Cyprus’s economic crisis is taking its toll on property values on the island as banks aren’t lending and people aren’t buying. The prices fell up to 20 percent on an annual basis between July and September, a survey showed, illustrating how difficult it will be for the government to get the economy again.
Property values on Cyprus grew steadily from about 2000 to 2009 as Europeans, particularly Britons, bought second homes and the country’s booming banking industry extended credit until the bubble broke and the banks were brought to ruin by big holdings in devalued Greek bonds and bad loans to Greek businesses that went belly-up in that country’s even worse economic crisis.
Then newly-elected President Nicos Anastasiades in March had to go to the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) for a 10 billion euro ($13.67 billion) bailout but that came with attached austerity measures and requirements that bank accounts over 100,000 euros ($137,000) have 47.5 percent of their deposits confiscated.
The Laiki Bank was shut down and the other state banks, with strict capital controls, aren’t providing mortgages in many cases and businesses are having trouble operating, without enough liquidity because their accounts are largely frozen.
On an annualized basis, property prices dropped 20.2 percent for retail space, while the prices of homes and apartments dropped 11.1 and 14.6 percent respectively, an index compiled by the Cyprus branch of the Royal Institution of Chartered Surveyors (RICS) showed.
A surge in unemployment to a record 17 percent and a gloomy economic outlook are deterring buyers. Those who were interested were unable to access bank finance or their deposits, RICS said. International lenders expect Cyprus’s economy to contract by 7.7 percent this year and 4.8 percent in 2014.
The major districts of Nicosia and Limassol, the least affected property markets until the second half of 2012, recorded the steepest price falls in the latest survey. Other districts which registered steeper declines earlier appeared to be nearing a trough, RICS said, according to Reuters.
The survey was carried out with Cypriot quantity surveyors and property consultants.