Fifty million lost due to planning delays

Editorial
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Fifty million lost due to planning delays

Cyprus planning delays cost millions annuallyTHE STATE is losing €50 million per year because of delays in the issuing of planning permits, according to the Cyprus Technical Chamber.

It said the state could use this money to build ten schools, three hospitals or a museum each year.

The chamber’s study says that there is vicious circle of legal distortions and poor implementation of regulations in the permit process which leads to large delays and violations of the law.

The delay in the issuing of permits translates into the unauthorised operation of hotels, restaurant/bars, shops and swimming pools, it added.

“The long delays lead to irregularities, cost money and lead to the consolidation of a culture of illegality where law-abiding citizens are punished,” the study said.

The problems identified are:

  • There is a large number of planning Authorities (in relation to the number of permits issued) who do not have the expertise needed or have other weaknesses.
  • The General Building Regulations are obsolete, with many shortcomings and repetitions, resulting in a difficult text that it is hard to interpret.
  • Long delays in the issuing of permits and modern property titles.
  • Extensive irregularities, i.e. starting of construction starting before permits, use of buildings without authorisation and urban planning and building irregularities at construction sites.
  • Complete lack of building control on the construction site.
  • Unskilled supervisors which are highly dependent on the license applicants.
  • Complete lack of use of the online application submissions system.
  • Poor performance of the Republic in the submission of contracts.
  • Town planning and building principles focused on details instead of being effective.

To resolve these issues the Technical Chamber suggests:

  • The creation of a registry for architectural and civil engineering offices which will upgrade their role and will allow the state to give them more responsibilities.
  • Application of the institution of the third-party building inspector.
  • Requirement that a properly completed application for a building permit accompanied by a certificate of completion of works be submitted before the inspection.
  • Defining requirements and internal procedures and maximum test / response time depending on the type and use of the building.
  • Rapid computerisation and the possibility of electronic submission of town and building applications.
  • Modernisation of the areas of Local Government related to town planning authorities.
  • Complete revision of the Law on Town Planning, including the creation of a modern General Building Regulation.
  • The Town Planning and Housing Department admits that there are problems in the process of issuing planning permits.

Recently, Minister of Interior, Constantinos Petrides said that in order to get a planning permit one can go to ten different authorities (Department of Town Planning and Housing, the five municipalities of the cities and the five District Offices of the Department of Town Planning and Housing) and to get a building permit one can go to 36 authorities (30 municipalities, a community and the five District Offices of the Department of Town Planning and Housing).

© In-Cyprus.com

Editor’s comments

In November 2016  we reported that the Interior Ministry had begun the task of reforming Cyprus’ time consuming and complex procedures involved with the licensing and control of building development as announced by the Interior Ministry.

In September 2017 we reported that the Interior Ministry has been working with experts from the Austrian Finance Ministry to overhaul planning and building control developing proposals and recommendations based on best international practices to rationalise Planning and Building Permits, Certificates of Approval, the enforcement of building control and the issuance of Title Deeds.

Speaking at that time a source said that “The proposed central authority will be issuing ‘two in one’ permits in a bid to get rid of unnecessary red tape and minimise the number of departments dealing with permits.”

In November 2017 The World Bank ‘Doing Business’ report for Cyprus highlighted the mind-boggling level of bureaucracy in dealing with building permits involving several government and local authority departments.

Now here we are in October 2018 and it appears that little (if any) progress has been made on these vital reforms.

Cyprus property market on the up

Editorial
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Cyprus property market on the up

Cyprus property market on the up say expertsREAL ESTATE experts believe the Cyprus property market is on the up but are wary that repossessed houses dumped on the market could derail the grassroots of recovery.

The House Price Index (HPI) reached 103.98 units for the second quarter of the year, increasing by 0.6% compared to the first three months of 2018.

The year-on-year increase of the index stands at 1.2% continuing the positive trend of the past few years, pleasing Real Estate specialists. But they are concerned about how investment funds acquiring properties linked to NPLs will choose to unload these assets to the market.

Property specialists are confident over the future of the sector, saying that the upward trend in house prices is combined with an ongoing increase in demand for real estate.

According to data from the Land Registry, 4,500 homes were sold in the first half of the year, 27% more than the number of transactions filed with the registry for the same period in 2017.

Experts expect the trend to continue throughout 2018 surpassing last year’s sales which reached an eight-year high with 8,734 transactions. In 2017 property sales on the island saw a staggering 132% growth from 2013 when sales had dropped to under half of what they were in 2010, the sector also grew by 24% from 2016.

