Mixed outlook for real estate

Press Release
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Mixed outlook for real estate

BNP Paribas has released its second 2020 report regarding the property market outlook post-pandemic, presenting forecasts about real estate in uncertain times.

The obvious differentiation regarding the previous report published in January is the fact Europe’s economy has moved from worrying about systemic risks arising from trade protectionism and Brexit to one magnified by a health crisis resulting in a profound disruption of the economies worldwide.

At the start of the lockdowns, the debate was about the shape of the recovery rather than the extent of the damage to the economies.

The initial predictions of a V-shaped recovery turned quickly to projections of U-shape and even of W-shape recoveries as many countries experienced second waves of the virus outbreak.

Current projections point to a contraction of -3.7% of GDP of the world economy and -9% of GDP in the Eurozone for 2020.

In Cyprus, even though the virus has been contained to satisfactory levels, the effects resulting from the current crisis have been much more profound than the financial crisis in 2013 although the two were based on completely different fundamentals.

The economy shrank by -11.9% year-on-year in the second quarter of 2020.

In 2013, GDP contracted 5.9% compared with the same period in the previous year.

Resilience in private consumption and the contribution from tourism helped the Cyprus economy during that time which is far different from the current situation.

According to official statistics, there was an 85.3% decrease in tourist arrivals for the period January to July which translates to tourism revenue plunging by 87.8% to €122 million in the first six months of the year, compared with around €1 billion in the same period of last year.

The principal problem reflected in any recession is the expansion in unemployment.

We have seen drastic measures by the government in providing financial support to businesses and individuals, however, it remains to be seen how employers will be able to maintain the workforce level current demand cannot support once the government funding schemes are ended.

For real estate, the macroeconomic situation remains exceptionally favourable over other asset classes such as equities which are extremely volatile or bonds which generate low or even negative yields. According to research by BNP Paribas, 90% of sovereign bonds in the advanced economies are yielding less than 2% and this is likely to get worse over the next two years.

Given the current state of economic uncertainty, investors seeking income and safety of capital are likely to turn to real estate investments.

However, to achieve the above criteria, asset selection will require greater discretion and due diligence.

Before the virus outbreak, real estate investors have been more lenient towards accepting lower returns from a growing real estate environment in anticipation of solid capital growth.

However, the crisis has reversed that, and now real estate investors will be seeking higher income returns, and therefore carefully selected prime assets to offset the uncertainty of capital growth in the medium term.

Therefore, despite the maintaining optimism about the long-term value of investing in real estate, the central view is that, in the short term, investors are likely to focus on prime assets in core markets.

The writer is Property Studies & Valuations Dept at Danos, An alliance member of BNP Paribas Real Estate

No deal Brexit strips expats of UK bank accounts

British High Commission
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No deal Brexit strips expats of UK bank accounts

Thousands of Britons living in the EU will have their UK bank accounts closed by the end of the year because of the UK’s failure to agree a post-Brexit trade deal.

Statement from the British High Commission, Nicosia:

“Some of our UK nationals in Cyprus may have seen recent media coverage about some UK banks’ decision to close accounts belonging to EU/EEA residents, and we wanted to share the latest information.

Whether UK banks can service EEA-based customers after the end of the UK Transition Period is a matter of local law and regulation in each country, and may be impacted by how firms are set up and what steps they have taken to continue to serve customers. We expect UK banks to comply with the law at all times.

If you are affected, your provider will contact you directly.

As we are unable to provide any financial advice, you should contact your bank or an independent financial adviser if you have any questions.

More information is available from the UK Financial Conduct Authority here: https://www.fca.org.uk/consumers/how-brexit-could-affect-you.”

