Cyprus real estate market review

Cyprus real estate market reviewPWC’S CYPRUS Real Estate Market for the first half of 2019 reports that the value of property transactions (sale contracts and transfers) over the period rose by 25% to reach €2.5 billion compared to the same period last year.

The number of properties transacted over the period also rose to reach 7,900.

PwC reports that the significant growth “appears to have been fuelled by a surging flow of foreign capital in the residential property” and that the clear slowdown in growth during Q3 2019 “should be monitored.”

  • Limassol had the lions share of transactions; 44% of the transaction value and 33% of the number of properties sold.
  • Paphos, which is predominantly driven by overseas buyers, came in second with 25% of the transaction value and 22% of the properties sold.
  • Nicosia had 15% of the transaction value and 21% of the properties sold.
  • Larnaca had 10% of the transaction value and 18% of the properties sold.
  • Famagusta had 6% of the transaction value and 6% of the properties sold.

April had the strongest month with the value of transactions reaching approximately €600 million; a quarter of the total.

Transactions by property type:

  • Apartments – 3,600 sold value €1.1 billion.
  • Houses – 1,900 sold value €0.9 billion.
  • Land – 2,000 sold value €0.4 billion.
  • Commercial – 300 sold value €0.1 billion.
  • Other – 100 sold value €0.05 billion.

Sales to overseas buyers

The first half of 2019 saw the number of properties acquired by overseas buyers reaching 2,482. Approximately 70% of those buyers were nationals of non-EU countries.

In terms of value, non-EU buyers accounted for approximately 45% of total transactions during the first half of 2019.

Further details and analyses are available the PwC publication ‘Cyprus Real Estate Market – First Half in Review – H1 2019‘.

Estia scheme falling flat on its face

1

AN AMBITIOUS plan publicized by the Cyprus Ministry of Finance as the perfect cure for the non-performing loans malaise of the banks is probably falling flat on its face, inside sources quoted by local financial news outlet Stockwatch said last week.

The ministry had said that “Estia” (Home) plan could help up to 10,000 owners of non-performing loans to repay their dues to the banks by subsiding their monthly instalment, and at the same time could unburden the banks of 3.5 billion euros (about 3.86 billion U.S. dollars) worth of bad loans.

Applicants to the scheme would safeguard their mortgaged primary resident against bank foreclosure.

However, with the normal time limit for applications to be submitted ending on Friday, Nov. 15, only about 200 loan owners had applied for relief and the government has extended application time to the end of the year.

Lawmakers who examined the trickle of applications said it was probably due to the complexity of the application process.

Applicants must fill 30 pages with family income and property details and at the same time append 40 to 50 different types of documentation, which requires a great deal of time and effort.

However, ministry sources said the reason for the low number of applications is most probably the fact that applicants are not eligible as their income and property value is over the criteria set for eligibility.

The applicants, the sources said, are wary of disclosing information about other assets or income, which might lead to capital or tax audits.

The program applies only to loans secured by a mortgage which were deemed non-performing as of Sept. 30, 2017. Loans designated as non-performing after that date are not eligible.

Estia applies to the first mortgage on a residence and covers loans or credit facilities regardless of currency.

Loans of eligible applicants will be written down to the market value of the primary residence and then the borrower will have to pay two-thirds of the monthly instalment of the rescheduled loan every month.

The state will subsidize the instalment by one-third, with the state making a direct payment to the banks once a year until the loan is completely paid off.

©2019 Xinhua, english.news.cn. All rights reserved.

Radical justice reforms on the way

Radical justice reforms on the way
The Cyprus Supreme Court

CYPRUS is adamant on following a roadmap to reform a sluggish justice system that is befitting of an EU member state while also trying to restore confidence among quality investors turned-off by the legal labyrinth.

Justice Minister George Savvides said the government has taken its decisions and is going ahead with sweeping changes no matter what the cost.

