Lysos, Cyprus Photo: Evgenly Isaev
Property prices in Cyprus are not heading for a bubble, the country and the European Central Bank have declared.
“Neither the European Central Bank nor the International Monetary Fund would agree with you that we are heading towards a new property bubble,” the island’s Finance Minister, Harris Georgiades, said in an interview with the Cyprus Mail last week .
Since the financial crisis, prices have plunged by around 30 per cent on average, according to the Central Bank of Cyprus, but that fall has begun to bottom out this year, with the second quarter of 2015 seeing a dip of just 0.4 per cent.
Nonetheless, according to the financial institutions, prices will continue to fall.
“I wouldn’t agree with the one extreme or the other, nor with the view that there will still be a further significant drop in property prices, nor I would say that that a new property bubble is imminent,” Georgiades added. “I would, in fact, take a middle-ground approach on this issue, essentially saying that the downturn of the sector has bottomed out, that we are seeing early signs of recovery, but I do not expect that circumstances will repeat themselves so as to fuel another bubble.”
The country has faced a number of issues post-recession, from falling prices to title deed errors to non-performing loans.
In July, the parliament passed a government bill offering tax breaks to property transfers, in an attempt to boost demand for real estate, which add to existing incentives offered to foreign investors, including a residence permit or, depending on the size of an investment, the Cypriot citizenship.
The minister said he sees the glass as “half-full” on the latter, with factors such as the 2013 banking crisis having been addressed.
“There is no quick-fix solution”, though, he reiterated.
His cautious optimism arrives as the economy showed it first sign of quarterly growth in Q1 2015 after 14 quarters of decline in a row.
“My confidence, however, is based on a very important prerequisite: that we shall continue along the path of continuously promoting reforms and structural changes, of maintaining discipline, of maintaining a business-friendly environment, and of maintaining the effort to strengthen the banking sector,” he continued.