Sales of properties in Cyprus are down by an average of 40% with Paphos being particularly badly hit.

The decline in property sales will affect the island’s revenue as it means a reduction in tax collected through Capital Gains. The country’s finance minster has announced that it may have to take measures to correct this, says Property Wire.

‘The downturn in the market is expected to affect public revenues. The government is taking this into account and if recession continues it will take additional measures,’ said Charilaos Stavrakis.

He said the income from capital gains tax had fallen by 18% this year. ‘This has been expected due to the dependence of the property market on the British market which is experiencing an economic crisis due to the drop in the value of Sterling,’ he added.

The government expects activity in the property sector to continue shrinking in 2009. As well as lack of foreign investors the property market is also suffering from more lending restrictions. Banks, who already screen property investors, developers and non-Cypriots who want to borrow, have raised the level of collateral required and changed payment terms.

The local Land Registry manager believes it could take three to four years for the property market in Cyprus to recover. Figures show sales have dropped by an average of 40% with Famagusta experiencing the highest fall at 50% and Limassol the lowest at 12%.

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