In comments to ANT1 TV, Savvides said the revamp will do away with lengthy delays in the justice system which is costing the country dearly as cases languish in the courts for years.

He said the justice system is in a for a total overhaul as the government plans to introduce specialised courts while creating a second Supreme Court to help speed up the resolution of cases before the body.

“We will split the supreme court into two, creating, essentially, two supreme courts. One will be the Supreme court and the constitutional court,” said Savvides.

“These courts will not be second instance as they are today, they will be third instance courts, while we will create a new second instance court to deal with appeals consisting of 16 new judges to be appointed and who will preside over all appeals of decisions issued by first instance courts,” he added.

The government has already approved the hiring of 32 district judges to handle the backlog of cases, as well as the creation of new courts in all towns.

Among the new courts to be created are specialised courts such a commercial and shipping court to speed up the island’s notoriously slow justice system, especially for business disputes.

The commercial court to preside over business disputes in which claims exceeded the amount of €2 million is expected to speed up the resolution of such cases.

Savvides said the shipping court is expected to effectively establish fast-track procedures for specific cases while facilitating efforts by the Deputy Ministry of Shipping to promote Cyprus as a shipping service centre.

“There are plans to create a state-of-the-art courthouse to host the Nicosia District Court which is expected to be built by 2024 costing the state some €70 million.”

In the meantime, the state will commission the premises of the former Filoxenia Hotel to temporarily set up the appeal court and the commercial and shipping courts.

Savvides said the government will proceed with the reforms no matter how high the cost, as there is an urgent need for swift democratic procedures in Cyprus.

not fit for purpose

Former MP and head of Frederick University’s Law Department Christos Clerides argued reforms in the justice system should be carried out the soonest possible.

He believes the current justice system is not fit for its purpose, noting that adjudication is delayed to such an extent that there is a fundamental breach of justice.

“Delivering justice with a serious delay is like not delivering justice at all,” Clerides told the Financial Mirror.

Ten years for justice served

According to the European Commission’s “2019 EU Justice Scoreboard,” the time needed to resolve civil, commercial and other cases in Cyprus has skyrocketed from just under 600 days in 2010 – to almost 1200 days in 2017.

“In fact, we are at the top of the list in Europe in terms of delays. From my experience, a case could take 4-5 years, plus another 6 years in case of an appeal. That is, a total of about 10 years,” said Clerides.

poor quality rulings

What is more alarming, said the law professor, is the quality of judicial rulings delivered over the past years is not of the standard one would expect.

“This also has to do with a large number of backlogged cases, the delays, the pressure judges are under means they do not study cases thoroughly.” Clerides argued it is also a matter of the quality of those appointed, noting that Cyprus lacks a system of selecting the best candidates for the job.

“Recently we have seen publications referring to cases in which the presiding judges had a conflict of interest, undermining public confidence in the institution of justice.”

huge backlog

Clerides said the reforms it will go a long way in clearing the backlog. It is estimated that there are currently 4,000 delayed appeals pending before the Supreme Court.

The Supreme Court, operating since 1964 as a single appellate court, will be replaced by a third instance five-member constitutional court and a five-member supreme court.

But at the heart of the judicial system and will be a new 16-member Court of Appeals where all cases of appeal will go.

Clerides said it will take a few years before the reforms start paying off, with some problems regarding specialisation remaining unresolved.

He said the lack of judges with specialised knowledge will be an obstacle to improving the quality of justice and the speed with which it is delivered.

Reforms have taken so long to be implemented due to the Supreme Court and the Justice Ministry not taking action earlier, said Clerides.

President of the Fiscal Council Demetris Georgiades said that the state needs to proceed with adopting measures to reform the justice system making it more trustworthy to outsiders, especially investors.

lack of transparency

He argued that the lack of transparency coupled with a cumbersome justice system is putting off quality investors from eyeing Cyprus as an investment destination.

“An investor could spend years lost in the labyrinth of the state bureaucracy, as they have to issue an unnecessarily large number of permits, which in many cases overlap,” said Georgiades.

