Local property tax set to change

Nigel Howarth
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Local property tax set to change

Cyprus property taxLOCAL property tax in Cyprus is set to change this year as the Municipalities and Communities will be assessing the tax payable on the 2013 property valuations rather than the 1980 valuations.

It is anticipated that most people will pay about the same local property tax as they did in 2016.

However, the new assessments may result in those whose properties were registered as plots or fields in 1980 and which have subsequently been developed – and those whose properties are in planning zones that have subsequently been rezoned will pay more tax this year than previously.

The Greek language newspaper ? ???????????? (Phileleftheros) reports that a person in the Limassol Municipality of Agios Athanasios has been asked to pay €229.32 compared to the €78.49 he paid last year, while another in Larnaca has been asked to pay €200 this year compared to his 2016 bill for €70.

We understand that the Municipalities have the option of imposing a uniform rate of up to 0.024 per cent on a property’s 2013 valuation. This will result in the Municipalities collecting approximately €20.8 million this year compared to the €19.1 million they collected last year.

The Phileleftheros reports that the rate in the Municipalities of Strovolos will be 0.015%, Aradippou 0.019%, Larnaca 0.023%, Limassol 0.024%, and Paphos 0.019% per thousand, while the rate in Paralimni has yet to be set.

Cyprus home prices fall 1.4 per cent

Nigel Howarth
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Cyprus home prices fall 1.4 per cent

Cyprus home pricesACCORDING to preliminary estimate of the Statistical Service, the Home Prices Index for the first quarter of 2017 amounts to 101.32 units (new base year 2015=100).

Compared to the fourth quarter of 2016, the index decreased by 1.4% while compared to the corresponding index of the previous year, the index increased by 4.1%.

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 101.32 -1.4 4.1
Q2
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 97.52b
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

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

Home prices in the euro area

According to a Eurostat news release house prices rose during the first quarter of 2017 were up 4.0% in the euro area compared with first quarter of 2016 and by 4.5% in the European Union.

Among the Member States for which data are available, the highest annual increases in house prices in the first quarter of 2017 were recorded in the Czech Republic (+12.8%), Lithuania (+10.2%) and Latvia (+10.1%), while prices fell in Croatia (-0.4%) and Italy (-0.1%).

Compared with the previous quarter, the highest increases were recorded in the Czech Republic (+2.9%), Latvia (+2.8%) and Sweden (+2.5%), and the largest decreases in Malta (-5.4%), Slovakia (-2.4%) and Cyprus (-1.4%).

Further reading

Cyprus House Price Index (HPI) Q1 2017

Eurostat newsrelease ‘House prices–annual rate of change for the euro area and the EU’

Banks helped by increased building permits

Cyprus News Agency
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Banks helped by increased building permits

Cyprus Banks helped by increased building permitsA SUSTAINED increase in demand in building permits will assist Cypriot banks to improve their asset quality in the real estate sector, rating agency Moody’s says, as building permits in Cyprus reach a new high since the 2013 banking crisis.

The Statistical Service of Cyprus released data showing that the number of building permits issued in the country during the first four months of 2017 reached their highest level since the 2013 banking crisis.

According to Moody’s, during the first four months of 2017, 1,861 building permits were issued, 8% more than the year-earlier period. The increase is the result of a 38% increase in building permits for the construction of new homes, while the total value of permits issued in the first four months of 2017 was 36% higher than in 2016.

“Although Cypriot banks continue to face significant asset quality challenges, a sustained increase in demand for building permits would be a credit-positive indication of an improving operating environment for the construction and real estate industries,” the agency said in its bi-weekly credit outlook.

Moody’s added it expects that “recovering demand for new real estate and overall improvement in the sector will increase construction companies’ cash flows, with positive implications on banks’ asset quality in the construction and real estate sectors, which constituted approximately 18% of gross loans as of March 2017.”

The agency pointed out that non-performing exposures (NPEs) in these sectors, based on the Central Bank of Cyprus’ assessment of troubled loans using the European Banking Authority’s broad definition, declined to 56.4% in March 2017 from 73.0% in November 2014, with the recovering construction and real estate sectors accelerating asset quality improvements.

Furthermore, Moody’s believes that of the large domestic banks, Bank of Cyprus, the island’s largest lender, is likely to benefit most from an improvement in these sectors, which accounted for 31% of gross loans as of March 2017.

Through debt to asset swaps, the bank’s Real Estate Management Unit (REMU), has acquird €1.4 billion of property, an amount that constitutes 6% of total assets and is the largest share of any Cypriot bank, Moody’s added.

“A gradually recovering property market would facilitate REMU’s sale of these assets and reduce the likelihood of the bank recording losses,” the agency pointed out.

However, the agency noted that “notwithstanding the improving operating environment, it will take time for Cypriot banks to rehabilitate their balance sheets because of the long cure periods for restructured loans before they are reclassified as performing, and the substantial volumes of distressed debt, with system-wide NPEs at 45% of gross loans as of March 2017.”

