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The decline in residential property prices could have been even worse if the banks had put pressure on developers to pay their loans by reducing new property prices even more to encourage sales.

Property prices have fallen for the last 6 according to the latest Central Bank  Residential Property Price Indices.

However, economist and ex-banker Symeon Matsis said the fall in property prices in Cyprus would have been worse if the banks put pressure on developers to pay their loans by reducing property prices even more to encourage sales.

According to Mr Matsis developers’ arrears are on the increase and the banks are bracing themselves for a further haircut on their Greek bond holdings.

In his interview with the Sunday Mail, Mr Matsis said that “The banks are not putting pressure on construction companies as they fear this would have further side effects. If the companies were pressed into selling their assets, this would cause a drop in the value of collaterals”.

Mr Matsis statement confirms property developers are not receiving enough income from property sales to pay their loans – and the banks are not chasing them for payment.

Obviously this situation cannot go on forever and some property developers are probably close to bankruptcy.

The banks in Cyprus must be very concerned about the situation; but their hands are tied because they are at the mercy of the developers.

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