Statement ends

UK Bank accounts closure: further reading

The Times – Brexit strips expats of UK bank accounts

The Guardian – Thousands of Britons living in EU told their UK bank accounts will be closed

Daily Mail – Tens of thousands of British expats in Europe ‘will be stripped of their UK bank accounts and credit cards in weeks’ after government failed to negotiate post Brexit rules

(Public Service Announcement)

Developers call to end ‘golden passports’ debate

Editorial
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Developers call to end ‘golden passports’ debate

The Association of Large Property Developers has called on those engaging in public criticism of Cyprus’ Citizenship for Investment scheme to stop, arguing that continued debate will harm the economy.

In a statement, the Association argued: “Recent reports combined with the ongoing row within the country, have taken their toll on the investment environment, which has also been struck by the coronavirus outbreak”.

It sounded the alarm, calling on all sides to put an end to the public debate on the matter.

“The appointment of a committee to probe into the issue, combined with the Government’s commitment to redesign and improve the institutional framework of the Investment Program, deems any further discussion of the issue unnecessary.”

Cyprus large property developers feel that the scheme has contributed significantly to the economic growth of the country and “therefore, we must all protect it, safekeeping it as the apple of our eye”.

In the announcement, developers declare their readiness to contribute with additional proposals and suggestions towards improving the institutional framework, “to make it simpler and more functional”.

“Everyone’s goal is to set up a serious and credible Investment Program which cannot be questioned by anyone, either at home or abroad.”

The Association said it remains committed to promoting Cyprus’ Investment Program abroad, in cooperation with the Government and other stakeholders, to attract new investors, “providing oxygen for the economy”.

A probe into the scheme was launched after broadcaster Al Jazeera claimed that politically exposed individuals and criminals had access to a Cyprus passport for a price.

Investing in high-end property is part of the investor scheme which has seen expensive luxury towers flourish in recent years.

Speed up reviews of complaints against lawyers

Evie Andreou
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Speed up reviews of complaints against lawyers

The backlog of more than 2,000 outstanding complaints against lawyers is a ‘huge problem’ that is tarnishing the image of the legal system, the lawyer who hopes to be elected as the next head of the Bar Association has told the Cyprus Mail.

“It also reflects on the people’s trust in the legal community since the mechanisms are not operating and lawyers remain unpunished,” said lawyer and law professor Christos Clerides, adding that the necessary disciplinary checks have not been carried out. Clerides is a candidate in the next month’s elections for head of the Cyprus Bar Association.

He said complaints range from unethical behaviour to overcharging and misuse of money.

More than 2,000 complaints against lawyers are currently pending before the Bar Association’s disciplinary board.

His concerns have been echoed by outgoing chairman of the Bar Association Doros Ioannides who told MPs earlier this month that the disciplinary board had failed in its mission, which was to investigate complaints against lawyers concerning claims for violation of the lawyers’ code of ethics. He had suggested increasing the board’s elected members so that more cases can be processed.

At present, the board consists of the attorney-general, the deputy attorney-general and the head of the Bar Association, with three more members elected every three years. The board has the power to strike off a lawyer, suspend his or her licence, impose fines or reprimand its members.

Last July, a bill was submitted to the House which would appoint the three members instead of them being elected.

Ioannides told the Cyprus Mail that he had also suggested raising the members of the disciplinary board from three to nine to speed up the complaints process, and that the House legal affairs committee has agreed to that.

Now the House plenum needs to approve it, he said. The question, of course, is when.

Clerides said he would also like to see the expertise of the disciplinary board widened so that perhaps other professionals could weigh in on these cases based on the code of conduct, to avoid giving the impression that lawyers try their own.

Ioannides said clearing the backlog is a daunting task since, whatever the nature of the complaint, from something light to a serious violation of the code of ethics, all claims need to be investigated.

Even though the board meets every week, he said, the large number of cases before it means it is unable to cope. He believes that if the number of the members is increased, meetings could be held more regularly and process more complaints.

Ioannides also told a House legal affairs committee earlier this month that the board should not be elected by lawyers since it was not ideal for lawyers to go around asking for a vote to be elected to the disciplinary board. He said he was eyeing positively a proposal to have a board appointed by the attorney-general and the Bar Association’s board.

