Cyprus house prices down

Nigel Howarth
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2
Cyprus house prices down

Cyprus house pricesHOUSE prices in the Euro area rose by 3.4% and by 4.3% in the EU, but dropped 3.3% in Cyprus during the third quarter of 2016 compared with the same quarter of the previous year.

The figures come from House Price Index statistics published by Eurostat, the statistical office of the European Union.

Among EU member states, the highest annual increases in house prices in the third quarter of 2016 were recorded in Hungary (+11.6%), Latvia (+10.8%) and Bulgaria (+8.8%). Cyprus (-3.3%) and Italy (-0.9%) were the only member states where house prices fell.

Compared with the previous quarter, the highest increases were recorded in Malta (+5.4%), Ireland (+4.7%), Estonia, Lithuania and Hungary (all +3.4%), while a decrease was observed in Romania (-0.7%). House prices in Cyprus over the quarter rose by 0.2%.

The Cyprus Statistical Service (CYSTAT) has also published its House Price Index. The figures concur with those published by Eurostat; an annual decrease of 3.3% during the third quarter of 2016 and a quarterly rise of 0.2%.

Further reading

Eurostat news release 14/2017 – 19 January 2017

CYSTAT House Price Index(HPI) Q3 2016

Swiss Franc mortgages interim judgement

Savvas Savvides
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3
Swiss Franc mortgages interim judgement

SWISS Franc loan contracts involved thousands of borrowers in default, both in Cyprus and other Balkan and European countries. This particular banking product, promoted especially in the early 2000’s, resulted in a severe socio-economic problem due to the depreciation of the exchange rates.

The indignation of borrowers, who observed a substantial increase in their balances on their loans and payments, forced them to resort to legal measures to defend their legal rights and entitlements.

The start of the judicial processes in various other European Courts and their decisions in favour of the borrowers have played a prominent role in the protection of creditors’ legal rights and the treatment of lending contracts that contained controversial and damaging clauses. Consequently, national European courts have tended to adopt decisions in favour of the borrowers.

Recently, in Cyprus, the first partial vindication of a borrower was heard before the District Court of Nicosia in a case that contested the banks overcharges and the financial loss caused by the depreciation of the exchange rate between the Swiss Franc and the euro. The loan had been granted by the bank for the purpose of funding emergency housing.

The Plaintiffs (borrowers), as with the majority of bona fide borrowers, paid their loan instalments meticulously and regularly. However, their loan never reduced over time and, in fact, continued to increase.

Swiss Franc borrowers were forced to convert their funds to pay their loan instalments on the day that the payments were due and according to the exchange rate on the date of the instalment payment. The devaluation and considerable downturn of the Swiss Franc negatively affected the loans and compounded the interest on them.

The plaintiffs in this particular case requested the issuance of a protective interim order under the provision of Article 32 of law 14/60 for:

(a) the suspension of the monthly instalments on the agreement and

(b) suspension of the defendants’ life insurances with two insurance companies in favour of the borrowers and not the bank.

The Cypriot Court, correctly interpreting the European Directive 93/13/EEC on the unfair terms in loan contracts, applied the European Precedent of the European decision C-26/13 Kasler and Rabai v OPT Jelzalogbank Zrt dated 30/04/2014 regarding the borrowing of Swiss Francs and questioned the clauses that weakened the other parties’ negotiation chances and, in particular, the bank’s position of “take it or leave it” that was in violation of the borrowers’ principles of autonomy and their contractual freedoms.

It is on this basis that the Cypriot Court, referred to the decision of the European Court of Justice in the case of Kasler for the understandable wording of terms so that they are meaningful and clear to a borrower.

It is widely viewed that the judge’s final verdict will primarily centre on ‘whether the manner and kind of lending represents a common loan agreement, for which the borrower knows from the beginning that he will be required to pay back a specific amount including the relevant interest on the loan’.

