Cyprus residential property prices continued to decline during the fourth quarter of 2013, as the eastern Mediterranean island is facing a liquidity shortage and the population reels under a rising unemployment which has reached 16.7 percent.
The residential property price index reflecting prices for houses and apartments receded by 2.6 percent on a quarterly basis and 8.7 percent on a yearly basis, according to latest data made available by the Central Bank of Cyprus on Friday.
Property prices had been on the increase for several years as the property sector enjoyed a boom until a slump started in 2009.
Cyprus had to apply for a Eurogroup-International Monetary Fund bailout in 2012 and concluded a 10-billion euro assistance program in March, 2013.
Property prices were central in shaping the bailout package, as international surveyors estimated the amount of money Cypriot banks would need to recapitalize on the basis of the assumed decline of property prices.
Non-performing loans added to woes of the banks, having risen to over 48 percent of the total as the value of properties used as security was estimated to have declined by as much as one third.
Though the government's needs were estimated at 10 billion euros over three years until the end of 2015, the total cost of rescuing the Cypriot economy topped an estimated 23 billion euros on account of the restructuring of the banking system.
It involved the winding down of the island's second largest lender and the recapitalization of its primary bank by using 47.5 percent of uninsured deposits over 100,000 euros.
The Central Bank statement quoted data published by the Department of Lands and Surveys which showed that the total number of sale contracts in the fourth quarter of 2013 recorded annual decreases in all regions of Cyprus, demonstrating persistent low demand for property.
The decline was reflected in a drop of sales of cement by 29.4 percent at a year-to-year basis.
It also said that prospects of a rebound in the construction sector in the short term are still weak, as the number of building permits recorded an annual decrease of 16.2 percent during the fourth quarter of 2013.