Clerides has also suggested offering a fee to those investigating those cases as an incentive.

The bill in question is part of the amendment to the law on lawyers, which modernises provisions and regulates the general meetings of district bar associations and the Cyprus Bar Association.

A passport to due diligence

Sandra Nebritova
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A passport to due diligence

It has been several weeks now, that the media has been buzzing about the leaked information on the individuals that have managed to obtain Cyprus citizenship.

Investigations were quickly opened and, surprisingly, decisions are being taken fast to revoke some of the passports.

This brings us to a conclusion, that facts were there on the surface and did not require a lot of digging or vetting.

However, it is quite upsetting, that things started being done only after some information was leaked.

There is a lot of speculation on the motives, but this does not change the main point – hardly any due diligence was applied for wealthy and powerful individuals and their family members.

A country that keeps updating and strengthening its against money laundering (AML) legislation, failed to apply it to their own internal processes.

Let’s face it, if a regulated institution got caught up in a similar story – there would be massive fines and, most probably, loss of business.

But being a government obviously has its perks.

So how difficult is it, to perform due diligence?

Actually, it’s not that hard at all – if you know where to start looking.

This means, that you will not simply rely on the information that has been given to you, rather, you will make your own search.

Individuals, that can afford such investments, do not come out of anywhere, neither do politically exposed persons and the mighty Internet – never forgets, which often comes in very handy.

The process might take some time but it’s definitely worth it.

Don’t have much time?

Not a problem at all, get specialized software to do that for you, it will even keep an eye on your customers daily and inform you, when something pops up, for example, like someone being added to sanctions lists.

There is a lot of software available now, that you just need to pick one and let it do its job.

But what is still most worrying in this story?

Perhaps that what is done cannot be undone.

Fighting against money laundering, crime, corruption should be a daily routine and not an occasional event due to leaked information.

Investments were made, funds wired, properties bought and so on – which part came from illicit funds and how were they obtained in the first place?

It is too late to go searching now, as all the stages of money laundering would have been finalized a long time ago and just like that, the fight was lost before it started.

About the author

Sandra Nebritova is a certified AML specialist

Cyprus golden passports bonanza

Andreas Chrysafis
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Cyprus golden passports bonanza

The Anastasiades government with a circle of political plotters are sharpening their knives and tongues to oust Mr Odysseas Michaelides the honourable Auditor General. Authorized and protected by the Cyprus Constitution, thankfully he remains steadfast and firm against all political attacks.

For his honesty and personal integrity; transparency and duty performance he has gained the respect of the public and the entire country but not so of the political system. Such qualities of honesty and duty for the country in a man are rare but real assets that make Presidents!

Corrupt officials and inglorious politicians are worried he would name Political parties (Kommata), firms of solicitors, agents, property developers and questionable characters involved with the notorious “Golden Passports” scandal revealed recently by Al Jazeera News.

It is for this very reason the government refuses to hand over to him files for audit. Pathetically, everyone in Cyprus knew about the shenanigans of the scandalous Passport scheme but preferred to live in the House of the Blind in a Society of Silence!

For sure the scheme encouraged corruption that generated millions for some by selling EU-Cypriot citizenship and passports! In fact, €9 billion worth! Where did all that money go? No one is talking!

That’s precisely what the Auditor General and his Team wants to know but also all those thousands of citizens that stand behind his efforts.

That money was not spent on infrastructure developments or on housing projects for the deprived, hospitals or even on social services to help those poor citizens who will soon become homeless for the first time in the history of Cyprus.

For sure Odysseas will fight for Justice and transparency but unfortunately in countries like Cyprus, “where there is no Justice, there exists no injustice or crime,” the rogues go free and dance on the graves of the innocent!

Andreas C Chrysafis
Author/Artist/Writer

NOTE:
A recognized artist, Andreas C Chrysafis is also a UK published author of five books and over 400 press articles. “Aphrodite’s Sacred Virgins” has been his latest Cypriot novel.

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