iota with regard to property in Cyprus, but I do feel the arrival of the budget airlines, changes to property legislation and increased tourism all point to a positive outlook for Southern Cyprus. Do you not think these will have positive influence on the property prices not to mention the rental potential?

Cheers

Your figures may well be correct but they merely confirm that Cyprus is experiencing a speculative housing market bubble. It's a market that's been supported entirely by foreign investors, pricing out the indigenous population and cannot continue. I think we'll see a significant slowdown as the UK's crash takes effect and Brits tighten the purse strings and stop investing.

Tourism figures from the North I'll choose to ignore until that part of the island is actually officially recognised as an independent state or is re-unified with the sovereign South.

Also, I'd defer to the greater knowledge of someone who actually lives in Cyprus to tell you how the housing market is as he sees it...in this case, Tuberider.

And finally, this site welcomes bulls & bears alike - but the clue's in the title and if you simply want to ramp property, prepare to be challenged!

Tubrider has been saying Cyprus market is fooked for 4 years - in that time I've cleared around £200k in profit in the bank. Although I dont live in Cyprus that is my first hand knowledge.

There's also been a crash happen ing in the UK for the last 5 years!!! During that time I've cleared another £200k on off plan and renovation projects. If I'd come on this site for direction a few years ago I wouldn't have made a sausage

My Dad lives in France but he hasnt got a Danny about the prices in France - he just lives there.

Re foreign investors - isnt that the case for all overseas markets?

Cheers

Everyone's got an opinion, I guess. From where I'm looking, it's a bubble (in Cyprus) that's gonna pop - I say this as someone who's invested heavily out there too, by the way. And I'm calling the top in the UK now (3 months ago, actually). Could be wrong, but that's my call. And anyone takes my 'advice' at their own peril!

I certainly wouldn't agree that all overseas markets are propped up by foreign investors, though; Cyprus certainly is, however, and that's what makes them so much more vulnerable. A crash over here will shaft them royally.

YBC

You sound to me like an agent ramping the market up.

True, I had thought the bubble here would burst quite a while ago.

I certainly believe that prices were well overvalued in 2005 and 2006 and maybe in 2004 as well.

Today, they are simply crazy. And I think the fallout will be greater now that things have been stretched so much further.

I'll give you my ideas why :

1) Mass overdevelopment. They have built too much, and they are not slowing down at all. To make matters worse, the government is now considering giving the developers power to self-regulate themselves when applying for building permits. As a recent Financial Mirror article stated, this is akin to letting the inmates take over the asylum. Building zones are also set to increase and an extra floor will soon be allowed for urban areas. This will further increase supply in an already glutted market.

2) Massive credit growth. We know that speculative bubbles cannot inflate without a source of cheap and easy credit. The banks here have flooded the market with money and now this is coming to an end. The central bank has recently raised the borrowing limit from 70% to 60% of a properties value. Last week, borrowing by local banks was further restricted by the CB and the local banks like Laiki Marfin and BOC have embarked on an aggressive campaign to attract deposits. Savings rates have jumped from 3.4 - 3.5% to well over 4.5% in the space of a week ! I have moved my money into Laiki and I am now receiving 4.9% locked for 3 months.

3) Bad publicity is growing about Cyprus. Mainly due to lack of title deeds, and dodgy developers ripping off the gullible Brits. Recent channel 4 documentary on selling property abroad a case in point. Also The Cyprus Property Action Group is attracting very bad publicity to the island's property market.

4) Rents are falling. This is evident everywhere you look and not even the estate agents will deny this. Far too many locals and foreigners alike have 'invested' here and there is a severe glut of rental properties on the market. Hardest hit are those who bought holiday homes and hope to rent them out for part of the year to help with the mortgage. Take a look at some of the Cyprus expat forums and you will see what kind of a nightmare this can be.

5) Falling tourist numbers and revenue. While we have had a little revival in the months of July and August the trend is clearly down YOY. To make things worse, our traditional big spenders, the British and Germans, are deserting us. The Brits and Germans SPEND. They drink gallons of beer, eat a lot of food and buy stuff. These tourists are being replaced by Russians, Israelis and Scandinavians, who are not particlarly big spenders. The Russians may have a big reputation but most of them are very low-key. They prefer to scrape along for 2 weeks and then purchase one big item (e.g fur coat) to take back with them. That is why you see a lot of fur coat shops here in and around the tourist areas. The Israelis are the worst kinds of tourist to have, more trouble than they are worth and they want everything for free. We are far better off without them.

6) Budget airlines are well and good and will be very very welcome here, but I think they will not save the Spainish property market from collapsing and I don't think they will save ours either. Maybe you are right on this one and they will increase traffic here, but If there is a recession in the UK then I don't see it making much difference. Other destinations will still be cheaper, with or without the budget airlines.

Where in Cyprus did you buy ? I am curious.

If you are interested in buying a Cyprus property, I can help you. I have friends who have been trying to sell their places in Limassol for some time, and can hook you up if you like (no commission)

Some articles below for your perusal,

==================

Price war on Cyprus bank deposits to hurt real estate
Financial Mirror
24/10/2007

An intense price war waged by Cyprus’ commercial banks in their bid to attract deposits is likely to hurt the property market, with bankers blaming the Central Bank for imposing tight liquidity conditions in order to control the spectacular increase in loans in the real estate and properties sectors.

Marfin Laiki Bank is widely blamed for starting the “price war” to attract deposits by offering exceptionally high rates on 3-, 6-, 12- and 24-month fixed periods, which are above the Lombard lending rate.

