Home sales in Cyprus slump to a record low

Home sales in Cyprus have slumped to a new low as buyers pull out despite tax incentives from the government.

Rich foreign investors are shunning Mediterranean sunshine island amid speculation over mortgage fraud, planning scams and the general shambles of the economy.

Even Russians, who have flocked to Cyprus in recent years, are not buying.

Just 6,269 sales were completed in 2012 – compared to 7,018 in 2011.

That’s half the figure recorded in 2000 and the prospects for 2013 remain ‘bleak’.

With prices still falling, after a 5.8% year-on-year drop in the third quarter last year, estate agents are hoping that prices may become more attractive to foreign buyers

No recovery in sight

However, the country’s massive budget deficit, lack of liquidity in its markets and high interest rates – coupled with falling confidence – will hold back any recovery of the Cyprus property market.

A spokesman for the Cyprus Real Estate Agents’ Association said: “After February’s elections, there will be questions raised over the economy and the next government must act decisively and increase liquidity in bank funds.

“We believe that this will help boost the small business sector in Cyprus and with it, people’s confidence should also return.”

“The drop in property prices does bring some hope that foreign buyers will be interested because the prices will be more attractive and foreigners appear to be the only ones who can buy property without having to get a loan.”

The association doubts the property market will recover until 2014.

Property prices in Cyprus began to rocket in 2004 as the price of land soared – which effectively locked out many in the local population.

Recession to worsen

The market peaked in 2007 and then collapsed in 2008, but Cyprus has been sensitive to criticism in foreign media complaining of property fraud which led to questions being asked in the European Union and UK parliaments. A number of court cases involving dissatisfied buyers and their Cypriot agents and banks are ongoing.

Meanwhile, hopes for an economic recovery this year in Cyprus have been dashed after a leading publication asked economists for their predictions.

The Financial Mirror says that the recession in Cyprus will be worse this year than last.

All the economists who were asked for their prediction said the economy would contract by around 3%. That was the average figure with the best prediction being a contraction of 2.7% and the worst offering a 5% fall.

The publication also raised the issue of how Cyprus can find the money in a worsening