Surge in new homes construction

Cyprus new homes constructionTHE NUMBER of building permits authorised in Cyprus during July 2017 stood at 492 compared with the 442 authorised during the same period in the previous year; an increase of 11.3% according to official figures released by the Cyprus Statistical Service.

The total value of these permits reached €202.3 million and their total area reached 176.1 thousand square metres.

During July 2017, building permits were issued for:

  • Residential buildings – 356 permits
  • Community buildings – 1 permit
  • Non-residential buildings – 87 permits
  • Civil engineering projects – 13 permits
  • Division of plots of land – 27 permits
  • Road construction – 8 permits

During the first seven months of 2017, 3,362 building permits were issued compared to 3,053 during the same period in the previous year; an increase of 10.1%

The total value of these permits increased by 49.2% and the total area by 41.6%.

Building permits for new homes

The 356 residential building permits approved in July provided for the construction of 537 new homes comprising 259 single houses and 278 multiple housing units (such as apartments, semis, townhouses and other residential complexes); an increase of 40.6% compared with July 2016 when permits were issued for the construction of 382 new homes.

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

Month 2016
(Dwellings)
2017
(Dwellings)
Increase/
Decrease
%age
Change
January 243 381 138 56.8%
February 312 383 71 22.8%
March 306 412 106 34.6%
April 201 289 88 43.8%
May 278 424 146 52.5%
June 287 381 94 32.8%
July 382 537 155 40.6%
Totals 2,009 2,807 798 39.7%

According to the Cyprus Statistical Service “Building permits constitute a leading indicator of future activity in the construction sector.”

Cyprus house price index up 3.1 per cent

Cyprus House Price IndexTHE CYPRUS Statistical Service (CYSTAT) announced that prices for houses and apartments in Cyprus rose on average by 3.1 per cent in the second quarter of 2017 compared to the first quarter in its House Price Index (HPI) published earlier today in a press release.

The HPI also reports that residential property prices have risen by 3.6 percent on an annual basis.

According to CYSTAT’s press release, the House Price Index “captures all types of residential properties, both new and existing”.

Year Quarter House Price Index
(2010=100)
Quarterly Change
(Compared to the previous quarter) (%)
Annual Change
(Compared to the same
quarter of the previous year) (%)
2017 Q1 99.64 -3 2.4
Q2 102.74 3.1 3.6
Q3
Q4
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 97.52
  Q2 100.59 3.1
  Q3 102.49 1.9
  Q4 99.4 -3
2014 Q1 98.08 -2.7 -6.2
  Q2 103.55 5.6 -1.2
  Q3 102.7 -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 106.4 -1.1 -4.6
Q2 106.02 -0.4 -7
Q3 110.14 3.9 -1
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
  Q4 107.6 -3.2 -4
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

(Note that the index for the first quarter has been revised and that there is a break in the series in the first quarter of 2015 due to redefinition of the model variables.)

IMF: Reinstate Immovable Property Tax

In a Concluding Statement following its recent mission to Cyprus, the IMF has made a number of recommendations on real estate including reinstating the annual Immovable Property Tax (IPT), raising transfer fees and streamlining the procedures from issuing and transferring Title Deeds:

Policy adjustments may be needed to avoid a potentially unsustainable increase in construction activity.

Several investment incentives, including the citizenship-by-investment (CbI) scheme, provided welcome support to construction and the economy more broadly in the aftermath of the crisis, and construction of luxury residential and tourist properties – financed mainly by foreign equity – has been brisk. However, this support has now achieved its goal, and could turn procyclical. Further decoupling the scheme’s eligibility requirements from real estate would help avoid excessive concentration of economic activity, and reduce the risk of over-supply of luxury properties.

Procedures for issuing and transferring title deeds for new properties should be streamlined, with timely transfer of titles to buyers. If signs emerge that construction in the luxury market is becoming reliant on domestic credit or activity is spilling over to other segments, tightening bank lending standards and raising macroprudential capital requirements would be appropriate.

Reinstating the recently rescinded immovable property tax and raising transfer duty on immovable property would provide additional countercyclical tools.

Further reading

Cyprus: Staff Concluding Statement of the 2017 Article IV Mission

Paphos marina decision expected soon

Paphos MarinaPAFILIA Group will find out in the coming days whether they have met the necessary criteria to construct a long-anticipated Paphos marina, according to the head of the Paphos Chamber of Commerce and industry.

