[Cyprus Real Estate Bubble]

by

Acknowledgement

I would like to express my thanks to my advisor, for his suggestions, comments, patience and understanding. Very special thanks to my parents, my father, my mother, my brother and my sister who were continuously supporting me throughout my life and leaving me free in all my decisions. I would also like to thank my colleagues for his technical support whenever I needed. I would like to thank to Department, all the university managers, teachers and students with whom I have worked.

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Abstract

Perhaps, it is difficult to imagine a person who would not want to buy a villa in Cyprus or buy an apartment in Cyprus. Cyprus has long been considered one of the most picturesque places in the entire Mediterranean coast: the numerous cultural monuments, mild climate, a healthy ecology and landscapes of great beauty open gaze of new arrivals to the island tourists. The sudden increase of real estate prices in Cyprus the recent years has made consumers a little sceptic about purchasing property and has in the short-run shifted the demand towards housing and apartments to the renting market. This has made scholars thinking about the possibility that the real estate market might be in a bubble and nobody knows when it is going to pop. The purpose of this study is to try to determine if there is such a possibility and whether people should purchase their property or rent waiting for the bubble to pop and afterwards acquiring their house.

Table of Contents

CHAPTER 1: INTRODUCTION1

Problem Statement1

Research Aims and Objectives2

CHAPTER 2: LITERATURE REVIEW3

Key Points3

Disappointing drop in Cyprus real estate prices4

Investment Yields4

CHAPTER 3: METHODOLOGY7

Search Technique8

Validity8

Reliability/Dependability10

Ethical Concerns11

Limitations and Suggestion for Future Research12

CHAPTER 4: CONCLUSION13

REFERENCES14

Chapter 1: Introduction

The main purpose of the study is to access the market price trends and determine if they meet the requirements for a bubble. The question addressed here is whether there is a bubble and we will examine the price trends in the market in order to determine the possibility of one (Ker-Lindsay 2005, Pp: 4-6).

Furthermore the study will examine the price trends of specific market segments such as plots, apartments and fields (Ker-Lindsay 2005, Pp: 4-6). In addition the study will try to determine if there is a correlation between the real estate prices and other external factors such as the rise and fall of the Cyprus Stock Exchange in 2000, the prices of construction materials and the LIBOR rate (Ker-Lindsay 2005, Pp: 4-6).

This is a very interesting question and an intriguing one because everybody wants to own a piece of land or want to have a house to call their own (Milesi-Ferretti and Kodres 2004, Pp: ...