By Stelios Orphanides
Home prices fell 2 per cent in third quarter of 2014, compared to the quarter before and 8.9 per cent compared to the respective quarter in 2013, even as interest rates for mortgages fell, the Central Bank of Cyprus said.
Apartment prices fell 2.7 per cent in the third quarter compared to the quarter before while the respective decline in house prices was 1.5 per cent, the central bank said in a statement on its website said. Average interest rates for mortgages fell to 4.27 per cent in July to September from 4.48 per cent in April to June.
The Famagusta district saw the largest quarterly drop in apartment prices in the third quarter, as they fell 6.2 per cent, while the smallest drop was in the districts of Larnaca and Paphos with 1.3 per cent, the central bank said. The largest drop in house prices occurred in Larnaca district as they fell 3.2 per cent compared to the quarter before. In both Limassol and Paphos, house prices fell a marginal 0.1 per cent.
On an annual basis, house prices fell 7.9 per cent in the July to September, while those of apartments fell 10 per cent, the central bank said.
In the second quarter, home prices fell 2 per cent compared to the first quarter and 9.1 per cent compared to the respective period last year, according to the central bank statement.
No recovery yet
Home prices may have a long way to go before they start to stabilise while it is too early to even talk about a possible reversal of the current trend, property evaluator Periklis Markaris said.
“Prices continue to fall for six years and we are entering the seventh year now,” he said in a telephone interview.
The Limassol-based evaluator said that “there are signs in 2014 following the 2013 shock” that may help home prices stabilise at some point he did not specify.
“We had positive developments we were not expecting,” he said. “Banks passed the stress tests. Encouraging steps in the right directions are developments related to natural gas findings, demand by foreign buyers not only for immovable property but also in investing in other areas of the economy”.
Foreigners who buy homes in Cyprus in order to benefit from a government scheme that offers them either a permanent resident permit or a Cypriot passport depending on the value of their acquisition, shows that “they have not lost confidence in Cyprus”, he added. “In order to see developments that will lead to a reversal of the falling trend in prices, a lot must happen,” including a decrease in interest rates and drop in unemployment rate, which continues to hover over 15 per cent.
While the approval of the legislation on foreclosures by the parliament may have a short-term negative impact on home prices as it could add to the existing “oversupply”, in both the medium-term and long-term, Markaris said.