Cyprus Rehash Corrupt Property Price Index

Posted on October 5, 2009 by Roberta
Posted in Foreign Property Tagged index, price, property

We have currently been doing quite a lot of due diligence on Cyprus property prices and valuations. I came across the following article on the changing climate of valuations in Cyprus. If you are even considering buying here, please read this article carefully.

Even as a very experienced investor and renovator, I found it extremely frustrating experience trying to get decent property to compare with on both sale and rental aspect. It would be very easy to get ripped off when buying in Cyprus. ( By the way, the web site this article was on is a fantastic resource for anyone interested in this market for investments.)

Article from The Cyprus Property Magazine below…( with a few of my own comments too!)

A row is brewing over the future of the Cyprus property price index. According to latest reports, RICS Cyprus has entered the fray and is planning to produce a regular property index starting in January 2010.

Last week the demise of the BuySell Cyprus Home Price Index was reported. An announcement was posted on their website.
( BuySell Cyprus is basically an estate agent index a bit like Right Move, and has been accused of being somewhat..er…biased in it’s figures. However, it is one of the main indexes people trust.)

Local Banks To Produce A Property Price Index

However, the local banks have got in on the act and will also be preparing a Property Price Index for Cyprus; some pundits are extremely concerned over this development. In an interview with the Financial Mirror George Mouskides, chairman of the Association for the Promotion of Property Developments, said that:

“A Property Price Index is a positive and useful tool. Provided it is accurate, it is a useful statistical tool for all those involved in the property sector. But it is worse to have an unsound PPI than not to have one at all. This is why the banks should approach this particular issue without agendas and ulterior motives if they really want to have positive results.

Moreover, banks should not proceed alone with this. It is essential that the Land Registry be involved, not simply as a partner, but as a protagonist.”

RICS Cyprus Jumps On The Bandwagon

In the last week we have learned that the Royal Institute of Chartered Surveyors (RICS) has plans to produce yet another Property Price Index for Cyprus.

RICS Cyprus has commissioned the University of Reading in the UK to produce a methodology for a ‘RICS Cyprus Property Index’; the first in its series of indexes will be presented in January 2010. According to reports, the index will cover the price of homes and offices, shops, warehouses and industrial estates in all districts of Cyprus.

But yet again, concerns have been expressed over this latest development. As a number of RICS Cyprus members are known to have interests in other real estate related businesses (including estate agencies, property construction, banking and property investment) they may be motivated to manipulate the index in their favour. (This was the major concern over the validity of the now defunct BuySell Home Price Index).

Editor’s Comment

Although the intentions of the banks and RICS Cyprus may be honorable, ( bearing in mind this is Cyprus! ) questions will always be raised on the independence and validity of any Cyprus Property Price Index they may produce.

Surely the only way to avoid potential conflicts of interests is for the Cyprus Property Price Index to be produced by a competent Government authority with no connections to or interests in the property business or construction industry; i.e. the Cyprus Statistical Service (CYSTAT).

With 146 permanent staff based in Nicosia, Limassol, Larnaca and Paphos, CYSTAT is ideally located to collect property sale data from the Land Registries and already has the necessary infrastructure.

My Own Thoughts

What this article demonstrates very nicely is the attitude of the various ‘official’ bodies in Cyprus. Cyprus has always been run by people in power who are in it purely from a self serving angle. If you are considering buying a property in Cyprus, you need to do LOTS of diligence, and lots of visits. You will also need to look for a specific niche if you want to rent your property. The market is saturated and rental demand for holiday lets is down 20% this year. Many Brits are returning home. Over 80% of all sales on the island are at present to British investors and ex-pats.

Now that the country has at last admitted to being in recession, it’s likely to get worse before it gets better. Valuations are over stated. Property has overshot the affordability factor. Cyprus has one of the most corrupt governments in Europe and it is essential you remember this and take independent advice from someone who knows the system. Don’t get carried away with the agent or brochure blarney.