Days after Cyprus banks were bailed out (or, rather, in) in March, even if it meant the complete collapse of the local economy just to keep the country in the Eurozone and potentially the sale of the country's gold to provide its own funding toward the "common cause", the Eurogroup came out with a "Debt Sustainability Analysis" which predicted some hard times for the country but its eventual recovery. About a week later it emerged that the funding needs of the tiny island nation would be far greater than previously imagined, but for the time being, since the liquidity (if not solvency) situation had stabilized, all was well and that was one bridge that would be crossed when Europe came to it. That time may be coming fast. As Reuters reports, the Cypriot banking collapse has finally spilled over into the economy and resulted in a record collapse in local real estate values, which ranged from a 12.6% price drop in the valuation of an apartment to a 23.3% fall for office space in just the second quarter, which were the "sharpest recorded since RICS started collecting data in 2009, Loizou told Reuters."
Cypriot property prices recorded one of their steepest falls in years in the second quarter, a survey showed on Tuesday, as an austerity-driven recession sapped demand in the country's once-buoyant property market.
Market sentiment on the bailed-out Mediterranean island was dampened by a worsening outlook and lack of available cash to invest in the property market, according to the survey by the Cyprus branch of the Royal Institution of Chartered Surveyors (RICS).
"Definitely the market is going to deteriorate further and faster than before. There is no lending available and people's money (in banks) is blocked," said Pavlos Loizou of RICS Cyprus, a compiler of the survey.
One wonders: with the complete collapse in modern Keynesian/monetarist economic machinery, in which the only "groath (sic)" comes from credit injection, did the local population expect otherwise? And if they had the chance to revote on their submission to Merkel's will, would they do so again, now that they finally see the absolutely collapse of not only their wealth but their retirement funds and pensions? If so, we hope they enjoy having the EUR. Or, technically, whatever Euros the local banks, which will likely have capital controls in perpetuity, will allow them to have.
Conceivably, they could be the sharpest over many years in a market not accustomed to sudden drops in valuations.
For at least a decade before 2009 Cypriot property prices were steadily growing on the back of foreign demand and liquidity-flush banks extending credit.
Over two growth cycles immediately before and after Cyprus joined the EU in 2004, property prices rose anywhere between 150 and 200 percent, Loizou said.
Surprised? Alas, too late. In the meantime, the capital is becoming a ghost town.
Boarded up shops have become commonplace in central Nicosia, the island's capital.
On Makarios Avenue, which was once a commercial hub teeming with traffic, dozens of shops stand empty, driven out by high rents and a shift in consumer preferences to other locations, including out-of-town malls
Loizou said some interest had been displayed by overseas investors looking at retail properties.
"But at the moment they are just sniffing around," he said, adding that fellow bailout recipients Ireland and Spain had also seen interest from overseas investors looking at distressed retail properties they could pick up at advantageous prices.
The punchline, of course, would be Spaniards and other insolvent Europeans, sick of their own "bailed out" economy, deciding to move over to yet another sunny vacation island-cum-"bailout" recipient, Cyprus, and starting there afresh.
Surely, stranger things have happened in the New Feudal Normal. All of this, of course, before Goldman LBOs southern Europe with cheap Fed credit.