Is the Cypriot market becoming overheated?

According to a recent survey printed in the Financial Mirror, a leading Cypriot financial and business newspaper, a sharp rise in property prices over the past year is now "driving investors away."

In fact property sales have declined by 29% year on year during the first half of the year, according to the Land Registry figures.

Part of the Financial Mirror's report reads: "Industry experts blame most of the real estate decline on the sharp increase in property prices, with Paphos now matching prices quoted in Spain and driving itself out of the market."

Mortgage Warning for Americans

Alan Greenspan, America's Federal Reserve chairman has followed up on last month's warning that the US property market may be set to crash by voicing concern at the worrying decline in standards in the mortgage lending industry.

Mr Greenspan is concerned by interest-only loans, floating rate mortgages, and other "more exotic" forms of home financing including loans where borrowers do not pay the full interest cost for an initial period and it is added to the principal.

"They are seen as vehicles that enable marginally qualified, highly leveraged borrowers to purchase homes at inflated prices. In the event of widespread cooling in house prices, these borrowers, and the institutions that service them, could be exposed to significant losses," Mr Greenspan said.

However, Mr Greenspan said problems were still largely confined to a number of local markets.
"The vast majority of homeowners have a sizeable equity cushion with which to absorb a potential decline in house prices," he said