But the biggest turn-off for investors is the lack of transparency and the delays in the justice system.

“The be-all for setting up a business-friendly environment is a country’s justice system,” said Georgiades.

Although Cyprus is considered to be an attractive investment destination, “when the call for tenders was made for the casino, we had only one bidder”.

He said investors want to feel safe, knowing that deals and contracts signed with local counterparts will be kept, but what they see is a slow justice system which takes years to deliver a verdict on disputes.

Paphos marina may have cruise ship facilities

THE CABINET has given the go ahead for a new study that will look into building cruise ship facilities as part of the proposed Paphos marina at Kissonerga Potima Bay.

(The possibility of building facilities for cruise ships as part of a proposed Paphos marina was given a positive reception when it was discussed at a meeting in July.)

Following the meeting, Deputy Tourism Minister Savvas Perdios said the official announcement for the tender to prepare the study would be made in the next two to three weeks.

The first part of the study will focus on whether the development of the marina should be combined with cruise ship facilities or whether only the marina should be constructed.

After this is completed, the results will be presented to the cabinet, Perdios said.

The second part will be about defining the terms of reference for the construction of the project.

The government has over many years invited and rejected tenders for the construction of the project.

Paphos marina: background

Since an initial study was carried out more than 30 years ago, the Paphos marina project has been stalled by bureaucracy and legal battles.

In 2008 the contract was initially awarded to the Cybarco Pandora consortium of which the Leptos Group was a member. The two other bidders, Poseidon and Pafilia, contested the award claiming that the Cybarco Pandora consortium used insider information that enabled it to bid a lower figure.

Eventually, in May 2016, the marina contract was awarded to the Poseidon consortium following a legal battle. Although the consortium secured a letter from the Bank of Cyprus in which the bank guaranteed to fund the entire project, Poseidon was unable to demonstrate that it had €122 million or 60 per cent of the total project cost of €215 million.

In 2017 Pafilia Developers, which was next on the list of tenders, was invited to tender for the marina’s construction and operation.

Then, in 2018, the Supreme Court upheld an appeal by the Poseidon consortium that the committee responsible for overseeing the Paphos marina tender process was unlawful.

In July 2018 the contract to build the Paphos marina was awarded to Pafilia by the ‘new’ Marina Management Committee.

But in October 2018, Pafilia decided to withdraw its interest.

Smaller rise in new home building permits

Smaller rise in new home building permitsTHE TOTAL number of building permits authorised in Cyprus during August 2019 stood at 443 compared with the 415 authorised during August 2018; an increase of 6.7% according to official figures published by the Cyprus Statistical Service.

The total value of these permits fell by 55.0% to €157.3 million, while their total area rose by 5.0% to reach 155.5 thousand square metres compared to August 2018.

These permits provided for the construction of 525 new homes, an increase of just 15.9% compared to the 453 new homes in August 2018.

During August 2019, building permits were authorised for:

  • Residential buildings – 319 permits
  • Community residences – 1 permit
  • Non-residential buildings – 68 permits
  • Civil engineering projects – 24 permits
  • Division of plots of land – 16 permits
  • Road construction – 15 permits

Building permits for new homes

The 319 residential building permits authorised in August 2019 provided for the construction of 525 new homes (dwellings). These comprised 246 single houses (compared with 226 in August 2018) and 73 multiple housing units including apartments, semis, townhouses and other residential complexes (compared with 59 in August 2018).

Building Permits Issued for the Construction of New Homes
(Number of Dwellings)

Month 2018 (Dwellings) 2019 (Dwellings) Increase/Decrease %age Change
January 476 548 72 15.1%
February
431
576 145 33.6%
March
467
615 148 31.7%
April
418
742
324
77.5%
May
541
907
366
67.7%
June
506
812
306
60.5%
July
632
1,028
306
62.7%
August
453
525
72
15.9%
Totals 3,924 5,753 1,739 46.6%

Of those 525 new homes, 183 are destined for Limassol, 165 for Nicosia, 110 for Paphos, 64 for Larnaca and just 3 for Famagusta.