MPB is offering 20 basis points above LIBOR on 24-month deposits, which is seen as an aggressive move to attract deposits and confirms the tight situation in the Cyprus pound money market.

Laiki’s move was immediately matched by Hellenic Bank, which has sent a message to its peers that while it will not start a price war, it is ready to match any such attempt by the others.

Bank of Cyprus is widely seen following with its own move soon by offering exceptionally high rates, which is likely to be matched by Alpha Bank and the rest.

As one banker told the Financial Mirror, the tight condition in the Cyprus pound money market is a result of the efforts of the Central Bank to drain excess liquidity from the market, as part of its efforts to orchestrate a slowdown in loans directed to the property market.

The banks are also at fault, he said, as they rushed to give “too many property loans without the comparative increase in deposits, so now, in order to support those loans, they need to attract deposits, otherwise their ratios will not allow them to carry the loans in their books.”

The Central Bank’s decision not to accept an effort by banks to classify their euro surplus funds as local currency only three months ahead of the shift to the common currency has added to the banks’ woes, which otherwise, would simply count their euros in the minimum deposit/loan ratios of the Central Bank.

“The Central Bank wants to cool the property market loans and after reducing the deposit requirement for loans, and banning banks from lending to foreigners on margin, now they are squeezing the banks by tightening the liquidity situation,” the senior banker told the Financial Mirror.

======

Cyprus banks go into lending frenzy
17/05/2007
Financial Mirror

-- Advances up 21%, deposits surge 21% to CYP 20 bln

Cypriots have gone on a massive borrowing spree encouraged by easy and flexible loan products from the commercial banks with the majority snapping up property, which in the process has fuelled prices ever higher.

The revelation by the island’s two largest banks, Bank of Cyprus and Marfin Popular Bank that during the first quarter of the year, their loan portfolios galloped at 23% and 28% respectively has been confirmed by figures released by the Central Bank of Cyprus, which shows that total advances by all banks in Cyprus surged 21.3% YoY to CYP 12.51 bln, or a whopping CYP 2.2 bln compared to CYP 10.31 bln a year ago in March 2006.

The biggest advance in loans has been channeled into building and construction loans, up 31% YoY to CYP 2.36 bln by contractors and by 28.5% with respect to private loans to CYP 6.3 bln from CYP 4.95 bln a year ago in March. The third largest component of loans, domestic and foreign trade was stable at CYP 1.5 bln.

The Cooperative Credit Societies, meanwhile, increased their combined loans by half a billion to CYP 4 bln by March compared to CYP 3.59 bln in March 2006, but the pace of advance in the first three months of 2007 amounted to CYP 52 mln, confirming that they are losing market share to the banks.

-- Lending frenzy

The lending frenzy in March must have been a record considering that in March 2007 alone, total lending surged by CYP 594 mln compared to February 2007, while in the first three months of the year, total lending is up CYP 830 mln.

Compare that to the total Jan-Mar 2006 increase of CYP 342 mln and one realizes the dimension of the lending craze now dominating the country.

The fact that most of the new loans are taken to buy property means that while property prices continue to head higher, at least the trade deficit and the rate of inflation have not been adversely affected. Inflation by March 2007 was up 1.8% YoY, while total imports were up only 3.3% in the Jan-March 2007 period with the trade deficit 8% higher, but mostly because of an 11% drop in exports.

-- Property bubble?

Residential house prices in Cyprus rose by 1.1% over the previous month in April, according to the BuySell Home Price Index, as the index reached 122.44 and brought the average home price in Cyprus to CYP 95,394 (EUR 196,680).

Compared with the same month of 2006, prices rose by 9.6% in April, slightly lower than the 9.9% increase recorded in March.

“With so much lending geared to the property sector, one would expect a much higher price increase in housing, but it seems that developers are busy off-loading property, reducing their inventory levels,” said a worried analyst, remembering the “crazy” days in 1999/2000 when easy money directed by the banks to the stock market, led to the creation of a bubble, after which equity prices crashed when the Central Bank tightened the flow of money and forced banks to halt such lending.

Will the Central Bank take action and start imposing penalties on bank for exceeding lending targets? That is the million pound question since not many people know the views of the newly appointed Governor of the Central Bank of Cyprus, Athanasios Orphanides.

He does have the right credentials, considering that he worked at the Fed and has seen the ups and downs of the property market in the US, its long term impact on the economy and banks in particular. Orphanides is also aware of the sub-prime lending problems haunting the US property market and the economy in general, a problem that can easily be repeated in Cyprus.

Alternatively the Central Bank may attempt a soft landing of the economy, by ordering the banks to cut down on lending, or at least enforce the minimum criteria, which since last year stipulates that housing loans should not exceed 70% of the value of the property.

===============

[quote name='Tuberider' date='Oct 30 2007, 10:12 AM' post='828022']
YBC

You sound to me like an agent ramping the market up.

- Nope, just a young man working in IT who has a number of global property investments subsidised by good quarterly bonuses (inc couple in Cyprus)geared towards enabling early as possible retirement!

True, I had thought the bubble here would burst quite a while ago.

I certainly believe that prices were well overvalued in 2005 and 2006 and maybe in 2004 as well.

Today, they are simply crazy. And I think the fallout will be greater now that things have been stretched so much further.

- You predicted a crash 3-4 years ago, since then prices have increased by around 50%, granted, that level of growth is unsustainable but it's an island with limited space to build further. I see Cyprus in the same situation as Spain 8 years ago - still some growth but there is a limit....

