As owners of properties in Cyprus thought things couldn’t get any worse, experts predict a chilling forecast for the country’s property market.
That’s because the highly respected PIMCO Strategic Global Government Fund looks set to downgrade property values in Cyprus by up to 65% in a ‘worst case scenario’.
The fund is spooked by the on-going real estate and economic difficulties facing Cyprus and fears the desperately needed £9 billion injection the country needs to help capitalise banks to a level demanded by the European Banking Authority may not materialise.
Property and economic problems started in Cyprus before 2008, when the home prices boomed but problems with who owned the title to the land they were built on became an issue when owners, usually from overseas, realised that they did not actually own the property they had paid for.
Coupled with this are mortgage lending problems in the country which have undermined the Cypriot property market and lead to an in-depth investigation by the European Union over allegations of property fraud on a massive scale.
Drop in sales
The latest statistics from the country’s Land Registry reveal that property sales are falling quickly and despite the crash in values foreign buyers are staying away.
Property analysts reckon 2013 will mark a record low for property sales in Cyprus after figures showed they had dropped by 53% since January 2012.
Analysts had predicted a drop in sales after a brief respite at the end of 2012 when buyers rushed to benefit from reduced property transfer fees.
However, the same analysts admit that they did not expect January’s property sales figure to set a new record low.
Meanwhile, an expert on the island’s property market says the country must help those who bought over-priced properties and are now saddled with huge debts.
£1 billion problem
George Kounis, a consultant with London-based Maxwell Alves Solicitors, says the move will boost the economy and help the banks.
He said: “It may cost Cyprus up to £1 billion but this is necessary because the problems have been ignored for too long.
“Cypriot banks admit no wrongdoing but the evidence says otherwise, and in any event, what happened to the property market is not only morally wrong but also legally wrong.
“The banks face being tied up in court battles for years to come if they continue to ignore the strength of public feeling and the determination of their victims to see justice.”