Affairs in Cyprus are not the best way

Average prices for the Cypriot housing decreased by 5.7% in 2012 to €384,316, according to the Royal Institute of Chartered Surveyors. 2013 was the fifth in a row year when there was a steady decline in house prices in Cyprus. And things are going to be even worse.

When adjusted for inflation, the decline in real estate prices across the country was 6.9%. In the fourth quarter of 2012, housing prices fell by 1.1% (2.2% when adjusted for inflation).

City	Price reduce in %	Average prices
Limassol	11.90%	€363,277
Nicosia	5.30%	€475,409
Larnaca	9.10%	€331,695
Pathos	5.90%	€390,513
Famagusta	2.60%	€360,686

By region, the sharpest decline in prices was observed in Limassol (16.6% when adjusted for inflation), then in Famagusta - 10.5%, in Nicosia - 5.1%, Larnaca - Paphos 4.9% - 3.2% .

Demand for housing is reduced. In April 2013 the total number of sales in the country fell by 38% to 285 contracts, compared with the same period last year. 59% of purchases were made ​​by the Cypriots, 41% of the transactions carried out by foreigners.

In the first four months of 2013 the total number of tourists in Cyprus decreased by 12.2% compared with the same period last year, according to the Central Bank of Cyprus.

Issuance of mortgage loans decreased by 5.8% to €14.2 billion in May 2013 compared to the same period last year.

Experts predict a further decline in the housing market.

Scandals in the property market in Cyprus

Scandals surrounding the real estate market are now very often common in Cyprus. Usually this is due to the fraudulent transfer of property, the deliberate withholding of ownership and illegal building permits.

Property owners often do not register their property in order to avoid payment of the tax on real estate, which is the sum of the following:

3% for the first € 85,430 project cost

5% over the next € 85,430 project cost

8% for the remaining amount

Unregistered property can bring its owner's myriad problems. In fact the person does not own the property, despite the fact that he paid full price for it. If your real estate has not been registered, the documents remain in possession of the previous owner, who can make any actions without asking your permission.

Around 40,170 objects bought by foreign investors, were not officially registered by November 2011. Of the 51,654 objects acquired by foreigners from 2000 to November 2011, only 11,484 was registered.

The most glaring problem is the unscrupulous developers, that extort money under the guise of the real estate tax. Shortcomings in the protection of consumer rights have attracted the attention of the European Union, which demanded from Cyprus to restore order.

Low-income rental

Rental revenues in Cyprus are very small. The average level of rental income in the fourth quarter of 2011 was 3.8% for apartments and 2% for houses. Larnaca has a higher level - from 4.54% to 4.76%.

City	Cost of apartment of 120 sq.m.	Rent yield
Nicosia	€1,646 per sq.m.	4.35%.
Limassol	€2,140 per sq.m.	4.10%
Pathos	€1,780 per sq.m.	2.71%
Larnaca	€1,330 per sq.m.	4.54%

The tightening of the credit market

Tighter credit standards were conducted in Cyprus in the first quarter of 2012 as a precautionary measure. In February 2012, the interest rate on loans rose to 6.76% (loan up to 1 year), 7% (1-5 years) and 5.14% (over 5 years).

Interest rates in Cyprus are now higher than in many European countries. Cypriot banks have been slow to follow the recommendations of the European Central Bank to lower interest rates.

Economic problems will continue in 2013

To get help from the IMF in the amount of €10 billion, the Cypriot government cut spending, raise taxes and reduce bloated banking sector.

In May 2013 the unemployment rate reached 16.3%. In May 2013 unemployment was 30% compared with May 2012.

University of Cyprus Economic Research forecasts economic downturn within 9-12% in 2013, while the European Commission is planning to reduce it to 8.9% by austerity measures. In 2012, real GDP decreased by 2.4% compared to last year.

Due to the banking crisis, rating agencies lowered the credit rating of Cyprus. Standard & Poor's lowered the rating to SD, Fitch to CCC, Moody's retained Cyprus at Caa3 rating with a negative outlook. Much is said about the fact that the country will face a new default in the coming years.

"Cyprus does not have enough flexibility to cope with internal or external shocks, so there is a serious risk that all aid programs are not sufficient to overcome the crisis in Cyprus," said the representative of the Fitch.