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Hi everyone

My, my this place has changed. I made a few posts in the early days (when it was in the old format... seems there were a lot more bulls back then too - whatever happened to that Minty bloke and the other one with the castle ?) but then I sort of lost interest in it after last summer when the first signs of the crash materialized.

So, to the point: I am in Cyprus and I firmly believe that we are also experiencing a house price bubble on my little island, however everyone here thinks I'm mad and that prices here will never fall. I have noticed a lot of new developments sitting unsold and empty for 6 months or more (if anyone is in Cyprus I would be glad to tell you where - maybe you can get a bargain) and the price of my own property had more than DOUBLED in the last 3 years. The problem is, I cannot find any hard evidence which would point towards a crash. I have seen some lacklustre pieces in various publications but nothing overtly bearish. The most recent piece in the Cyprus Mail was bordering on a joke:


House prices looks set to continue their rise

By Jean Christou

(archive article - Wednesday, July 20, 2005)

THERE is not likely to be any let up in the rise in house prices in Cyprus for the foreseeable future, but experts yesterday ruled out any notion of a bubble.

In June 2005, house prices rose 1.1 per cent over May, according to the BuySell index, the only one published on the island.

The June increase brought house prices to an accumulated 3.6 per cent rise for the first half of 2005, with the BuySell Index rising to 110.7 and the average home price to £86.218.

“In some countries prices go in cycles and in some others they go up or not,” said Stelios Platis Director of S.Platis Economic Research, which has just published 60-page analysis on the Cyprus property market, which was commissioned by BuySell.

Platis said before the BuySell monthly index was formulated, there was no clue as to the property market in Cyprus. He said it was also widely used abroad as in indicator as to the state of the market in Cyprus.

“Whether there is a bubble or not depends on the country and how the financial system of that country works. My opinion is that the chances of a bubble in the Cyprus property market is very small,” Platis said at a news conference yesterday to present the findings of the research.

The study analysed the key factors that that have led to a rise in prices, and also the factors that negatively affect the market. It concluded that liberalisation of the financial sector and a decrease in interest rates led to easier borrowing, an increased demand for higher quality housing and also for second homes.

Platis said that between 1992 and 2001 the population increased by some 90,000, while at the same time the number of people per household declined from 3.23 in 1992 to 3.06 in 2001 and the percentage of owner-occupation increased from 63.8 per cent to 68.2 per cent.

“The inability of the existing housing stock and the construction industry to meet the increased demand led in the short run to house-price increases,” said Platis. “The construction frenzy recorded in the period following interest-rate liberalisation could therefore be explained by the existence of demand that had not been satisfied earlier by the previously existing supply. The inability of the supply side to meet demand for specific locational characteristics may also have led to an increase of the prices of such locational characteristics.”

He also said the increase of land value and construction costs had contributed to the increase of house prices in the long run. “The size of the profit margin for developers (the difference between house prices and construction cost) is decisive in whether new houses are constructed and therefore determines the level of supply of housing in the medium term,” he added.

Platis said the stock market bubble also turned the attention of Cypriots back to property as an investment, something that contributed to increased demand and increased house prices, as did EU accession.

Negative effects on the market included the stabilisation or marginal decrease of per-head disposable income of Cypriots during 2001-2002 and the interest-rate increase of 100 basis points by the Central Bank of Cyprus in April 2004.

“This development contributed to an increase in the cost of financing, restricting demand for housing loans and consequently for housing, thus affecting prices negatively,” Platis said. “Additionally, the directive issued by the Central Bank of Cyprus to the commercial banks, instructing them to grant housing loans of up to a maximum of 70 per cent of the value of a house, may have contributed to the decrease of demand in 2003, since it limited the number of eligible persons.”

Referring to the second home market, Platis said that special circumstances such as oversupply of second homes, relatively high prices and an increase of interest rates in the UK, may have caused a demand decrease – with negative or stabilizing effect on prices – especially after the developments in the Cyprus problem from April 2004 and the opening of the Green Line a year earlier.

“Today, and most particularly from February onwards, the Cyprus housing market is believed to be in a phase of price recovery – a tendency which is expected to continue,” Platis said. “The examination of the current conditions on the Cyprus housing market, based on the study’s conclusions, leads us authors to assume that house prices will probably continue to rise.”