I'll give you my ideas why :

1) Mass overdevelopment. They have built too much, and they are not slowing down at all. To make matters worse, the government is now considering giving the developers power to self-regulate themselves when applying for building permits. As a recent Financial Mirror article stated, this is akin to letting the inmates take over the asylum. Building zones are also set to increase and an extra floor will soon be allowed for urban areas. This will further increase supply in an already glutted market.

Agreed on this so lays further importance on buying the right development. Also places further need on increased demand via budget airlines, tourism etc


2) Massive credit growth. We know that speculative bubbles cannot inflate without a source of cheap and easy credit. The banks here have flooded the market with money and now this is coming to an end. The central bank has recently raised the borrowing limit from 70% to 60% of a properties value. Last week, borrowing by local banks was further restricted by the CB and the local banks like Laiki Marfin and BOC have embarked on an aggressive campaign to attract deposits. Savings rates have jumped from 3.4 - 3.5% to well over 4.5% in the space of a week ! I have moved my money into Laiki and I am now receiving 4.9% locked for 3 months.

the new 60% rule I welcome, it will stablilise the market to more sustanable growth. It will also stimulate the resale market

3) Bad publicity is growing about Cyprus. Mainly due to lack of title deeds, and dodgy developers ripping off the gullible Brits. Recent channel 4 documentary on selling property abroad a case in point. Also The Cyprus Property Action Group is attracting very bad publicity to the island's property market.

I don't buy this at all. Dodgy developers can be found anywhere, where there is money there is dodgy dealings - UK, Spain, Cyprus, France etc etc. In life, where money is being made corruption is never too far behind. If a buyer does his own DD then this will be a non-story

4) Rents are falling. This is evident everywhere you look and not even the estate agents will deny this. Far too many locals and foreigners alike have 'invested' here and there is a severe glut of rental properties on the market. Hardest hit are those who bought holiday homes and hope to rent them out for part of the year to help with the mortgage. Take a look at some of the Cyprus expat forums and you will see what kind of a nightmare this can be.

The official figures tell a different story:

% figures show the yield....

LIMASSOL
50 sq. m.
102,000 470 5.53% 2,040 9.40
80 sq. m.
165,000 750 5.45% 2,063 9.38
120 sq. m.
260,000 950 4.38% 2,167 7.92
150 sq. m.
320,000 1,150 4.31% 2,133 7.67
250 sq. m.
523,000 2,150 4.93% 2,092 8.60

LARNACA

50 sq. m.
105,000 400 4.57% 2,100 8.00
80 sq. m.
173,000 605 4.20% 2,163 7.56
120 sq. m.
284,000 900 3.80% 2,367 7.50
150 sq. m.
338,000 1,350 4.79% 2,253 9.00
250 sq. m.
600,000 2,200 4.40% 2,400 8.80

PAPHOS

50 sq. m.
145,600 600 4.95% 2,912 12.00
80 sq. m.
254,700 955 4.50% 3,184 11.94
120 sq. m.
348,000 1,480 5.10% 2,900 12.33
150 sq. m.
415,000 1,900 5.49% 2,767 12.67


5) Falling tourist numbers and revenue. While we have had a little revival in the months of July and August the trend is clearly down YOY. To make things worse, our traditional big spenders, the British and Germans, are deserting us. The Brits and Germans SPEND. They drink gallons of beer, eat a lot of food and buy stuff. These tourists are being replaced by Russians, Israelis and Scandinavians, who are not particlarly big spenders. The Russians may have a big reputation but most of them are very low-key. They prefer to scrape along for 2 weeks and then purchase one big item (e.g fur coat) to take back with them. That is why you see a lot of fur coat shops here in and around the tourist areas. The Israelis are the worst kinds of tourist to have, more trouble than they are worth and they want everything for free. We are far better off without them.

I have loads of reports stored on my other laptop around the tourism figures for Cyprus, in the absence of these reports I read in the Financial Mirror the tourism figures up to Sept '07:

Authorities in Cyprus have recorded an increase in the number of tourists this year, potentially boosting investment prospects on the island.

During the year to September 2007, there was a 6.4 per cent increase in tourism in Cyprus, according to official figures cited by the Financial Mirror.

This was found to be due to a surge in the number of holidaymakers originating from countries as diverse as Russia, Sweden and the United Arab Emirates.

Meanwhile, more than half of the tourists visiting Cyprus were said to have come from the UK.

Figures showed that during this period, the number of Britons taking a holiday on the Mediterranean island rose by 4.7 per cent to 178,664.

6) Budget airlines are well and good and will be very very welcome here, but I think they will not save the Spainish property market from collapsing and I don't think they will save ours either. Maybe you are right on this one and they will increase traffic here, but If there is a recession in the UK then I don't see it making much difference. Other destinations will still be cheaper, with or without the budget airlines.

Did they save the Spanish market? No - they made the market!! I know people who bought many units in Spain prior to the budget airline boom, obviously they have made a packet over the last decade. the budget airlines will naturally increase the tourist numbers and, i believe, the numbers moving to Cyprus for prolonged periods. Life is all about what ifs and buts......if everyone lived their lives worried about the what if around recession or UK market then the world of investment in the UK would be non-existent. You could add to that approach that due to Northern Rock collapse money is no longer safe in the bank....so what do you do with your money? Under the mattresss? Well another risk of theft!

There is risk in everything - people pay money and take the choice and the risk!

On the UK uncertainty, do you think that if it all goes tits up then people will stop going on holiday? Surely the budget airlines will benefit as when the purse strings are tight people will go on less exotic, long haul holidays in favour of a cheap budget sun holiday.