According to the preliminary results of research conducted by a group of real estate specialists, Limassol and foreign investors are still driving the market with 37% of transactions carried out in Cyprus’ second city, followed by Paphos with 23%, Nicosia with 18%, Larnaca 15% and lastly Famagusta with 7%.

All districts have recorded a significant rise in transactions with even Larnaca, the only district with a negative growth index for 2017, recording a 15% rise in property sales.

“The investment for citizenship scheme is still playing its role in market growth. Transactions involving foreign investors have more than doubled with Limassol and Paphos having the lion’s share with 70% of transactions involving foreigners,” a property specialist explained.

The specialist said that although Paphos is leading the charts as far as the number of actual transactions involving foreign investors is concerned, with 39%, properties sold in Limassol are worth substantially more.

Optimism over the future of the real estate sector also stems from the rise in the number of building permits issued and the diversification of projects.

The specialist said that 3,100 permits were issued in the first half of 2018 compared to 2,900 in the same period last year.

“We are not talking about only an increase in absolute number, but also of an increase in the value of projects for which licenses have been issued in the first six months of the year which amounts to €750 million. In the same period in 2017, projects obtaining licenses were worth €650 million,” he said.

 Cypriot demand for property

The specialist said there is a serious increase in the number of property sales to local buyers and this is evident by the number of transactions carried out in the capital and building permits issued for Nicosia projects.

“If one is to look at sales carried out in each district, you will see that the capital has recorded an impressive YoY increase of 34% in transactions, the vast majority involving houses and Cypriot buyers.”

Adding to the picture, Nicosia leads in building permits issued with 39% of the total, keeping Limassol in second place with 29%.

It comes as no surprise that a significant chunk of activity regards the construction of houses said the specialist.

“It’s only natural that the key finding of reports concerning the sector is that a significant chunk of the industry’s activity concerns housing. Neither should it come as a surprise that Nicosia is leading the statistics regarding building permits.”

Other data shows that Nicosia has seen property sales go from 1,200 in 2016 to 1,485 in 2017 with current data indicating that sales in 2018 will surpass those of last year.

Cypriot demand for housing was put on ice during the years of the crisis as people were living with the uncertainty of the times but as the economy grows confidence is back and more mortgages are available.

An increase in the numbers of students studying at the Nicosia-based universities has created a shortage in housing which has, in turn, pushed up demands with more flats being built.

However, the high number of NPLs linked to property is a negative factor.

Chairman of the Cyprus Property Owners Association George Mouskides, said that he is not concerned so much over the growing repossessed property portfolios of the banks, as he is over the sale of asset-backed bad loans to investment funds.

“Banks have been very reasonable and cautious so as not to cause damage or a crash in the market,” said Mouskides.

The Bank of Cyprus sold NPLs to the Apollo Fund that are linked to some 9,000 properties.

BoC has sold a portfolio of 14,000 loans with a nominal value of €5.7 million which are linked to assets worth €2.8 billion at half the price (€1.4 billion).

Mouskides, however, feels that funds wanting to sell off their portfolios at values much lower than the market rate may not be a plausible scenario.

“Just like banks, funds will also seek to protect their investments and not cause an abrupt drop in prices by unloading a large number of properties to the market”.

“I do not expect to see funds selling off properties at prices below 75% of their estimated value. Sales carried out these days are usually with a price tag of 80% of the property’s estimated value. It would not be the end of the world if prices fall by even 5% as the most important thing now is to keep prices at a healthy level,” argued Mouskides.

He believes the high levels of asset-backed NPLs are currently providing a ceiling on property prices, keeping prices at a manageable level with a small growth, rather than posing a threat to the market.

Locals fear for Coral Bay

Bejay Browne
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Locals fear for Coral Bay

Coral Bay, Cyprus, PeyiaTHE GOVERNMENT’S decision to allow a 2005 appeal by Leptos developers to build next to blue-flagged Coral Bay is scandalous and overrules a town-planning decision, environmentalists local Peyia officials said this week.

Leptos’ appeal concerns building 22 villas and services on a piece of land which sits above Coral Bay and has commanding views of the beach and Mediterranean Sea and has recently been used as a car park.

Andreas Evlavis, secretary of the Paphos Green Party, told the Sunday Mail that the government’s decision to effectively ignore the local plan and overrule the decision of town planning is a huge scandal.

“This will open the way for all developers to do what they want,” he said. “If this goes ahead, there will be buildings everywhere at Coral Bay and no place for visitors. The developer also wants to take over the operation of the two beach kiosks as part of the agreement on beach access, another big scandal for us.”

