The Governor of the Cypriot Central Bank, Christodoulos Christodoulou has issued a warning to banks and mortgage lenders to exercise caution in their lending policies for home loans and property deals, as the nation’s property prices continue to soar.
According to Christodoulou, house prices have risen by up to 50% in the last eighteen months, and he told reporters recently that the situation was serious enough that "as the monitoring body we have told the commercial banks to be extra cautious in reviewing loan applications."
The Central Bank chief argued that the press and media were partly to blame for the situation by playing up the impact that European Union membership will have on the property market, which he said has created “a psychology of demand".
"If the rumours continue that the English and the Germans want to buy a house in Cyprus then surely prices will continue to increase," Christodoulou explained.
In a bid to avert a potential economic crisis in the event of a crash in the real estate sector, it has emerged that a leaked Central Bank memo has advised banks to lend only up to 70% of a property’s value.
According to reports, around 64% of all new loans approved in 2003 were intended to fund a property transaction, compared to 24% in 2002.
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