Where in Cyprus did you buy ? I am curious.

I have a couple of units, one in between Peyia and Coral Bay (sea views, 2 balcony, 2 bath, 2 bed only 35 units in whole development) - for me a holiday home with bits and bats for rental income from friends, family, colleagues and referrals. Pre launch price (last few went for £20kCYP more than mine(on 10 year Swiss mortgage.))

The other one is an underdeveloped area the other side of Paphos, an area called Anarita (golf) - 2 bed townhouse bought a pre launch price (now sold out), last few went for £25kCYP more than my exact unit.

The plan? Keep first one long term and flog the second one in 3-4 yaers when the areas becomes more developed with amenities, golf courses, restaurants, bars etc)

I'm not after anymore as just invested in a couple of other emerging countries so my capital money pot is now empty!

Cheers
YeboC

good for you, YBC - nice post

I see no point in further debate as we are obviously at odds as to what might happen. In any case, we will see quite soon which way it will go.

If you change your mind about that property, let me kow

will do!

I'd be keen to read your thoughts on the theory that, from a rental point of view, Sunny European countries with budget airline deals have a greater rental potential (as apposed to long haul, carribean, Oz etc due to the squeeze on disposable income ??

Even though we are at odds on the Cypriot market generally, I'd welcome your input on this...

Also what are your (and anyone else's) thoughts on Brazil and Malaysia as property investments?

Cheers
YeboC

YBC, you are to be congratulated on your profits, but have you actually banked them or are they "on paper"?.

My reason for asking is that on another forum you recently asked for advice on how to go about 'flipping'.

Sure, I agree with your statement in very general terms. From my point of view, holiday rentals on short haul budget airline routes should fare better than those further afield during an economic donwturn.

Malaysia and Brazil - never been to either so I am afraid I cannot comment. Good luck with those.

One more article for you, just out today, which supports my side of the argument. It seems 'foreign demand' is down 50% according to the developers. With local salaries averaging about 800 quid a month, a drop in foreign demand cannot be good news at all.

==============

Land Register reacts to CB measures
First Published: 30/10/2007 12:13:45
Stockwatch

The Central Bank’s decision to cut the lending ceiling for the purchase of a home from 70% to 60% aroused strong feelings to the Land Register. During the House Commerce Committee’s session, which focused on the repercussions from the CB measures, Lang Register Manager, Andreas Christodoulou urged the Central Bank to review its measures. “The problem concerns the land market, where a plot can be sold 3 – 4 times before reaching its final buyer, and not houses. The Central Bank must leave the lending ceiling to 80% for the homes and must cut the ceiling for the purchase of land. In this way, the annual property increases will range between 5% and 10%”, he said.

On the other hand, CB Governor, Athanasios Orphanides defended Central Bank’s decision, stressing that there are signs of overheating in economy, as well as inflationary pressures. “Especially in the sector of constructions, the increase is expected to exceed 40% by the end of the year, which is exceptionally alarming. We sought to protect the banks, since the bigger their exposure is in the property market, the bigger is the risk of our economy to be affected by unfavourable conditions in the international environment”, he noted.

According to Mr. Orphanides, the CB wishes to see a rational increase in the price of properties, which must be close to Cyprus’s GDP, that is, 4%. “For constructions that were already in progress, the banks kept the plan before the CB decision. We cannot assume when the property price increases will become rational. The CB data on the price of properties are not good”, he added.

Responding to the question raised by EVROKO President, Demetris Syllouris, why the CB measures in 2006 were unfruitful, Mr. Orphanides said that if the CB had not taken those measures, the increase in property prices in 2007 would have been even higher.

Chairman of Land Developers’ Association, Lakis Tofarides, expressed his concerns on the course of the sector. According to Mr. Tofarides, the measures have affected the purchase of homes by non-Cypriots, since they have recorded a drop of 50%. “We will be able to deal with the repercussions in two years. The Central Bank should not worry about a bubble, since the land is restricted and the prices will continue to increase”, he said.

Responding to Mr. Tofarides, Mr. Orphanides said that the non-Cypriots can raise a loan for the purchase of a home in Cyprus to a foreign bank. “We simply want to protect the banks’ loan portfolio”, he insisted.

AKEL MP, Stavros Evagorou said that the Parliament should be informed on the latest conditions after the Central Bank’s decision to cut the lending ceiling. “The purchase of second homes grew rapidly in the past few years, reaching 7% - 8% of GDP and attracting significant foreign capital”, he said.

On the other hand, Chairman of the Committee and DISY MP, Lefteris Christoforou, said that the Central Bank shouldn’t have taken measures before seeking the Land Register’s advice.

Adversely, a Finance Ministry representative stated that the Ministry realizes the risks that emerge from the accumulation of the banks’ portfolio in a sector and the inflationary pressures and agreed with the Central Bank’s decisions.

As for EVROKO, Mr. Syllouris said that if sales to non-Cypriots have declined by 50%, the measure is dramatic. “The CB should be exceptionally concerned about this”, he concluded.

Hi Radio - my previous investments are profits in the bank but the flipping opportunities are "on paper", I haven't sold in Cyprus for 2 years but did make some excellent returns before this time. None of these were flipped just sold after a year or two or three!

I asked about flipping as it's not something i've done before - the two I have left in Cyprus are both subject to 9 month completion delays so it's kinda screwed my plans to sell on after a few months - hence now looking at concept / realism of flipping...any constructive advice would be well received....

