By Alexander Apostolides on March 03, 2011

What's happening in the real estate sector?

At least some serious people are thinking of the economy in a rational way [you know who you are - thanks for a stimulating conversation today]. Perhaps unfortunately they are not politicians, technocrats or journalists: although they are exceptions, most, including the credit rating agencies are focusing on issues that are not such a big threat to our future well-being.

In general the real concerns in Cyprus are real fundamentals and not the issue of bank guarantees to Greek debts --> the banks themselves are well handled to deal with that since they have strong liquidity and access to ECB funds if needed to.

Our issues are the fact that unemployment is rising and businesses are closing. In addition the person who I spoke to pointed out that the real estate needs to be given a higher visibility.

Having moved away from a system of borrowing on trust (where two signatures of solvent persons would guarantee your loan) to a system of loans backed by property, we created two issues:
1) The issue of whether prices have bottomed out in the real estate sector both in the housing, business and tourist housing sector.
2) How many developers are practically insolent, and to whom they owe their money.

Strangely enough we had much lower rates of defaults using the trust borrowing system rather than the property system. Although its is partly due to the fact that smaller sums where involved it is my hunch (which i would like to explore further) that the issue was one of not upsetting family bonds and greater due diligence on the solvency of their clients by banks.

Anyone with an opinion on any of these two issues is welcome to comment

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