The Court rightly determined in the case that the borrower was not in a contractual position to have knowledge of the entire sum of the loan and the obligations/relationship between the lender and borrower. In these types of loan contracts, the content is normally unknown and/or undefined and/or unclear in the repayment of loans that are reliant on exchange rate fluctuations (between the currency of the loan contract and the currency of the borrower’s income), including the variable interest rates imposed on the loan.

Although, the Cyprus Government has, to date, not taken a stance on this matter, the Cypriot justice system has followed both European and Case Law in protecting borrowers from contracts containing unfair and concealed terms by the banks for the sole purpose of gaining a profit.

The first Cypriot judgment (albeit interim) regarding Swiss franc loans, in conjunction with the European Legislation and Law, is a formidable safeguard available to borrowers in difficulty who wish to restore through the Courts the financial losses that they have suffered.

© 2017 – GoldNews.com.cy

This article was first published in GoldNews and was written by Savvas Savvides, Partner at Michael Kyprianou & Co LLC.

New repossessed property regulations

Elias Hazou
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New repossessed property regulations

repossessed propertiesTHE HOUSE finance committee began discussing a bill on Monday allowing banks to rent as well as perform maintenance on repossessed properties on their books to make them more marketable.

The bill, submitted by the finance ministry, would also allow authorised credit institutions (ACIs) to complete unfinished properties.

The provisions are required in order to harmonise with EU directives.

Under the Business of Credit Institutions Laws, banks are required to dispose of repossessed property within three years.

In addition, international accounting standards mandate that a bank demonstrate that it can sell repo properties within 12 months.

Some have expressed concerns that swiftly disposing of the many repossessed properties may set back the property price in the short run.

But speaking at the committee session, a Central Bank official poured cold water on the notion of extending beyond three years – to perhaps five years – the period for which banks can keep repo properties on their books.

To date, banks could request an extension on the three-year period from the Central Bank of Cyprus (CBC). Almost all such requests have been granted, a CBC official informed MPs.

But the rules have changed, as from now on such requests must also be sanctioned by the European Stability Mechanism.

Under the new legal framework a bank can auction a property at a reserve price of 80 per cent of the current market price. If there is no interest, the bank can place the property to a new auction with the same price while in a year’s time it can auction the property with a new reserve price amounting to 50 per cent of the current market value.

Property sales soar (update)

Nigel Howarth
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0
Property sales soar (update)

Cyprus property sales

THE DEPARTMENT of Land and Surveys reported an almost unbelievable 121 per cent rise in the number of property sales contracts deposited at Land Registry offices across Cyprus during December compared with December 2015.

This 121% rise follows a 46% rise in November, a 37% increase in October and a 50% increase in September bringing the annual increase to 43%; the largest year-on-year rise for the past decade.

Of the 1,134 contracts, 780 (69%) were deposited by domestic (Cypriot) purchasers, while 31% (354) were deposited by overseas (non-Cypriot) purchasers.

Part of the increase is probably accounted for by those taking advantage of the concession introduced in 2015 exempting those who bought property by 31st December 2016 from paying Capital Gains Tax regardless of when they sold the property.

However, we also know that an unknown number of these 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.

As the Department of Lands & Surveys does not record these ‘non-sale’ agreements separately, the figures presented do not accurately reflect the real number of property sales.

We can only hope that the Department of Lands & Surveys will amend its statistics to separate actual sale contracts from ‘non-sale’ agreements so that an accurate picture can be presented, which will benefit both the property industry and those who may be considering buying property on the island.

Sales rose in all district compared with December 2015. In percentage terms Nicosia led the way with sales up 156%, followed by Limassol, where sales rose by 156%. Meanwhile, sales in Paphos, Famagusta and Larnaca rose by 137%, 107% and 18% respectively.