He added that the Green party fully support the efforts of the local mayor and the municipality not to give in to the demands of the developer.

Although unwilling to go into details because discussions with Peyia municipality are ongoing, developer George Leptos told the Sunday Mail that his aim is to enhance the area overall.

“The municipality knows our views and what we want to do in the area. We understand the importance of Coral Bay and the legal rights of the company, we would like to resolve this situation,” he said.

Leptos confirmed that the original application to develop Plot 1 – 22 villas and services, such as a restaurant – was made in 2005 and rejected by Paphos town planning.

However, in May, the government ministerial committee upheld the appeal, with stipulations. The Peyia mayor and his council only found out about it in September.

“Since 2005 we have been in long discussions and expressed our views. Our wish is to include facilities necessary for a public beach and to enhance the area overall,” said Leptos.

He added that comments made that there is no access to the beach after the development was built was not the case as there are four or five existing pathways leading from the road to the beach.

“There will be a minimum of six or seven ways of public access and we would like to reach an amicable solution to move ahead smoothly.”

Mayor of Peyia, Marinos Lambrou, said the Leptos application made in 2005 was rejected as provisions of the Paphos local plan and other legislation on public pathways and ravines were not met.

He said that when the original application was made, more building density was permitted, and since then the regulations have changed. This decision was overturned by the central government and not by town planning in Paphos, he added.

“I want to believe that the government didn’t understand what they approved,” he said.

The mayor said that if such a development were allowed to go ahead, it would mean not only Coral Bay is finished, but Peyia too.

“I don’t know if Leptos has changed the plans, but the ones approved do not show any public access.”

He noted that the developer has the right to develop the land, which has around fifty years left on a lease, but at 15-20 percent maximum and that 40 per cent also lies in the coastal protected zone.

“This is according to the laws which exist now, and with the approval of the planning authority.”

A two-hour meeting between the council members and six Leptos officials, including both Michael Leptos and his son George Leptos, took place last week.

Peyia councillor Linda Leblanc noted that the mayor presented counter-proposals which fall under the current Local Town Plan, which mean that around 15 to 20 per cent could be built on.

“Leptos also told us if we don’t make a deal, we should buy the land. This is my preference and one that has been refused by Leptos for many years,” she said.

“If he is serious, let’s get an appraisal, it’s in the public interest to do so.”

Leblanc also pointed out that two restrictions placed on the appeal upheld by the government make it impossible to move forward under current laws.

“These refer to the abolition or moving of public footpaths and the ravine/riverbed, which is impossible under the law,” she said.

However, she also noted that a recent proposal by the Disy parliamentary group to amend the property law, would permit the privatisation of public land, such as footpaths and riverbeds, and could favour the developer.

“If approved, the proposed new law which was put forward in September, will clear the way of these stipulations to be met, and Coral Bay to be developed.”

Both Lambrou and Leblanc noted that no decisions have yet been taken by council and the situation is on the agenda for the next council meeting, which is open to the public, and slated for next week.

“We are also looking at pursuing legal action against the government,” she said.

The Sunday Mail was unable to contact the Minister of the Interior for comment as he is abroad.

Continuing rise in property sales (Update)

Nigel Howarth
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Continuing rise in property sales (Update)

Cyprus property sales continue to riseDURING September 2018, the number of property sales contracts deposited at Land Registry offices across the Republic of Cyprus rose 14% compared to September 2017 according to official figures published earlier today by the Department of Lands and Surveys.

Property sales have been rising for 17 consecutive months and this September rise follows a rise of 14% in August, 21% in July and 2% in June.

During September a total of 687 contracts for the sale of residential and commercial properties and land (building plots and fields) were deposited at Land Registry offices, compared with the 602 deposited in September 2017.

Of the 687 contracts deposited, 302 (44.0%) were for properties purchased by non-Cypriots.

The figures show a continuing improvement in the economic conditions, coupled with government measures such as the citizenship by investment scheme (aka ‘Passports for Cash’ scheme.)

Although sales in Famagusta fell 21% compared with September 2017, they rose in all the other districts. In percentage terms Nicosia led the way with sales rising by 36% followed by Limassol, where sales rose by 24%, while sales in Larnaca and Paphos rose by 13% and 3% respectively.

