End of Greek Cyprus boom comes from UK

Bloomberg

His company, Leptos Estates, is struggling to sell vacation homes on the Mediterranean island to British buyers after the pound lost almost a quarter of its value against the euro and U.K. unemployment climbed to a nine-year high.

Two thousand miles away, Greek Cyprus is feeling the aftershocks of the end of a British housing binge. Prices for apartments in the resort towns of Paphos and Paralimni fell as much as 25 percent in the past four months, after more than doubling since 2002, according to data compiled by broker Antonis Loizou & Associates in Nicosia. Building permits for homes on the island, a gauge of future housing starts, declined 2.4 percent during the first 11 months of last year.

"The industry has just stopped," said Stuart Crouch, who was managing director of Parador Properties until the company filed for bankruptcy in August. Britons are pulling out of second-home markets after the deepest recession since the 1980s cut U.K. house prices 20 percent since the August 2007 peak. The economy shrank 1.5 percent in the fourth quarter from the previous three months as the financial crisis led to a collapse in consumer spending and investment.

Aristo, the biggest homebuilder in Greek Cyprus, reported a 41 percent decline in sales during the first 10 months of 2008 as demand from U.K. buyers fell by about 75 percent.

Dreams turn sour

At Leptos’s sales office in north London, dozens of customers planning for retirement were unable to sell their homes to finance a move to Cyprus, and investors seeking a holiday home or rental property have similar problems, Cartwright said. As a result, Leptos has reduced prices and slowed its development program, he said.

"Business isn’t good, but we’re surviving," Cartwright said. "The biggest problem is the value of the pound and the weak U.K. housing market."

British investors owned 425,000 foreign homes valued at about 58 billion pounds ($83.4 billion) in mid-2008, up from 10 billion pounds in 1998, according to broker Savills. Since last year, purchases of assets ranging from villas in Spain to ski chalets in Bulgaria have almost ground to a halt.

The pound’s slide has stretched the finances of most British owners, particularly those with overseas mortgages. Foreign Currency Direct, which handled money transfers for 30,000 property transactions outside the U.K., said the number of British customers repatriating money rose by as much as 31 percent in the 12 months through January. "We’ve noticed a significant increase in the number of our British clients selling property abroad," Chief Executive Officer Peter Ellis said. "Many are willing to discount the sale price of their property to secure a sale."

Greek Cyprus depends more on U.K. buyers than any European property market. In the past five years, the British accounted for about 10 percent of new-home sales on the island and two-thirds of all foreign purchases, according to three brokers on the island.