Cyprus' Central Bank decided to leave key interest rates unchanged as it moves to bring the island's monetary policy in-line with the European Central Bank ahead of next year's planned entry into the euro zone.
The minimum bid rate on main refinancing operations was held steady at 4.50% which, following the ECB's recent rate increase, narrows the gap in key interest rates between the euro zone and Cyprus to 75 basis points. Cyprus is joining the euro zone Jan. 1, 2008 and must bring its interest rates, which are higher than in Europe, in line with the rest of the euro-zone. March 8, the ECB raised its key interest rate to 3.75% from 3.50%, the seventh rate hike since the start of monetary tightening in December 2005. The ECB is expected to raise rates further in June.
Joining the Eurozone is a factor that will contribute towards an increase of demand in Cyprus property since interest rates will fall. This will have a dual effect. On one hand mortgages will be cheaper and buy to let investments will have much better returns than today. On the other hand depositing money in the banks will stop being a good investment and people with a lot of cash will be looking for property investments in order to get a better return on their money.
Furthermore joining the Eurozone will save Europeans buying property in Cyprus currency exchange costs which can be up to 0.5%.
VAT on land is definitely another factor. Cyprus has a transitional period until 2008 before imposing VAT on land and when this applies property prices are expected to go up by at least 5% only because of that.
So what does all these mean? Prices will increase gradually, at least by 50 % by 2008. The future remains to be seen but what we know for sure is that now the prices of real estate in Cyprus are going up fast and will continue going up even faster for sometime to come. So if you are considering to buy a property my advice would be to first do your own research and then find a reliable consultant to assist you in minimizing any risks of a price stabilization.
For more news on Cyprus Properties please visit
No comments:
Post a Comment