Nicosia: Cypriot property prices recorded one of their steepest falls in years in the second quarter, a survey showed on Tuesday, as an austerity-driven recession sapped demand in the country’s once-buoyant property market.
Market sentiment on the bailed-out Mediterranean island was dampened by a worsening outlook and lack of available cash to invest in the property market, according to the survey by the Cyprus branch of the Royal Institution of Chartered Surveyors (RICS).
Cyprus struck a deal with international lenders for €10 billion (Dh48.45 billion) in aid last March, but in return had to wind down an insolvent bank and impose losses on big deposits in a second.
Capital controls to prevent a bank run are in place.
“Definitely the market is going to deteriorate further and faster than before. There is no lending available and people’s money [in banks] is blocked,” said Pavlos Loizou of RICS Cyprus, a compiler of the survey.
Second quarter annual declines — which ranged from a 12.6 per cent price drop in the valuation of an apartment to a 23.3 per cent fall for office space — were the sharpest recorded since RICS started collecting data in 2009, Loizou told Reuters.
Conceivably, they could be the sharpest over many years in a market not accustomed to sudden drops in valuations. For at least a decade before 2009 Cypriot property prices were steadily growing on the back of foreign demand and liquidity-flush banks extending credit.
Over two growth cycles immediately before and after Cyprus joined the EU in 2004, property prices rose anywhere between 150 and 200 per cent, Loizou said.
Boarded up shops have become commonplace in central Nicosia, the island’s capital. On Makarios Avenue, which was once a commercial hub teeming with traffic, dozens of shops stand empty, driven out by high rents and a shift in consumer preferences to other locations, including out-of-town malls.
Loizou said some interest had been displayed by overseas investors looking at retail properties.
“But at the moment they are just sniffing around,” he said, adding that fellow bailout recipients Ireland and Spain had also seen interest from overseas investors looking at distressed retail properties they could pick up at advantageous prices.
Official figures on Tuesday showed Irish residential property prices have recorded their first annual rise since a property crash crippled the country’s economy in 2008 — a landmark in Ireland’s uneven recovery.
In Spain, whose weakest lenders were bailed out with European money, the 2008 property crash has left banks saddled with plots of land on their books worth less than many have accounted for.