Cyprus property deals hit record CYP 1.7 bln

Cyprus property deals during the first nine months of 2007 surged by a spectacular 42% YoY to CYP 1.7 bln or EUR 2.9 bln from CYP 1.19 bln a year ago in the same period, which was up 73% over the 2005 figures.

Real estate analysts explain that the spectacular activity in property is mostly due to the impending imposition of VAT on land sales, with many developers rushing to lock in the deals before the additional taxation kicks in.

Easy credit by banks is also widely blamed for fuelling an unprecedented buying spree, with many engaging in speculative activity, which the Central Bank of Cyprus is now attempting to stop.

By the end of October, bank lending to the property sector was up 33% with the public and the banks ignoring the new tougher lending measures introduced by the Central Bank, which reduced the leverage of property loans from 70% to 60%.

The government meanwhile is racking in huge gains from the imposition of capital tax on property gains. State income from capital gains taxes jumped 155% to CYP 200 mln in the first nine months of the year compared to CYP 79 mln in the same period in 2006 and CYP 38 mln in 2005.