Cheers

from todays DT:

There are plans for a much-needed facelift and new marina. New airports are to open in Paphos and Larnaca next year........ The country had the largest increase within the top 10 overseas locations searched for by UK internet users, more than doubling from 2006, according to online research company Hitwise.

Cheers
Y

The same article quotes a BuySell spokesperson as saying there's "a sturated market for new build property"; my own research indicates the same.

The delay in completion on your properties does not seem to be an isolated case, nor limited to just one developer. As for flipping or selling after completion, check your contracts very carefully as to whether you need the developers permission; either way, in the current market, without title deeds (which you can wait years to obtain) you will find it harder to sell. Your past successes were partly due to the reising market. You might find it harder to repeat that, but as you have youth on your side, you can afford to be patient.

The author is misinformed in one respect: there are no new airports being built, in Paphos or Larnaca; the existing ones are having their facilities upgraded.

To get a feel for things 'on the ground' check out the Cyprus Living forum:

www.cyprusliving.org

sure - thanks. I'll check out that site..

Agreed on the oversupply/ saturation - I guess it means tougher to shift so more emphasis on the location and the development itself. Resales, in my opinion, although tougher, can be achieved with the right mix. Persoanlly I'm encouraged that my remaining two were sold out in the first few weeks of off plan release.....granted they may all be from investors looking to make a quick sale!!

Thought it was just a renovation of paphos airport not a new airport - lazy journo!

cheers
YeboC

ah while i agree with my esteemed friend radio concerning the oversupply/saturation issue (can i have a link to that article please?) he is in fact wrong concerning the airports

two big new airports are under construction right now in larnaka and paphos. the old ones have been renovated only as a temporary measure and will be usedonly for cargo once the new airports are ready in 2009 (paphos) and 2010 (larnaka)

you can see the construction of both from the airport roads

Tubberider,

My apologies, but isn't it the case that the 'new' airports are being built alongside the existing ones, effectrively being an enlargement of the extant facilities ?. (Same thing happened when I lived in Nigeria (ugh !).

Joust log on to the Daily Telegraph website for today's issue to see the article YBC & I refer to.

Do you post on CL ?.

Hi Radio

I don't know about Paphos as I have not been there for a while, but Larnaka's new airport is definetly a separate entity, albeit very close to the crappy existing one.

The new marina in Limassol has not yet been signed, but the plans look great. Sort of like Dubai's palm tree development. The negative side is that it has been designed as a 'city within a city' - with shops, hotels, and yes you guessed it, hundreds of new residential properties, all commissioned to be built by Cybarco ! I mean who the hell is going to buy all these properties when they cannot sell the existing ones !

I don't post on CL, although I lurk there from time to time.

More negative press for the CY property market from today's Cyprus Mail.

Keep well and enjoy the sunshine. I'm off for a swim and a fish meze at curium.

==============

New loan rules cooling down the property market
By Jacqueline Theodoulou

THE CENTRAL Bank has reduced loan financing for property purchases to 60 per cent in order to protect banks from a worrying increase in loans, the Central Bank (CB) Governor said yesterday.

Speaking before the House Commerce Committee, Athanasios Orphanides explained that the continuous and worrying demand for property loans in Cyprus had forced the CB into reducing financing from 70 per cent of the cost of a purchase to 60 per cent.

He added, however, that banks would continue to finance 80 per cent of first-time property purchases, a decision made to encourage young people into buying their first home.

AKEL Deputy Stavros Evagorou, who submitted the matter for discussion, requested that Parliament be informed on the consequences of the CB’s decision to alter its financing conditions, pointing out that the holiday home sector had seen great developments over the past few years, reaching seven to eight per cent of Gross Domestic Product (GDP) and attracting significant investments from abroad.

Orphanides explained that the CB’s July 12 decision to reduce financing to 60 per cent was taken because the economy was showing strong risks of overheating with inflationist tendencies.

He added that the rate at which loans had increased in 2007 had doubled from the year before, pointing out that in the first eight months of 2007, 28 per cent of the increase in loans was in the property sector and if it continued at the same rate, it would surpass 40 per cent by the end of the year.

Orphanides told deputies that dangers for banks were continuously increasing, mainly due to the dire developments in the property sector internationally, and they needed to be restricted.

A Finance Ministry spokesman agreed with the CB’s decision, saying he understood the dangers banks were facing with the accumulation of loans and inflationist pressures.

Responding to deputies’ questions, Orphanides explained that any EU citizen could acquire their first home in Cyprus and receive financing under the same conditions as Cypriots.

He added that immoderate growth along with immoderate property price increases could not continue if the economy was to develop healthily.

“We want reasonable growth,” said Orphanides, adding that he did not know when prices were going to return to normal standards.

The head of the Land Registry Office pointed out that the increase in property prices was due to increases in land value. He explained that by the time a plot of land reaches the land developer, it has been sold three and four times, which contributes to property prices hitting the roof.

He added that there had been a decrease in land purchases since the CB’s decision to reduce the rate of financing, and suggested that financing be reduced to 50 per cent for land purchases.

The European Party’s Demetris Syllouris pointed out that property investments from abroad had decreased by 50 per cent and continued to drop.

He added that if property sales had dropped since the CB’s decision, then the measure was not just wrong but tragic.

Committee Chairman Lefteris Christoforou of DISY said after the meeting: “The government’s has once again been exposed, in the absence of a complete housing policy.”

The committee called on the CB governor to keep financing for land purchases at 60 per cent, or reduce it to 50 per cent and increase financing for property purchases.

