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Property price correction is slow

23/07/2013 06:49
Prices of residential properties in Cyprus are almost double compared to 2003, according to new European Central Bank data.

The data show a sharp rise in property prices in recent years, resulting to the exclusion of many households from purchasing a first home.

The price index of residential property of the ECB also shows that, despite the shocks on the domestic property market, the decline in domestic prices is relatively small compared to the large correction of the properties in other "memorandum" countries.

According to ECB data elaborated by StockWatch, property prices in Cyprus were 90% higher in 2012 compared to ten years ago.

The only country that shows a property increase is Estonia, where prices rose by 97% since 2003.

In France, prices rose by 73%, in Belgium by 81% and in Germany by only 18%.

Things are different in the countries of memorandum. In Greece, prices have dropped to levels of 2003, having lost close to 30% of the levels they were in 2007.

In Spain, the decade increase is restricted to 17% and in Portugal to 10%.

On the other hand, residential property prices in Ireland have suffered significant and rapid correction having dropped to levels 20% below the 2003 prices.

Based on ECB data, the prices of new and old residential properties in Cyprus had recorded one of the biggest increases in the eurozone. From 2003 to 2008, prices jumped by 130%.

In the past five years they have dropped by 17%.

The relatively mild correction emerged despite the large decline in sales from 12.6 thousand units in 2003 to about half in 2012.

The rapid development of real estate led to an oversupply in the real estate market, which is currently not absorbed because of the difficulties in the disposal of properties by the banks.

Banks have recorded hundreds of millions of losses from bad loans in the industry. Only Bank of Cyprus – according to Pimco – is estimated to have suffered losses €0,8 billion from loans to developers.