Annual construction figures

During the period January – August 2019, a total of 5,579 building permits were authorised compared to 4,114 in the same period last year.  Their total value increased by 54.9% and their total area by 37.5%. The number of new homes authorised rose by 46.6%.

The 3,316 residential permits issued this year provided for the construction of 2,116 new homes in Limassol, 1,800 in Nicosia, 828 in Larnaca, 767 in Paphos and 242 in Famagusta.

According to the Cyprus Statistical Service, building permits constitute a leading indicator of future activity in the construction sector.

Overseas property sales fall

Overseas property sales fallFIGURES released by the Department of Lands & Surveys reveal that while property sales to the local market in October rose by 19% compared to October 2018, sales to the overseas market fell by 19%.

Of the 813 contracts for the sale of property deposited at Land Registry offices, 487 (60%) were deposited by domestic (Cypriot) purchasers and the remaining 327 (40%) by foreign buyers of whom 133 were EU nationals and 193 non-EU nationals.

Domestic property sales

Sales to Cypriot purchasers rose 19% in October compared to the same month last year. With the exception of Limassol and Famagusta, where sales fell 18% and 8% respectively, they rose in the remaining three districts. Sales in Paphos rose 175%, while the number of sales in Larnaca and Nicosia rose by 76% and 29% respectively.

During the first ten months of 2019, local sales have risen 22% compared to the same period last year.

Domestic Property Sale Contracts – 2018/2019 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2018 126 84 104 93 135 123 155 84 97 126 141 108
2019 127 164 115 137 168 121 153 90 114 163
Famagusta 2018 -3 18 18 12 34 27 18 29 21 36 14 29
2019 32 19 16 58 45 25 2 13 16 33
Larnaca 2018 60 44 67 41 55 61 41 47 60 46 82 52
2019 54 82 47 73 83 42 90 53 67 81
Limassol 2018 107 152 199 162 169 207 194 174 175 176 196 201
2019 166 152 192 291 329 138 177 134 176 144
Paphos 2018 18 8 43 21 43 55 62 48 32 24 64 60
2019 30 31 28 69 175 69 54 54 34 66
Totals 2018 308 306 431 329 436 473 470 382 385 408 497 450
2019 409 448 398 628 800 395 476 344 407 487

(Note that an unrecorded number of these local sales may have resulted from properties acquired by banks as part of loan restructuring agreements, etc.)

Overseas property sales

Total property sales to the overseas (non-Cypriot) market during October fell 19% compared to October 2018.

Although sales in Larnaca and Nicosia rose by 13% and 5% respectively, they fell in the remaining three districts.

Sales in Paphos fell by 30%, sales in Limassol fell by 26%, while sales in Famagusta fell by 19%.

During the first ten months of 2019, overseas sales have risen 5% compared to the same period last year.

Total Overseas Property Sale Contracts – 2018/2019 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2018 20 12 22 24 18 23 21 7 21 19 20 23
2019 34 30 16 32 45 24 21 13 23 20
Famagusta 2018 51 34 22 40 45 34 43 21 24 21 33 17
2019 21 29 29 38 42 18 47 17 24 17
Larnaca 2018 52 55 49 42 58 72 71 47 61 70 61 51
2019 60 43 71 67 90 60 67 40 35 79
Limassol 2018 118 104 115 84 113 131 120 88 76 113 148 89
2019 85 104 95 137 217 81 109 62 64 84
Paphos 2018 146 155 129 136 158 125 171 108 120 180 166 170
2019 157 180 157 155 229 136 176 112 139 126
Totals 2018 387 360 337 326 392 385 426 271 302 403 428 350
2019 357 386 368 429 623 319 420 244 285 326

Overseas sales (EU nationals)

Property sales to EU nationals fell 9% in October compared to October 2018. Although sales in Larnaca, Nicosia and Limassol rose by 77%, 25% and 11% respectively, they fell in both Paphos and Famagusta by 29%.