Is it not ridiculous that the only house price data available for the whole island comes from BuySell, the biggest estate agent here ? I sent the following letter to the paper but they did not publish it or reply:


Dear Sirs

I found your recent article on house prices (Wednesday 20th July) to be biased and selective on many counts. It is also quite ridiculous (and amusing) to see that the research quoted in the article is sponsored by BuySell, the biggest real estate agent on the island and obviously a corporation which has a vested interest in having people believe that house prices will continue to rise. Such scaremongering is clearly generated in order to induce panic buying and thus stave off the real estate collapse which is clearly looming.

The answers are very simple. Real incomes have not increased significantly on the island, in fact we have less disposable income then before as the cost of living has risen and will continue to rise as a result of higher energy costs in the oil and gas markets. Therefore the rise in house prices is merely fuelled by speculation and sentiment, as was the rise in stock prices during the CSE bubble of the late 90's. As any economist worth his salt will tell you, sentiment in markets can change very quickly. Locals simply cannot keep up with the massive rise in house prices on their incomes, so it follows naturally that they will come to a point where they simply refuse to buy, or will buy at a very high level of exposure which leaves them vulnerable to panic selling when things get tough.

It could be argued that UK buyers will continue to prop up the market, but the British real estate bubble has already burst and the recent small price falls we have seen will gather steam over the next few years. Few will be willing to risk purchasing a home abroad when equity on their main residence in the UK is slowly slipping downwards. Once the crash in the UK market gathers steam, Cyprus will shortly follow suit.

Finally, the argument that lower interest rates will drive prices higher is also questionable. If we study the case of Japan we will see massive house price falls over the past fifteen years since the Japanese housing bubble burst in the early 90's. Interestingly, Japanese interest rates are at 0.10 percent and have been for some time now with no upward effects on prices at all.

For more on the global house market bubble, I would steer interested readers towards excellent grassroots sites such as www.housepricecrash.co.uk and advise them to leave the BuySell propaganda well alone. It can all only end in tears.

Unquote -

Anyone in Cyprus who can help me out with this seemingly Herculean task ? I would appreciate any pointers,

Best regards to all,

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Tube Rider

I holidayed over there (Stayed in a lovely villa in Coral Bay) I stayed near a friend who has bought over there; I think the push to buy before VAT was added increased the bubble. My View is that there is Bubble but, maybe not as bad as the UK as the prices are not as high. However I would not buy at this time!

Big AL.

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Hi guys

Thanks for the replies,

There are two new developments behind the seafront mcdonalds in Limassol which have been sitting empty since last February. One is an Athanasiou development and consists of 20 houses, the other is a GP Lazarou job and consists of about a dozen. A total of only six of these has been marked as 'reserved' but i see no signs of activity.

The Tryfonas Hills complex in Ayios Tychonas, Limassol is only a third sold, no further sales since last spring. There are many for 'for sale' and 'to rent' signs appearing in Limassol which leads me to believe that the market is now saturated.

No downward pressure on prices has appeared here yet as my fellow cypriots are an optimistic bunch and believe they can defy the laws of demand and supply (as they tried to do with the huge stock market bubble here in the late 90's) but i think the end is nigh for us as the Brit buyers seem to have all dried up and we locals cannot afford these crazy prices

If anyone is in or from Cyprus it would be nice to hear from you, i feel like a lone voice in the wilderness out here

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Depends on which one. On average:

120-130k for a two bedroom 'villa' (concrete box with small garden)

Three bedroom 'villas' all sold, when I called earlier this year the agent told me they were coming in at around 145k

160k - 200k for four bedroom concrete box, price varies depending on Sqm and size of garden.

Don't forget that the title deeds are not available and will not be either for the next 2-3 years. Land registry office works very slowly out here.

There are also several blocks or flats being built in the Athanasiou Mesogios compley. A two bedroom flat at around 120sqm and right across the road from the beach goes for 250k. Thats Cyprus pounds, so read 300k sterling. Problem is (and as anyone who knows Limassol will tell you) the road you have to cross is a dual carrigeway and very busy at all times of day and night with people screaming up and down at high speeds. Strangely, this road does not appear on their artist's impression :


Things have gone mad out here, i'm telling you. It's gotta end in tears.

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