Property Sale Contracts – 2017/2018 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2017 72
 73
 79
 80 118 162 124 76 87 117 170 306
2018 146 96
 126
 117
 153
 146
 176
 91
 118
Famagusta 2017 21
 19 40
 29
 38 46
 59 47 57 51 52 169
2018 48 52
 40
 52 79
 61
 61
 50
 45
Larnaca 2017 102
 100 113
 69
 119 96
 103 88 107 111 151 181
2018 112 99
 116
 83 113
 133
 112
 94
 121
Limassol 2017 132
 177 232
 192
 298 304
 289 201 203 306 321 532
2018 225 256
 314
 246 282
 338
 314
 262
 251
Paphos 2017 96
 87 162
 136
 183 235
 184 160 148 183 212 349
2018 164 163
 172
 157 201
 180
 233
 156
 152
Totals 2017 423
 456 626
 506
 756 843
 739 572 602 768 906 1537
2018 695 666 768 655 828 858 896 653 687

Property sales – year to date

Between January and September 2018 sales have increased by 21% with the number of sale contracts deposited rising to 6,706 compared to 5,523 deposited during the same period last year.

So far this year sales in Famagusta have risen 37% and sales in Nicosia have risen 34%, while sales in Limassol, Paphos, and Larnaca have risen 24%, 13% and 10% respectively.

(The sales figures include an unknown number of properties acquired by banks as part of loan restructurings, etc.)

Overseas property sales

The Land Registry figures reveal that a total of 302 property sale contracts were deposited by non-Cypriots during August 2018. Of those 85 were deposited by EU citizens and the remaining 217 by non-EU citizens, but we cannot quantify the number of non-EU citizens who bought property with a view to applying for citizenship.

Paphos remained the most popular district with the overseas market with the number of property sales contracts deposited reaching 120. Limassol recorded 76, Larnaca 61, Famagusta 24 and Nicosia 21.

Overseas Property Sale Contracts – 2018

District Source Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia EU 10 8 9 10
 9
 8
 11
 5
 10
      
Non-EU 10  4 13
  14  9 15
  10  2  11      
Total 20 12 22  24 18 23 21 7 21
Famagusta EU 15  24 8
  12  19  16  20  9  0      
Non-EU 36  10 14
  28  26  18  23  12  24      
Total 51 34 22  40 45 34 43 21 24
Larnaca EU 9  9 9
  6  9 20
  15  11  15      
Non-EU 43  46 40
  36  49  52  56  36  46      
Total 52 55 49  42 58 72 71 47 61
Limassol EU 15  17 32
  17  19  22 25
  24  11      
Non-EU 103  87 83
  67  94  109  95  64  65      
Total 118 104 115  84 113 131 120 88 76
Paphos EU 41  58 55
  49  70  60  79  55  49      
Non-EU 105  97 74
  87  88  65  92  53  71      
Total 146 155 129  136 158 125 171 108 120
Totals EU 90  116 113
  94  126  126  150  104  85      
Non-EU  297  244 224
  232  266  259  276  167  217      
TOTAL 387 360 337  326 392 385 426 271 302

During the first nine months of 2018, a total of 3,186 sales contracts were deposited by overseas buyers, with 1,004 deposited by EU nationals and 2,182 by non-EU nationals.

Limassol is the most popular place for non-EU citizens, while Paphos is favoured by the majority of EU citizens.

Cyprus Property Sale Contracts 2000 – 2018

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
2018 (Sept)
  3,186  3,520 47.5%  6,706
Totals
 64,210 151,035 29.8% 215,245

Limited progress on resolving NPLs

Cyprus News Agency
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Limited progress on resolving NPLs

Cyprus: Limited progress on resolving NPLs says IMFTHE INTERNATIONAL Monetary Fund (IMF) has said that the progress made in resolving non–performing loans (NPLs) in the banking sector of Cyprus has been limited.

The growth momentum is strong and fiscal performance is robust, said a Concluding Statement on the preliminary findings of an IMF mission undertaken under Article IV of the Fund’s Articles of Agreement, but noted that challenges remained.

“A set of legislative reforms aimed at addressing the crisis legacy of non-performing loans has been approved, catalysing the clean-up of bank balance sheets. Nevertheless, challenges remain. Risks have partially been transferred to the public sector as part of the bank clean-up strategy, but high debt will remain a burden on the private sector until NPLs, which constrain investor confidence and growth prospects, are resolved”, the IMF statement noted.

“Notwithstanding the strong economic recovery, the Cypriot economy is weighed down by very high private and public debt. NPL ratios, while declining, are among the highest in Europe. The recent resolution of the government-owned Cyprus Cooperative Bank (CCB), the second-largest bank, and the passage of a long-delayed legislative package to strengthen the insolvency and foreclosure frameworks, have mitigated near-term risks to financial stability”, it said.

