Visitors to the expat forum are busy discussing the current state and future of the Cypriot property market which is proving very difficult to forecast. While obviously the local economy has been impacted by the global downturn there are other issues to consider in this popular and often complex property market.
It is only over the last few years that Northern Cyprus has effectively escaped from the shadows having managed to arrange a significantly better travel network with popular cities and countries around the world. While Southern Cyprus has fared much better than its Northern compatriot over the years this is also a property market which has proved very popular. So what direction can we expect the Cypriot property market to move in?
There are many factors to consider when looking at the Cypriot property market which include:-
UK property investors have dominated the Cyprus property market for some time and while there has been a significant fall in interest over the last 18 months, due to the worldwide recession, there is no doubt that at some stage investors will return. The market itself has held up better than many had expected in the short term although as overseas interest continues to fall we are seeing signs that prices are softening and developers are becoming a little more imaginative in their sales pitches.
At this moment in time the UK pound has effectively collapsed against all major currencies around the world which has, and will continue to, put off a number of potential property investors in the short term. Currently it is unclear how long the UK recession, or possibly depression, will last which has led to further speculation about when the UK pound will recover. Interest rates have hit record lows, liquidity in the UK financial markets is also at record lows and those investors with funds available appear to be staying on the sidelines. It would be wrong to say that UK investors dictate the Cyprus property market, but from a Northern Cyprus point of view in particular they are very important.
Local property prices
As we touched on above, the Cyprus property market has held up better than many had expected in the short to medium term. However, as suggested on the thread, there are a number of developers offering discounts on their unfinished properties. There is some debate as to whether these properties are the ones “that nobody wants” or in fact we are seeing a general downturn in prices. So far the fall has not been large enough to cause major problems but the longer the global recession continues, and pressure is placed upon the Cyprus economy, the more chance this reduction in property values could spread to other areas of the sector.
New initiatives by developers
It would appear that some developers are now offering sweeteners for those looking to acquire property in the region with suggestions that cars and other such “gifts” are becoming more commonplace than ever before. Over the last few years, when the Cyprus property market has been buoyant, we saw no sign of such incentives and this is something which is alarming a number of people.
A number of contributors to the thread have expressed the opinion that they would prefer a discount on the property rather than gifts such as cars etc. Quite why a car would seriously impact upon your investment strategy and investment decision can be a little difficult to understand for some people, as there is a danger that such gifts could cloud your judgement. At the end of the day, if the property offers good value for money surely you should be looking for a further discount rather than a gift that you may not particularly want or need?
Rent and then buy
This is a very interesting development in the Cyprus property market, the option for potential buyers to rent a property in the short term and then look to acquire it in the medium to longer term. It would appear that some developers on the island are very proactive in this particular area with any rent paid reduced from the final purchase price if the investor goes down this route. The one problem here may be a potential movement in property prices in the short to medium term which, unless covered in a contract, could see the value of the property “bounce” and become a missed opportunity.
It would appear that a number of expats in the Cyprus region are looking to sell up and move back to the UK because of the benefits of exchanging the local currency into UK pounds. There has been significant downturn in the international value of sterling and while a number of members on the thread are suggesting that UK property owners in Cyprus will “reduce their prices” because of the currency issue, this is open to debate.
Each and every property investor in any market around the world is basically out to get the best price they can for their property at any given moment in time. While there may be currency benefits to those moving back to the UK, with their spending power increased, they will still need and want to wring every single penny they can get out of their property investment.
The medium to long term future of the Cypriot property market
While much of the focus at the moment appears to be on a doom and gloom scenario for the UK and other economies around the world, this will not last forever. There is a feeling that as and when the UK economy in particular picks up, whenever this may be, we could see a significant bounce in the Cyprus property market as investors return. Historically, deep recessions have been known to “bounce” very quickly when they hit rock bottom although the situation regarding depressions is slightly more negative.
Due to particular changes in the make-up of North and South Cyprus, with the suggestion there may be some kind of political agreement in the short to medium term, the economies and property markets in the region have been fairly buoyant of late. However, like other economies around the world they have been impacted by the global recession which is now starting to hit the property market.
UK investors have been particularly active in the region for many years, due to the historic links, and the withdrawal of this significant investment funding is now starting to hit home. However, in the longer term there is the potential for significant growth in the Cypriot property market as transport network links across the region have been improved drastically in recent times. Many observers argue that the value of property in Cyprus has been “overextended” for some time, but this, as with so many arguments about Cyprus, is very much open to debate.