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Cypriot property suffers slow winter

3rd January 2007 | back to article listings BACK    print this article PRINT

After a strong overall year for Cypriot property, prices began to tail off towards the end of 2006 with three out of the last four months recording falling prices, according to new research.

House prices on the Mediterranean republic fell for the third month in a row, signalling the end of the previous six-month boom period where annual property price inflation peaked at 8.5 per cent in August, according to BuySellCyprus' home price index.

At the end of the summer, prices on the island reached a peak at CYP 93,171 (£109,650) but have since fallen by two per cent to CYP 91,213 (£107,369).

In September prices dropped by 0.8 per cent, in October by 0.9 per cent and in November by 0.4 per cent, but inflation for the year is still running at a healthy 6.3 per cent, representing a considerable return on investment.

The good news for jet-to-let investors is that prices fell by the smallest amount since August's peak and it may be significant that the quantity of the fall was similar to that of January 2006, which anticipated the mammoth six month boom in the middle of the year.

What emerges from these figures is that Cyprus is now a stable property market, although prone to minor swings from month to month (primarily due to its reliance on the tourist economy which picks up in the summer months) it is underpinned by strong economic fundamentals meaning that volatile crashes are highly unlikely.

Along with Malta, Cyprus is aiming to follow Slovenia, which became the first former communist country to become part of Europe's elite on January 1st this year, into the eurozone in 2008.

However, its proposals and economic health must be surveyed and approved by both the European Commission and the Frankfurt-based European Central Bank.

Factors influencing European chiefs' decision include exchange rate stability, strength of the legal system, interest rates over the long term, budget deficit, and inflation.

Today the island's Statistical Service reported that the consumer price index fell to an average of 2.5 per cent over the course of 2006, down from 2.6 per cent the previous year, according to the Financial Mirror.

These figures together show that the island is host to a low inflation economy, especially considering that in the UK, Gordon Brown is continually praised for delivering a low inflation, low interest rate economy, even though our retail price index is currently running at 2.7 per cent.

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