Real property

Real estate markets around the world showed the best recovery results in the second quarter of 2013 since the pre-crisis boom of 2006-2007. This information is provided by Global Property Guide, that recently published a statistical report on the global house prices. Recovery of European markets in the second quarter of 2013 is going slowly amidst the debt crisis in the region. Of the 25 European markets included in the study, 14 showed better results than the previous year.

Positive developments

Denmark showed the best results among the other European countries and the eighth result worldwide, despite weak economic growth. Real estate prices increased by 7.76% for the year as of the second quarter of 2013. A good result, considering that last year over the same period there was a decline by 4.12%. The prices for the quarter were up by 1.94%. The Danish economy is projected to grow by just 0.2% in 2013 after a contraction of 0.57% in 2012.

In Turkey the housing prices are also rose rapidly. The cost of real estate for the year grew by 6.94% in the second quarter of 2013. Compared with the previous quarter prices rose by 1.55%.

In some other European countries have also been significant positive developments. In Germany, prices were up by 3.63%, Switzerland - by 3.63%,Norway - by 3.37%, and in Sweden - by 3.34%.

Among the cities, Kiev is in the lead with an increase of 6.24%, Vienna (6.01%) andTallinn (4.65%). Warsaw and Vilnius sharply slowed their decline: -3.41% and -1.02% respectively.

In some European countries, prices rose slightly. In Iceland, the value of the property for the year increased by 1.51% as of Q2 2013, Finland - 0.58%, in Ireland - 0.53%, in Latvia - 0.4%. Compared with the first quarter of 2013 in Iceland, prices rose by 2.7% in Finland to 0.33% and in Ireland by 2.34%, while in Latvia prices fell by 0.03%.

Negative indicators

Despite these positive developments, some European markets are still in a deep depression. Twelve of the most weak global markets are in Europe. The worst performance in the reporting period was at Cyprus, where prices fell during the year by 12.74% as of the second quarter of 2013, which was a record decline in recent years. Compared with the previous quarter prices were down by 4.15%. Cyprus economy is projected to shrink by two-digit number in 2013 because of the huge financial difficulties the country has faced in recent times.

In Greece, the prices decreased by 11.12%, which is slightly better than the annual decline of 12.73%, as shown in the second quarter of 2012. Compared with the first quarter, the prices were down by 4.08%. The Greek economy is shrinking for six consecutive years, against the background of ongoing austerity measures by the Greek government. In 2013, the economy is projected to decrease by 4.2%.

The situation in the real estate market in Romania is slightly depressing against the improving economic situation. The cost of housing has decreased by 10.2%. Compared with the previous quarter prices fell by 2.84%. Romania's economy grew by 0.5% in the quarter and 1.5% for the year. By the end of 2013, experts predict a rise of 2%.

Among the cities the worst performance demonstrated Zagreb, where prices for the year decreased by 8.14%. During the quarter, real estate prices dropped by 1.78%. Croatian economy continued recession, leading to a decline of 0.3% by the end of the year.

In Netherlands, prices were down by 7.25%, the eleventh consecutive quarterly decrease in the cost of housing. During the quarter, prices were down by 1.04%.

In Russia, prices in the secondary market decreased by 5.27%, the largest decline since the 4th quarter of 2010. A quarterly basis, prices were down by 0.94%.

Property prices in Bulgaria dropped by 4.6%, which was the eighteenth of the account quarterly decline in the cost of housing a row. During the quarter, housing became cheaper by 0.95%.

All seven of the worst markets, except for Greek and Dutch, showed the worst results in the second quarter of 2013 compared to the same period last year.

The slight decrease in prices was observed in Poland (-3.84%) , Portugal (-3.41%) , the UK (1.56%), Slovakia (-1.35%) and Lithuania (-1.02%) .

The fact that the rate of decline slowed in most countries may cause some optimism.

Dynamics of prices on the European markets in the second quarter of 2013:

Country	Price dynamics per year	Price dynamics per quarter
Denmark	7.67%	1.94%
Turkey	6.94%	1.55%
Austria, Vienna	6.01%	2.66%
Estonia, Tallinn	4.65%	-1.14%
Germany	3.83%	4.62%
Switzerland	3.63%	0.63%
Norway	3.37%	1.62%
Sweden	3.34%	1.25%
Iceland	1.51%	2.70%
Finland	0.58%	0.33%
Ireland	0.53%	2.34%
Latvia, Riga	0.40%	-0.03%
Lithuania, Vilnius	-1.02%	0.33%
Slovakia	-1.35%	-0.96%
UK	-1.56%	1.87%
Portugal	-3.41%	3.10%
Poland	-3.84%	-1.66%
Bulgaria	-4.60%	0.95%
Russia	-5.27%	-0.94%
Netherlands	-7.25%	-1.04%
Croatia, Zagreb	-8.14%	-1.78%
Romania	-10.20%	-2.84%
Greece	-11.12%	-4.08%
Cyprus, Nicosia	-12.74%	-4.15%

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.