I dont see the article as being particularly negative - it sounds like the authorities are taking appropriate measures to steady the market. Look, clearly the growth last few years cannot be sustained, however, preventative meaures such as these can ensure a stable housing market and avoid the boom / bust scenario. I welcome measures such as this.

The question is will the market cool or will the market crash?!? There is a big difference!

Out of interest, those who predict a "crash", to what % level do you see the crash impacting the house prices?

As an aisde the Nationwide reported 1.1% rise in the UK market last month.

Cheers
YeboC

That is the million dollar question, my reptilian friend.

Show me a market through history that has sustained such gains without crashing thereafter.

The disparity between apartment prices and rents should be enough to worry anybody.

A newbuilt 2 bedroom apartment sells now for around 100k plus VAT.

Rent is no more than 350 Cy pounds a month. I challenge anyone to rent their flat for more than that.

"off for a swim and a fish meze".

That was a low blow, as I reach for my fleece...........

Tubrider, a couple of queries:

1.What's your definition of crashing? What % drop warrants a downturn to be defined as a crash?

2. On the Rent, I'm assuming you are referring to long term rents as apposed to holiday lets? For example, my colleague went to Paphos last week and stayed at a well furnished 2 bed 2 bath place and paid £400 for the week. 12 of those over the year at you have £4,800 ie 4.8% yield. Now, its ambitious to think that the units will be let for 12 weeks over the peak period but if one was to work on the basis of 50% holiday occupancy @ £200 per week that would give a return of £5200 (5.2% yield) - this is what I've based my rental forecast on.

I may be dreaming! Would welcome all constructive (or non-constructive ...i'm always up for a laugh!) feedback on my forecast.

Cheers
YeboC

Radio

Sorry I thought you were over here - Keo on me next time.

It really is very warm for November though. Still in my shorts and t-shirt during the day, although the nights havea slight nip to them now.

YBC

Bit busy today so forgive my slapdash answers,

Re Crash

I guess around 30% minimum, but I can't really define it. For me a crash means that prices fall back in line with fundamentals, and the speculative premium is blown off the top of the price. Personally I don't like to pay 12 times the annual rent for any property, but that's just me. These 2-bed newbuilds are worth only around 50k by my book.

Lets say you buy one of those new flats like many people are. You pay 115k inc VAT and put down the central bank stipulated 40% and borrow 60%, or 69k. At 5% over 25 years your monthly payment will be in excess of 400 quid, well above the £350 rent you can glean from an oversaturated market. And that's not even factoring in any possible interest rate rises.

If Cyprus is such a small overcrowded island and more and more people want to come here, then why the hell aren't rents rising ? The arguement doesn't make sense.

Re holiday lettings

Mate I could not really tell you... Yes, your figures look optimistic but as you say, everything is a risk. I guess it could work. I have some friends that do this, and from what I can see it needs time and attention. Some have done well out of it, others not. Most would agree that finding a good agent is the key, and that letting is a way to subsidize (not cover) the mortgage.

Some practical problems faced are trashing of flats/furniture by holidaymakers and very high utility bills (people leaving the a/c running day and night etc etc)

There are some good threads on the Eastern Cyprus forum and Cyprus Living concerning holiday lets, have a look.

Tuberider,

Not there yet, hopefully sometime in 2009, meanwhile 3 or 4 visits per year. I think YBC is optimistic with his rental returns (again supply & demand), and I concur that at best rentals will only subsidise costs not cover them; so one is reliant on capital growth, and I think it will be several years before there is any liklihood of that.

As ever, it's about location, quality & the unique 'wow' factor, hence my suggestion re. top end properties; two bed boxes are two a penny (or at least worth no more than £50k, as you say).

To achieve 5% I need to rent 26 weeks a year at £200 per week. After costs maybe £400 a month, all my investments are on 12-15 year mortgages (to help me realise choice of retirement before I'm 45)so not expecting to cover the monthly payments - if I can cover 60-70% I'd be pretty happy. My wages / bonuses can cover the shortfall. So, I've got a long term view around most of my investments - D&T reckon £100k two years ago will be worth £290k in 8 years in Cyprus.

Back to the 26 week vision:

5 weeks family
5 weeks friends
5 weeks work colleagues
5 weeks website enquiries
6 weeks agent subsidised

Easy!! time will tell how much I'm living in a dreamworld I guess..

Cheers
YeboC

Tuberider,

"fish meze at curium..."..oh don't torment me. You had me drooling at the thought of that. I lived in Zakaki near the port - not far from Curium - and often used to pop into Chris Blue Beach for a beer and a snack by the sea after dropping the kids off at school. Bliss!! Nigel Howarth from the Cyprus Property Action Group was a good friend of mine when we lived there.

I loved the area where we were - close to the port and Ladies Mile, and near the orange groves of Fassouri going towards Akrotiri. Sadly, I heard through my former landlord that a huge developer had just bought up all the groves in Fassouri and will be building a huge concrete box development in the area. This will destroy the character of the place for ever and certainly add to the supply side of the equation to depress prices for even longer. All that guff by Buy/sell and Yerboah is pure ramping and hype. The property market in Cyprus has been dead for the past 2 years and everyone knows it - all for the reasons you and others have pointed out. Now comes the global property crash - you can write your own headlines from now on.

To correct one thing - the Paphos and Larnaca airport projects are not "new" airports as such but replacements for the poor existing facilities. It's not as though there are now 4 airports where there were 2 before.


Cheers,

John

[quote name='rjw8652' date='Nov 7 2007, 03:27 PM' post='840392']
Tuberider,

All that guff by Buy/sell and Yerboah is pure ramping and hype. The property market in Cyprus has been dead for the past 2 years and everyone knows it - all for the reasons you and others have pointed out. Now comes the global property crash - you can write your own headlines from now on.

