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By George Mouskides
General Manager, Fox Smart Estate Agency, Licensed Estate Agent, US CPA
With the new government already in office for a month, the new ministers have begun work and the conditions of the EU aid package/ loan memorandum have been set, with all the accompanying after-effects.
So, then, what does the future hold for the real estate market?
Uncertainty and negative psychology among property buyers is certain to gradually reverse. Based on market liquidity and with banks now open, this psychology will rebound to a new air of confidence.
CASH INJECTION
Cash injection from the bailout plan and the lifting of the temporary bank measures, including mobility of funds, should get things back on track.
Based on the large number of properties on the market, prices are forecast to drop. Conducive to this would be the pressure put on mortgaged borrowers by the Laiki ‘’bad’’ bank to settle their non-performing dues.
Nevertheless, given adequate time, realty sales should pick up as interested buyers will have access to funds at a more favourable interest rate.
LESS EXPENSIVE
As time goes by, buyers should be able to operate in a pool of properties the price of which will drop.
Investors who lost big time by seeing their cash deposits with banks having being slashed overnight are bound to direct some funds into the real estate market. Some investors will also jump at the opportunity to buy property and rent it out to secure a monthly income.
FORECLOSURES
Even though banks can put the pressure on mortgaged borrowers, based on the bailout package conditions, we are convinced they will not proceed with mass foreclosures. The reason is that their loan security will suffer and they will be desperate for additional funds to achieve their minimum capital adequacy ratios.
So, which factors will determine the price of properties?
DETERMINING FACTORS
To begin with, we will list the factors we believe will push prices down:
– The large number of available properties, something which will gradually decrease;
– Bank measures to pressure mortgaged buyers will lead to an increased number of properties on the market;
– The current reduced market liquidity;
– Reduced demand for properties (mainly for rent) by foreigners as unemployment will lead them out of Cyprus;
– Economic recession;
– Rising unemployment.
Prices should pick up an upward trend as all these factors, one by one, cease to be part of the equation.
If liquidity improves leading to better interest rates and unemployment percentages drop, property prices should improve as well.
Increased interest on the part of local and foreign investors should also push prices up.
PROMISES
If the current administration stands by its pre-election promises for the opening of casinos and the promotion of medical tourism, the market will get a much-needed boost.
Developments in the energy field should also help as the country’s natural resources are sure to attract investments in the region of hundreds of millions.
The construction of a natural gas terminal is expected to offer employment to around 6,000-10,000 persons.
THE QUESTION IS…
The first question that springs to mind is when will all these measures materialise?
Answers to this range from 6 months to 2 years, with the more pessimistic expecting them to take shape in as long as six years.
As an industry, we strongly believe based on the indications thus far, that change will occur much more swiftly, offering a better prospect to our country.