– Cyprus News Agency

Further reading

Moody’s Credit Outlook – 13 July 2017 (pages 12 & 13)

Cyprus real estate market review

Press Release
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Cyprus real estate market review

“CYPRUS Real Estate Market – 2016 Year in Review” is PwC Cyprus first publication on the Cyprus Real Estate market.

The publication provides a general overview of the sector and an analysis based on available market data up until December 2016.

Specifically, through the use of PwC’s specialised expertise, the publication provides analysis of sales contracts, planning permits and prices among other, segmenting data based on geography and type of property.

The publication is intended for individuals and companies interested in developing, investing and buying as well as in renting or selling real estate. It constitutes a rich source of information without however substituting proper professional advice.

Commenting on the publication, Mr Constantinos Constantinou, Partner, in charge of Advisory at PwC Cyprus said: “The real estate and construction sector contributes significantly to the Cyprus economy (contribution to GVA, currently accounts for 14.1%), foreign investments and employment. This publication comes at a time when the Cyprus Real Estate sector is recovering after having suffered the consequences of the financial crisis of the previous years. We hope that it will serve as a useful tool for professionals, offering them an analysis of the current situation in the market.”

Further reading

Cyprus Real Estate Market – 2016 Year in Review (English)

Pissouri homeowners still in limbo

Staff Reporter
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Pissouri homeowners still in limbo

Pissouri homeowners still in limboHOMEOWNERS in the Limes area of Pissouri are at a loss over what to do next after 60 homes in the area suffered severe structural damage and three were deemed inhabitable.

Members of the House Internal Affairs Committee on Monday learned that many of the houses had been built on former lakes that had been shored-up with construction site rubble.

MPs also learned that the houses had likely been built without a geological study being carried out in advance and that the cost of structural repairs was now expected to cost €4 million more than the original €15m estimate to cover the cost of rebuilding the most extensively damaged homes.

The MPs criticised the government for allowing the area to, in 1980, be declared a residential zone with chairman Eleni Mavrou noting that, under the legislation still in place, someone applying to build in the affected area today would still be given the go ahead.

A Paphos District Administration representative told MPs that three or four lakes in the area – incidentally known as ‘Limes’ (Lakes) – were dried out from 1963 onwards while Limassol District Administration engineer Marios Alexandrou said cement had to injected into the land to make it more stable.

He also noted the houses that had become problematic to a lesser or greater degree had been built between 1986 and 2007 and began showing signs of the problems in 2011 and 2012.

The problem was made worse, Alexandrou noted, because there was no way for excess water to drain away.

Speaking on behalf of an initiative group representing residents of the affected area, Elina Zoi, called on the state to rehome all those affected after putting their trust in the Republic of Cyprus and investing their money in a home.

Copyright © 2017 Phileleftheros

Vote imposing VAT on land sales postponed

Elias Hazou
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Vote imposing VAT on land sales postponed

Vote imposing VAT on Cyprus land sales postponedLAWMAKERS have postponed until September a vote on an EU harmonising bill through which the state would levy 19 per cent VAT on building and development plots.

The legislation concerns the imposition of VAT on land sales for commercial property transactions.

On acceding to the EU in 2004, Cyprus was granted a derogation from the relevant VAT directive, allowing the island to continue exempting the supply of building land until December 31, 2007.

With Cyprus facing the risk of infringement proceedings and fines from the EU for continued non-compliance, initially MPs were warned they needed to pass the legislation as soon as possible, before the summer recess and certainly by the last plenary session this coming Friday.

But at the House finance committee on Monday, the attorney-general’s office said passage of the law could be delayed for a while longer due to the fact that the European Commission has yet to initiate infringement proceedings.

The bill, as it has been amended, will now be dispatched to the European Commission via the EU Pilot process.

The EU Pilot is an informal dialogue between the Commission and the member state concerned on issues related to potential non-compliance with EU law, prior to launching a formal infringement procedure.

Along with the bill, the government will also send to the Commission a circular drafted by the Tax Department which defines ‘building land’ that is subject to the 19 per cent tax.

The circular defines ‘building land’ as undeveloped building land that is ‘clearly intended’ for the construction of one or more fixed structures.

Also, the transfer/sale of land that is subject to VAT does not presuppose the existence of a title deed.

Undeveloped building land – with water supply services or not – concerns non-built-up plots (under development, completed, with a final certificate of approval, or with a title deed) within zoning designated for residential, commercial, tourist, vacation, industrial or manufacturing use, or land plots in an area in which development was activated after certain conditions apply – such as plans for a road network.

Farm land, protected areas and forest land are exempted.

Currently, consumers do not pay any VAT on purchasing a land plot, but if they build a house on that plot they pay five per cent.

By contrast, if they buy a house from a land developer they pay only five per cent VAT.

 

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