/quote]

What other official stats for house prices are out there? Exactly.

I have no interest in "ramping" or "hyping" the market. What I do know is that I bought a townhouse off plan for £83kCYP 3 years ago off plan. An exact unit in the same block has been marketed and now officially SOLD for £116kCYP. These are facts. Now if a 28% rise in 3 years is a dead market, I can't wait to root out a buoyant market!!

I acknowledge the limited resales market and the over supply/ build but I do not accept it is a dead market, I'd give you a "slowing" market in terms of capital appreciation....but not dead.

What I need to do is actually sell one of my remaining units and post some "in the bank" facts about the last three years in Cyprus..

Cheers
YeboC

Cheers

YeboC,

Want to sell? Drop the price - simple. This principle works the same the world over.

The buyers in the 'bouyant" market should be flocking to your door.


John

yeh, but buyers have got eyeballs not crystal balls - I've not even tried to sell yet!!

Cheers
YeboC

Cyprus home price index up 3.75 percent in October

BuySell Cyprus Real Estate, a real estate advertiser, publishes a monthly ‘Home Price Index’ - the only one of its kind in Cyprus.

The company started to produce the index in 2004. It shows the movement of prices at which residential properties in Cyprus are sold and is based on an average of around 400 to 500 property sales/month.

When the index started in January 2004, the average residential property price was CYP 77,910. By the end of October 2007, it had reached CYP 107,686 - an increase of 38.22% over the 46 months since its introduction. This equates to an approximate annual growth of 9.97%.

For the whole of 2006, the Index rose by 5.87%, after a rise of 2.48% in 2005.

In the first 10 months of 2007, the Index has risen by 15.43%

--------------------------------------------------------------------------

Wow - lookinng at a 20% growth in 2007 as a precursor to the Euro accession
Cheers
YeboC

Proving that it's nothing more than a speculative bubble. You might squeeze more growth out of it (if you flip off-plan, for example) and good luck to you, but it's ultimately unsustainable.

Do you know what the average wage is in Cyprus? Clue: it's not Cypriots propping up this market, it's overseas investors. When they catch the credit-crunch cold that's sweeping the globe, it's crash time...

..just be sure I understand how much money you've made...

you pay C£83/-, and assuming you sell for C£116/-, that's a 40% uplift. Great.

..but hold on a second, hasn't the cyprus pound fallen 20% versus sterling in that time? So, if you'd put your money in the bank at 5% in the UK, you'd have a 16% compound sterling return, and instead you've got 17% unrealised sterling return (1.4/1.2) , assuming you have had no transaction costs, and assuming you've spent nothing to improve your house, nothing on maintenance, no insurance. So by my maths, the profit above the risk free rate is simply 1% plus the time value of deferral of the principal balance, which we don't know, less the other other costs like legal expenses et al that I've excluded. And no cost for your time and effort.

ybc quite rightly calls BuySell a real estate 'advertiser', as they are not a licensed estate agency - it's how they get around the law. They can hardly be considered a disinterested party; it's in their interests to put a positive spin on things.

The fact that they are the only party producing a 'Homes Price Index' does nothing to enhance the credibility of the figures.

As an aside, an on-going court case involving a developer in Paralimni won't do anything for buyers' confidence:


www.lyingbuilder.com

With respect - What a load of ******!!

Let's take the currency first of all, when I bought it was 0.83, now it 0.812 - not sure I'd want you as my accountant!!

Now, you've got so bogged down with munching figures that you've over looked the fact that I only put 20% deposit down to secure the unit. So I pay £20k down on a £100k (sterling) unit, in 18 months the unit is sold for £135k. So my £20k has turned into £55k (say £45k after costs). Now lets get back to the number crunching.....you show me a bank that will turn my £20k savings into £45k in 18 months??!?!?!

Cheers
YeboC

Radio - There is no other official stats for house price inflation that the Buysell and it seems pretty much above board to me....modest growth in '05 and '06 but a spike in '07. Re lying builders, wherever in the world there is money you will corruption...Cyprus is not unique in that respect.

Red - you may be right. But I did hear the same sentiments in the UK at the end of the 90's!!! This was the "experts" view 6/7 years ago in the UK! Suffice to say I thought they were wrong at the time and made some excellent "in the bank" profits from developing various properties mixed with some sound off plan units.

Cheers
YeboC

looking into how it pans our currency wise, I'd be up.

take £100kCYP approx 0.83 (£120.5k) in 2005 - the pound after converting the irrevocable fixed exchange rate of 0.585274 CYP per 1 euro and converting the back to sterling then the £120.5k is worth I originally chucked into the pot is worth as of today £122205 a 1.4% positive.

Cyprus market could be shaken to the core:

A scandal involving a leading property developer in Cyprus may have the potential to shake to the core the credibility of the holiday homes market on the island, following allegations supported by video evidence, contracts and audio evidence that a property developer in Paralimini sold a plot of land to Conor O’Dwyer in 2005 for £163,000 and then resold a house designed for Conor O’Dwyer’s family to another buyer Michelle McDonald, without the knowledge of O’Dwyer.

The plot thickens with the apparent collusion of local law firms in Paralimini who according to O’Dwyer have conspired to cover up the fraud.

This has inspired Conor O’Dwyer to setup a website www.lyingbuilder.com which is his own crusade to expose what he sees is the injustice and illegality of the whole situation.