Andreas Demitriades told the Cyprus Mail on Monday that he expects a decision to be made before the end of October.

“The Pafilia Group were asked to provide all of the necessary documentation to highlight their ability to promote, implement and finance the project for the construction of the marina in Potima in Kissonerga. They need to demonstrate that they meet the terms and conditions of the competition,” he said.

The Poseidon consortium had planned to build and run the new Paphos marina, which came with a €215 million price tag, but they were rejected in April, which meant that tender runner up Pafilia could step up and submit their paperwork for a chance to snare the deal.

The Pafilia bid is a different design and costs less, around 175 million euros, and if their bid is successful the project will be awarded to them. However, if the developer fails to meet the criteria, the entire process, which has already dragged on for more than a decade, will be cancelled and another tender announced, he said.

“This tender has gone through turbulent times due to the various recourses to the Supreme Court. I think it was wrong not to award the tender immediately to the first company. The tender authority has the right to do this, and by now, the marina would be built and fully operational.”

He noted that in this instance, even if the Supreme Court had found the government liable to some degree, the benefits reaped would have probably exceeded any amount the government had to pay in compensation.

The tender for the Paphos marina project was first announced in 2007 and in 2008. It was initially awarded to the Cybarco-Pandora consortium, which includes the Leptos Group.

However, the other two bidding consortiums, Pafilia and Poseidon, a joint venture in which Aristo Developers is a mayor stakeholder, challenged the award at various stages. They claimed the winning developer used inside information to offer a lower figure for the construction of the marina, and won the tender.

The project was then frozen after litigation began in 2008.

In December 2015, the Supreme Court voted in favour of Poseidon and their €215m project. They then had to provide proof of funds – a total of 60 per cent of the amount, which was set at €125m.

However, after many months of negotiation, it was decided that Poseidon was unable to meet the financial criteria, and the project then passed on to Pafilia, the biggest developer in Cyprus.

Kissonerga community leader, George Stylianou said that the local council is fed up with the delays and that a final decision must be made ‘one way or another’.

“Our concern is that the current situation is holding us back from taking any important decisions and we need to know if there will be a marina or not,” he said.

He said that the stretch of coastline earmarked for the construction is often victim to large waves which need to be controlled by the construction of breakwaters in order to provide a better level of safety for swimmers and beach users.

He said that this was being held up by the inaction over the marina.

“We have been told that the construction of the marina will change the currents and that the marina will have to be built first, the currents studied and then we can proceed with any breakwaters.”

He added that once safety at the 1.5km long stretch of beach is improved, it will be the best beach in the area, with parking and other facilities.

“Even though no-one has drowned here for the last one hundred years, the sea can get rough with large waves and people have to be very careful. This is an important beach for us, it will help the tourist industry and greatly benefit the community,” he said.

The proposed marina will include up to 1,000 berths and more than 42,000 square metres of residential and commercial developments. The project will take approximately three years to complete.

Representatives of Pafilia were unavailable for comment.

VAT on land sales agreement

VAT on land sales in CyprusWITH THE BLESSING of the European Commission, Cyprus will apply the Dutch model to the imposition of VAT on the purchase and sale of land for commercial activities at the rate of 19 per cent according to reports in the Greek language media.

The Tax Department has issued a circular defining land that will be subject to VAT as “transfer of undeveloped buildable land which is clearly intended for the construction of one or more fixed structures.”

According to the circular no VAT will be imposed on the on the purchase or sale of land located in a livestock zone and non-development areas, zones/areas of environmental protection, archaeological, rural, etc.

Cyprus faced hefty fines from the European Commission if it failed to transpose the EU VAT Directive into national law. When it joined the EU in 2004, Cyprus was granted derogation from the directive, allowing the island to continue exempting the supply of building land until December 31, 2007.

September property sales up 8 per cent

Cyprus property sales up 8 per cent in SeptemberTHE NUMBER of property sales in Cyprus during September rose 18 per cent compared to September 2016 according to official statistics published by the Department of Lands and Surveys earlier today.

This rise follows a 27% increase in August, an 18% increase in July, and a 28% increase in June.

During September a total of 602 contracts for the sale of residential and commercial properties and land (building plots and fields) were deposited at Land Registry offices across Cyprus, compared with the 556 deposited in September 2016.

Of those 602 contracts, 441 (70%) were deposited by Cypriot purchasers and 161 (30%) were deposited by overseas purchasers.

