Financial troubles often signal opportunity for property investors. Europe has witnessed it share of problems in the past year with Cyprus being the latest EU member state to face a banking crisis. Cash buyers with long-term interests may find bargain properties in Cyprus where home prices have been falling for years and are likely to continue downwards due to the recent banking crisis.
The Cypriot market was in decline before the bailout of banks with prices falling as much as in half for residential properties in some parts of the country and by 35% for commercial properties since the last market peak in early 2009, according to the chairman of the country's Property Valuers Association.
The current RICS Cyprus Property Price Index shows prices continue to decline. Comparing year-on-year, residential property prices fell between 5.7% (homes) and 7.9% (apartments) from December 2011 to December 2012. Prices for commercial property also fell, with the price of retail units declining by 15.5%, and office and warehouse prices declining by 10.0% and 9.3% respectively.
A further drop in prices will magnify the country’s overall economic crisis as Cyprus has relied heavily on income from foreign investors in the second home market, most notably, British and Russian buyers. More recently, the island had seen growing interest from the Chinese in the western coastal town of Paphos and in Limmasol.
The financial crisis has shaken the confidence of potential overseas investors, according to Nicholas Lemonaris, founder and managing director of Lemonaris Estates, based in Paphos. He added that property sales over the past two years were already very low and although people from Cyprus and other EU member states are interested in buying, borrowing money is virtually impossible.
For those with cash, one London-based investor was quoted by Property Wire saying, “There will be some great deals. People that are stuck may need to sell up their land very quickly.”