During the first ten months of 2019, sales to EU nationals have risen 8% compared to the same period last year.

Foreign (EU) Property Sale Contracts – 2018/2019 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2018 10 8 8 10 9 8 11 5 10 8 7 15
2019 14 14 9 19 20 16 13 5 8 10
Famagusta 2018 15 24 8 12 19 16 20 9 0 7 13 6
2019 9 6 14 17 10 8 17 14 10 5
Larnaca 2018 9 9 9 6 9 20 15 11 15 13 11 19
2019 12 12 21 18 20 11 16 13 6 23
Limassol 2018 15 17 32 17 19 22 25 24 11 27 38 20
2019 16 25 20 21 28 26 27 17 25 30
Paphos 2018 41 58 55 49 70 60 79 55 49 91 74 73
2019 56 72 61 48 69 59 73 58 61 95
Totals 2018 90 116 113 94 126 126 150 104 85 146 143 135
2019 107 129 125 123 147 120 146 107 110 133

Overseas sales (non-EU nationals)

Property sales to non-EU nationals continued on their downward path, falling by 25% in October compared to October 2018. (There has been a steady decline in sales since May following the introduction of more stringent criteria for non-EU nationals seeking a Cypriot passport and citizenship.)

Sales fell in all districts. Limassol was hardest hit with sales falling 30%, followed by Paphos, where they fell 31%, while sales in Famagusta, Nicosia and Larnaca fell 14%, 9% and 2% respectively.

Foreign (Non-EU) Property Sale Contracts – 2018/2019 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2018 10 4 13 14 9 15 10 2 11 11 13 8
2019 20 17 7 13 25 8 8 8 15 10
Famagusta 2018 36 10 14 28 26 18 23 12 24 14 20 9
2019 12 23 15 21 32 10 30 3 14 12
Larnaca 2018 43 46 40 36 49 52 56 36 46 57 50 32
2019 48 31 50 49 70 49 51 27 29 56
Limassol 2018 103 87 83 67 94 109 95 64 65 87 110 69
2019 69 79 75 116 189 55 82 45 39 54
Paphos 2018 105 97 74 87 88 65 92 53 71 89 92 97
2019 101 108 96 107 160 77 103 54 78 61
Totals 2018 297 244 224 232 266 259 276 167 217 257 285 215
2019 250 257 243 306 476 199 274 137 175 193

Analysis of property sales since 2000

Cyprus Property Sale Contracts 2000 – 2019

Year Overseas Sales Domestic Sales Percentage
Overseas Sales
Total
Sales
2000 450 12,214 3.6% 12,664
2001 1,207 12,849 8.6% 14,056
2002 2,548 14,111 15.3% 16,659
2003 3,981 15,294 20.7% 19,275
2004 5,384 11,947 31.1% 17,331
2005 6,485 10,106 39.1% 16,591
2006 8,355 8,598 49.3% 16,953
2007 11,281 9,964 53.1% 21,245
2008 6,636 8,031 45.2% 14,667
2009 1,761 6,409 21.6% 8,170
2010 2,030 6,568 23.6% 8,598
2011 1,652 5,366 23.5% 7,018
2012 1,476 4,793 23.5% 6,269
2013 1,017 2,750 27.0% 3,767
2014 1,193 3,334 26.4% 4,527
2015 1,349 3,603 27.2% 4,952
2016
1,813 5,250 25.7% 7,063
2017
2,406 6,328 27.5% 8,734
20181 4,367 4,875 47.3% 9,242
2019 (Oct)
3,757 4,792 43.9% 8,549
Totals
69,148 157,182 30.6% 226,330

1 The Department of Lands & Surveys has advised that overseas sales in 2018 and subsequent year should not be compared to sales in previous years due to changes in the methodology used to classify ‘Aliens’ (foreigners).