Although sales in Larnaca fell by 12% compared with September 2016, they rose in the remaining four districts.

Sales in Famagusta rose 78%, while sales in Paphos rose by 17%. Meanwhile sales in Nicosia and Limassol rose by 7% and 4% respectively.

Total Property Sale Contracts – 2016/2017 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2016 54
79
82
79 82 98 102 64 81 80 86 144
2017 72 73 79 80 118 162 124 76 87
Famagusta 2016 22
35 33
35
24 34
27 41 32 47 19 87
2017 21 19 40 29 38 46 59 47 57
Larnaca 2016 78
108 121
127
103 120
123 81 121 111 114 153
2017 102 100 113 69 119 96 103 88 107
Limassol 2016 92
179 197
166
145 222
220 129 195 270 249 432
2017 132 177 232 192 298 304 289 201 203
Paphos 2016 81
100 106
107
120 183
153 136 127 126 183 318
2017 96 87 162 136 183 235 184 160 148
Totals 2016 327
501 539
514
474 657
625 451 556 634 651 1,134
2017 423 456 626 506 756 843 739 572 602

During the first nine months of 2017, sales contracts have risen 19% compared to the same period last year.

(An unknown number of property sales contracts relate to ‘non-sale’ agreements such as loan restructurings, recoveries and debt-to-asset swaps agreed between the banks and defaulting borrowers. These contracts inflate the total figures above and the domestic sales figures below.)

Domestic property sales

Property sales to the domestic (Cypriot) in September rose 3% compared to September 2016.

Although sales in Larnaca and Nicosia fell by 19% and 4% respectively, they rose by 95% in Larnaca, 8% in Limassol and by 2% in Paphos.

Domestic Property Sale Contracts – 2016/2017 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2016 43
70
10
69 68 92 94 58 75 70 73 116
2017 63 69
71
62
103
150
109
70
72
Famagusta 2016 20 31 21
33
24 7 19 32 22 37 9 72
2017 20 17 24 23 27
31 30
25
43
Larnaca 2016 68 96 85
91
93 75 91 67 90 81 74 114
2017 77 80 85 49 76
70 62
63
73
Limassol 2016 68 158 145
122
126 162 156 101 142 202 196 307
2017 97 130 176 152 202
227 194
160
153
Paphos 2016 61 72 59
65
105 126 74 88 98 83 111 171
2017 73 47 82 93 88
157 93
81
100
Totals 2016 260 427 382
380
416
462
434 346 427 473 463 780
2017 330 343 438
379 496
636 488
399
441

During the first nine months of 2017, domestic sales contracts have risen 12% compared to the same period last year.

Overseas property sales

Property sales to the overseas (non-Cypriot) market during September 2017 rose 25% compared to the same month last year with 161 contracts of sale deposited compared with 129 in September 2016.

With the exception of Limassol, where sales fell 6%, they rose in all the other districts.

Nicosia led the way with the number of property sale contracts deposited rose 15% compared with September 2016. Meanwhile, sales in Paphos rose 66% and by 40% in Famagusta and by 10% in Larnaca.

Overseas Property Sale Contracts – 2016/2017 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2016 11
9
10
10 14 6 8 6 6 10 13 28
2017 9
4
6
18 15 12 15 6 15
Famagusta 2016 2 4 12
2
0
27
8 9 10 10 10 15
2017 1 2 16 6 11 15 29 22 14
Larnaca 2016 10 12 36
36
10
45
32 14 31 30 40 39
2017 25 20 28 20 43 26 41 25 34
Limassol 2016 24 21 52
44
19
60
64 28 53 68 53 125
2017 35 47 56 40 96 77 75 41 50
Paphos 2016 20 28 47
42
15
57 79 48 29 43 72 147
2017 23 40 80 43 95 78 91 79 48
Totals 2016 67 74 157
134
58
195
191 105 129 161 188 354
2017 93 113 186 127 260 208 251 173 161

During the first nine months of 2017, property sales to the overseas market have risen 42% compared with the same period last year reaching a total of 1,574.

(During September a total of 121 properties were transferred to overseas buyers bringing the total number of transfers for the year to date to 739.)

Cyprus Property Sale Contracts 2000 – 2017

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 (Sept) 1,574 3,949 28.5% 5,523
Totals
60,192 145,138 29.3% 205,328