The Cypriot market is already experiencing turbulent times, with the storm clouds already on the horizon with major developments experiencing problems selling units. Such scandals which are now making the headlines in the UK will severely undermine property sales in Cyprus.

News organisations in Cyprus and the UK have been monitoring the story looking at the way in which British buyers like Conor O’Dwyer who in good faith purchase land from developers like Karayiannas are allegedly defrauded, in the belief that they own the property. But in fact the developer resells to another buyer.

Other examples are now surfacing of Brits buying from Cypriot developers and are either finding the property is not built to standard or the title deeds are not given.

London Greek News has posted the various videos by Conor O’Dwyer, who has made several allegations with court cases pending in the Cypriot legal process. We will post news as and when they appear.

-------------------------------------------------------------------------------------------------

As an investor in Cyprus, I'm encouraged when I read these articles and when I see they are receiving prominence in the media. Why? Well, Cyprus has posted strong economic performance just 2 months before the Euro and the property market is a major factor for this strength. If I was in government and I saw articles like this it would ensure that I did something about it before it had far wider ramifications.

Without these types of horror stories nothing would be done.

Cheers

Ah yeah I lived in Zakaki for a few years, I like that side of town much better. Closer to the good beaches and Fassouri is great for bike riding and hiking. The east side of town is a bit dull if you ask me, and the beaches in town are crap.

Yes it's true that Lanitis will cut down the citrus groves and build a golf course and resort. My only hope is that it will not be too ugly and intrusive and that they will leave the roadside trees alone as they have been there for decades.

Airport - maybe I should check my facts, but it certainly appears to be a separate entity entirely, albeit very close to the existing facility. I just flew back from the UK a few days ago and had a good look as we landed. It is being built about half a click from the exisiting airport on the far eastern end of the runways, where all the cranes are.

P. S. I seem to remember you had a plot or something in Kolossi, did you sell it in the end ?

PPS. Sorry about the fish meze, didn't mean to rub it in. if it's any consolation it's windy and raining today and about 20 deg

ok, hands up on the currency, not sure how that happened, I plead sleep deprivation. You are better off in Euros than sterling.

All the same, your numbers are a moving feast.
- CYP£83 to CYP 116 you said was 28%, then you say 35% in a later post. Looks like 40% to me, which is in your favour.
- you said deposit put down 3 years ago in your October gloat, so in 2004, then you say 18 months, so in early 2006.
- you say costs of perhaps CYP£10,000. Well, you know what you've spent, but solicitor as buyer and seller must be 1,000 minimum, transfer duty 4% avg, stamp duty 1.5%, estate agency fees on sale, interest for 18months = 7.5% or more, insurance and other running costs. Perhaps you've kept the cost down by borrowing in Swiss Francs, but that is a currency speculation gain, a seperate risk profit, and not a profit generated from your expert eye for property.

And you've not sold it. So when you sell it asking price you deserve that glass of celebratory champagne. But a 10% discount to expected price, or a one year wait to sell it undermines the profit. Either, fair play to anyone who can turn an honest profit on anything, but a realised profit is the only relevant number.

And you are right, when investing you should not be able to match the reward for risk and time invested in off plan with a risk free yield of a bank deposit, that'd be a pretty miserable investment. But you would probably have made more in the relevant equity market without the downside risk you have from 4x gearing, and with immediate access to money. Since mid 2004, taking your first indicated investment commitment the Greek equity market has doubled in capital value (before dividends), whilst the Turkish market is up to 3.5x its starting point (before dividends).

Useful input - thanks.

Looking at my contract, I signed in November 2005 but dont complete until Sept '08, approaching 3 years but two years as of today. £10k is about right, probably a little less but like to pessimist on costs (yes did get Swiss mortgage). Agreed in the bank is the only profit that counts, dont mind dropping 10% would still make tidy profit from f all work.

Re Equity markets, your note flags a decent investment opp, however, I know nothing about these markets. I'm of the opinion that even in a buoyant market it is investment suicide to jump in with little or no knowledge.

Cheers
YeboC

My note flags that equities were an excellent opportunity, but I prefer to retain a value-bias to investment as opposed to a momentum driven approach. So not sure the fact Turkey has gone up a lot in recent years means it is still a buy.

Good luck, whatever your deal is, but I prefer to avoid the "free lunch" investments shown to me. I miss some good ones, but I miss a lot more duff ones.

I spoke to a man who runs Eastern European property funds, with a commercial bias - he said he had looked at bailing out some of the listed residential property funds which were trading well below asset value (I was offered and ducked these a year or so back as I felt like I was the last person to be offered said funds..), but when he looked at it, he found the asset value was massively overstated, so even at an apparent deep discount they were still expensive when one looks at proper metrics. So looks like values are being held up in some places as the professionals try to exit.

My note flags that equities were an excellent opportunity, but I prefer to retain a value bias to investment as opposed to a momentum driven approach. So not sure the fact Turkey has gone up a lot in recent years means it is still a buy.

Good luck, whatever your deal is, and I think it wise to stick to investing in what you know. I prefer to avoid the "free lunch" investments shown to me, I miss some good ones, but I miss a lot more duff ones.

I spoke to a man who runs Eastern European property funds, with a commercial bias - he said he had looked at bailing out some of the listed residential property funds which were trading well below asset value (I was offered and ducked these a year or so back as I felt like I was the last person to be offered said funds..), but when he looked at it, he found the asset value was massively overstated, so even at an apparent deep discount they were still expensive when one looks at proper metrics. So looks like values are being held up in some places as the professionals try to exit.