WHILE thankfully Cyprus has not been tainted by mega-cases of international corporate scandals, nevertheless it continues to suffer on the world stage from the collective sins of its property sector.
Many buyers have been hit by fraud and thousands still cannot obtain their Title Deeds. Despite much vaunted government plans to rectify the property mess, even if they work it could take up to two generations for the global stigma and its marketplace consequences to fade.
The arrogance being shown by developers towards foreign buyers is scandalous
As a leading estate agent confided to me recently: “The arrogance still being shown by developers towards foreign buyers on the Title Deeds issue is scandalous. They don’t seem to be aware just how much lasting damage they have done to the market and to Cyprus“.
The risk of Cyprus developers going bust is exemplified by the A&G Froiber collapse last September. A large number of buyers who had already paid for their property but had not received their Title Deeds have found themselves in conflict with the bank who issued mortgages to A&G on the same properties.
The outcome is unclear but at one stage a bank spokesman was making it clear that liquidation could well result in buyers losing their property and, at best, receiving only a percentage of the liquidation money.
developers are desperately struggling to survive in a flat market
Other developers are desperately struggling to survive in a flat market and rumours of particular developers being in serious financial trouble abound. Such rumours harden when one reads press advertisements by agents inviting offers on significant numbers of distressed properties.
The ‘high prices, no buyers’ problem is exacerbated by the banks continuing to extend developer loans rather than instituting 90-day recovery procedures. This encourages developers to think they can sit out the recession with artificially high prices and await the return of mass foreign buyers. As this may take another 5-10 years or more, much of the current new stock will be distinctly old by then and sellable only at knockdown prices.
developers have allegedly sold the same property several times over
In a number of recent cases reported to Risk Watch, it has been alleged that developers have sold the same property several times over and inexplicably all the contracts of sale appear to have been lodged with the Land Registry. While the majority of the victims are foreigners, some are also Cypriot citizens.
Since the government through the Attorney General has determined that cases of this kind are civil wrongs and not criminal offences, the police will not accept information laid before it and will not proceed with a criminal investigation. Perhaps it is felt that there are so many potential property fraud cases that to accept one as warranting criminal investigation would open the floodgates to hundreds if not thousands of others that would both swamp the police and add to international embarrassment.
However, an official blanket denial that property fraud is a crime may not be effective in quelling angry buyers, investment boycotts or international reaction. It may simply throw fuel on the fire.
About the author
Dr Alan Waring is an international risk management consultant with extensive experience in Europe, Asia and the Middle East with industrial, commercial and governmental clients.
Contact: waringa@cytanet.com.cy
©2010 Alan Waring