According to the IMF, growth is expected to exceed 4% in 2018–19, driven by domestic demand. Over the medium term, the IMF projected that growth would slow towards a potential growth rate of around 2,5%.

The Fund warned that “while NPLs have now partially shifted from the banking system to the public balance sheet as a result of bank clean-up operations, progress in resolving NPLs and in strengthening payment discipline is still limited. In this context, delays in NPL resolution will continue to weigh on investor sentiment and growth potential until they are adequately addressed”, it said.

The Statement identified as key policy priorities a further private and public balance sheet repair by steadfastly implementing the recently amended legal tools to lower NPLs and the private debt overhang; safeguarding fiscal space and reducing risks to public debt sustainability by maintaining strict spending discipline; and enacting structural reforms, especially in the judiciary and public administration, to attract further investment and enhance productivity. “These policies are critical to reduce vulnerabilities and reinvigorate medium-term growth potential”, it added.

The Fund also pointed out that the supervisory and governance framework for credit-acquiring companies—which includes the newly-established Cyprus Asset Management Company (CAMC) needs to be strengthened. “To maximize recovery and contain fiscal costs, the governance framework for the government-owned CAMC needs to adequately balance operational independence with public accountability and transparency, with a clear mandate accompanied by operational targets, an independent board, and skilled management compensated based on performance”, the Statement noted.

Furthermore, it underlined that the proposed subsidy scheme (Estia) to encourage distressed borrowers to begin servicing their loans should be better targeted to those most in need of assistance and suggested tighter eligibility criteria and clearer communication to avoid moral hazard that would further erode payment discipline by extending benefits to those already capable of servicing their obligations.

– Cyprus News Agency

Further reading

Cyprus: Staff Concluding Statement of the 2018 Article IV Mission

Cyprus house prices rise 0.6 per cent

Nigel Howarth
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Cyprus house prices rise 0.6 per cent

Cyprus house prices rise 0.6 per centTHE CYPRUS Statistical Service (CYSTAT) has announced that prices for houses and apartments in Cyprus rose by an average by 0.6 per cent in the second quarter of 2018 compared to the first quarter in its latest House Price Index (HPI).

The HPI also reports that residential property prices in Cyprus have risen by 1.2 percent on an annual basis.

According to CYSTAT’s press release, the Cyprus House Price Index (HPI) “is a quarterly index which measures the change in the average prices of residential dwellings. It captures all types of residential properties, both new and existing. The land component of the residential property is included.

“The data source used for both, indices and weights, is the Department of Lands and Surveys, Ministry of Interior. The data cover all areas which are under the control of the government of the Republic of Cyprus.”

Year Quarter House Price Index (2015=100) Quarterly Change (Compared to the previous quarter) (%) Annual Change (Compared to the same quarter of the previous year) (%)
2018 Q1 103.34 -1.8 3.7
Q2 103.98 0.6 1.2
Q3
Q4
2017 Q1 99.64 -3.0 2.4
Q2 102.74 3.1 3.6
Q3 102.46 -0.3 0.6
Q4 105.24 2.7 2.4
2016 Q1 97.29 -2.1 -0.2
Q2 99.18 1.9 -1.4
Q3 101.87 2.7 -0.6
Q4 102.72 0.8 3.3
2015 Q1 97.52b
Q2 100.59 3.1
Q3 102.49 1.9
Q4 99.40 -3.0
2014 Q1 98.08 -2.7 -6.2
Q2 103.55 5.6 -1.2
Q3 102.70 -0.8 2.8
Q4 101.56 -1.1 0.8
2013 Q1 104.54 -3.4 -1.7
Q2 104.77 0.2 -1.2
Q3 103.05 -4.7 -9.3
Q4 100.78 0.9 -6.9
2012 Q1 106.40 -1.1 -4.6
Q2 106.02 -0.4 -7.0
Q3 110.14 3.9 -1.0
Q4 108.22 -1.7 0.6
2011 Q1 111.56 -0.4 -2.5
Q2 113.99 2.2 1.1
Q3 111.22 -2.4 -1.0
Q4 107.60 -3.2 -4.0
2010 Q1 114.37 -1.6 -6.6
Q2 112.79 -1.4 -6.9
Q3 112.39 -0.4 -5.7
Q4 112.05 -0.3 -3.6

There is a break in the series in the first quarter of 2015 due to redefinition of the model variables.

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