Cyprus property prices are forecast to register at least a 20% increase, well above expectations, as easy money provided by affordable loans from the banks, the rush to beat the 15% VAT imposition on land and strong demand from foreigners investing in mainly coastal areas have combined to make 2007 yet another boom year for the Cyprus property market.
During the first quarter of the year, for which official data are available, property transactions surged to a record CYP 560 mln or EUR 957 mln.
According to Solomon Kourouklides, Chairman of the Cyprus Real Estate Agents Association, demand is strong and expected to stay strong well into 2007, with the average increase in prices seen at 20% within a 15-25% price range.
Easy loans offered by the banks is seen as the principle reason leading to a rush by the public to invest in property deals. Another reason is the rush to beat the 15% VAT on land dealings, which is set to come into force from January 1, 2008. Another reason is strong demand from foreigners investing mainly in Cyprus’ coastal areas, with Kourouklides estimating that some 20% of Cyprus’ annual property sales are being made by foreigners.
Regarding the prices of houses and apartments, the survey forecasts a 5-8% increase for 2007.
The official statistics back the figures. According to the Inland Revenue Department, tax revenue from the property capital gains taxes reached CYP 100.4 mln or EUR 173 mln in the first five months of 2007, up sharply from CYP 36.2 mln or EUR 62 mln a year ago in the same period.
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Lending craze
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 according to Central Bank of Cyprus figures complied by the Financial Mirror.
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 Cooperative Credit Societies meanwhile increased their combined loans by a half billion to CYP 4 bln by March 2007 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.
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Record year for property transactions
All indications point to 2007 being a record year, well surpassing the total CYP 1.7 bln or EUR 3 bln in property transactions made in 2006.
Moreover, 2007 could be a record year in relation to the amount of money in loans Cypriots have taken from banks. The last five years has seen a constant increase in mortgage loans.
The last two years (2005 and 2006) have recorded a total of around CYP7 bln in mortgage loans.
Nicosia still marginally tops the property demand list with Limassol coming in a close second of the CYP 5.5 bln in property deals concluded during the past five years.
In the first three months of 2007, Limassol has continued its increasing trend in property transactions and is staking its claim as the most popular place to buy property on the island. In the first three months of the year, 1,572 transactions took place in Nicosia with just 47 less for Limassol.
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