The situation on the Cyprus Real Estate is well known and with special reference to the British demand, which is the main holiday home market for Cyprus, it can only be described as being tragic (not only for Cyprus, but a Europeanwise situation). The second main holiday home buyers for Cyprus real estate is the Russian market, which up to prior to the crisis, had a budget of around €1.0-€2.0 mil., and interest was directed mainly for holiday homes, either on the beach or with a sea view and demand was directed mainly for individual villas and beach apartments. Their main interest was directed towards Limassol, but with the new situation, including the economic situation in Russia, the present circumstances and demand from this market source seem to be changing. The economic situation in Russia apart, we note that the rouble has devaluated in terms of euro (making Cypriot houses more expensive by approximately 15%), new projects have a V.A.T. charge (another 15%) and the Russian Government is keeping a closer look on Russian investments abroad, (making those who could afford to buy more cautious).

The present results have shown that:

• A new market is appearing now having an average budget for units in the region of €400-€600.000.

• It is family orientated demand, as opposed to the original, in addition, investment market.

• Sales are not so much concluded through advertising and promotion, but more through personal contacts, either from existing Russian buyers or well connected Russian agents and Russian friends.

• The recession has caused local developers and others to offer higher commission to these Russian connections from the original average of 5% to 8%-10%.

• So notwithstanding the fact that prices have decreased (by the present situation), the end result when adding the 10%+15%+8% commission, they are not actually less.

• Due to the fact that Limassol housing is over-budgeted (by the present Russian budgets), Russian interest has been partially directed towards Larnaca and north of Paphos region (Polis Chrysochous/Lachi area).

• Sales staff not of Russian origin have a far less chance to conclude a sale, as opposed to Russian staff living here.

• The last change is quite interesting, since, before, Russians would prefer not to do business with native Russians of the fear of the latter reporting them to the Russian Tax Authorities etc.

• Etc

This new market situation has upset the high end mainly beach located properties, which are primarily directed towards the upmarket Russian demand. Now that this interest of +-€2.0 m. demand has been reduced (by approximately 70%) these projects have runned into difficulty. This change of the Russian market budget has also come about through Cyprus becoming more known to the Russian middle/upper middle market, either through the increasing living standards in Russia (thus creating a middle class demand) and as Cyprus becomes more and more known through tourism in Russia, more middle income groups get to know this place. The odd thing about the whole situation, is that Cyprus, cannot cope with tourist demand by providing visas speedily. Russia being such a vast country visa applications and procedures are dealt through mail. A glism of hope appears through the use of the Bank of Cyprus Russia Branches (100 outlets) which has undertaken to assist, as well as the creation of attaché offices in more places in Russia.

It is difficult to predict when the worldwide economy recovery will appear, but even if we are to adopt the estimated time of 2011, the last thing that foreign people will consider is buying holiday homes abroad. So in this sense, we do not expect that Cyprus will feel a “good” recovery earlier than 2014 and that said, we do not expect that circumstances will come back to the situation prevailing the year 2007/8. Patience is what is needed, but also the cooperation of the financing banks, since most of these Russian directed projects were financed by the banks at a large proportion of the total cost. Referring to the Banks we say that even if they attempt to foreclose on their mortgages and they take over properties, what are they going to do with them? At least if they show a patience of say 2 years (provided the borrowers cover interest payments), they will still charge interest in their accounts and not show a loss in their balance sheets, when comparing the amount loaned and the present values of a possible forced sale realization.

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