Total Property Sale Transactions – 2015/2016 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2015 46 45 83 88 86 61 60 37 65 64 60 54
2016 54
 79
 82
 79 82 98 102 64 81 80 86 144
Famagusta 2015 16 27 17 17 21 33 45 14 30 29 33 42
2016 22
 35 33
 35
 24 34
 27 41  32  47 19 87
Larnaca 2015 90 71 98 67 68 111 95 75 85 87 111 114
2016 78
 108 121
 127
 103 120
 123 81  121  111 114 153
Limassol 2015 95 97 160 115 135 135 156 87 114 166 137 169
2016 92
 179 197
 166
 145 222
 220 129  195  270 249 432
Paphos 2015 74 85 94 94 95 124 140 88 91 117 105 134
2016 81
 100 106
 107
 120 183
 153 136 127  126 183 318
Totals
 2015 321 325 452 381 405 464 496 301 385 463 446 513
2016 327
 501 539
 514
 474 657
 625 451  556  634 651 1134

Annual performance

During 2016 sales rose by 43% compared with 2015, with sales increasing in all districts. In percentage terms sales in Limassol over the year rose by 59% and in Paphos they rose by 40%. Meanwhile sales in Nicosia, Famagusta and Larnaca rose by 38%, 35% and 27% respectively.

Domestic property sales

Property sales to the domestic (Cypriot) market in December rose 106% compared to December 2015, with sale (and ‘non-sale’) agreements reaching 780 compared with 378 in the same month last year.

Domestic sales rose in all district compared with December 2015. In percentage terms Nicosia led the way with sales up 164%, followed by Limassol, where sales rose by 150%. Meanwhile, sales in Paphos, Famagusta and Larnaca rose by 92%, 76% and 41% respectively.

Domestic Property Sale Transactions – 2015/2016 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2015 39 36 71 74 74 58 56 36 55 60 50 44
2016 43
 70
 10
 69 68 92 94 58 75 70 73 116
Famagusta 2015 9 2 16 16 9 30 28 14 25 24 24 41
2016 20 31 21
 33
 24 7 19 32  22  37 9  72
Larnaca 2015 77 49 91 40 45 82 60 62 53 59 81 81
2016 68 96 85
 91
 93 75 91 67  90  81 74  114
Limassol 2015 71 77 147 90 86 100 123 65 81 127 82 123
2016 68 158 145
 122
 126 162 156 101  142  202 196  307
Paphos 2015 39 38 86 64 34 63 83 64 47 92 71 89
2016 61 72 59
 65
 105 126 74 88  98  83 111  171
Totals
 2015 235 202 411 284 248 333 350 241 261 352 308 378
2016 260 427 382
 380
 416
 462
 434 346  427  473 463  780

Annual performance

During 2016 domestic sales rose 46% compared with 2015, with sales increasing in all districts. In percentage terms sales in Limassol over the year rose by 61% and in Paphos they rose by 46%. Meanwhile sales in Nicosia, Famagusta and Larnaca rose by 38%, 37% and 31% respectively.

Overseas property sales

Property sales to the overseas (non-Cypriot) market, which are unaffected by ‘non-sale’ agreements during December rose 162% compared with December 2015 with 354 properties sold compared with 135 in the same month last year.

Overseas sales rose in all district compared with December 2015. In percentage terms Famagusta led the way with sales up 1400% (having sold just one property in December 2015) followed by Paphos, where sales rose by 227%. Meanwhile, sales in Nicosia, Limassol and Larnaca rose by 180%, 172% and 18% respectively.

Overseas Property Sale Transactions – 2015/2016 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2015 7 9 12 14 12 3 4 1 10 4 10 10
2016 11
 9
 10
 10 14 6 8 6 6 10 13 28
Famagusta 2015 7 25 1 1 12 3 17 0 5 5 9 1
2016 2 4 12
 2
 0
 27
 8 9  10  10  10  15
Larnaca 2015 13 22 7 27 23 29 35 13 32 28 30 33
2016 10 12 36
 36
 10
 45
 32 14  31  30  40  39
Limassol 2015 24 20 13 25 49 35 33 22 33 39 55 46
2016 24 21 52
 44
 19
 60
 64 28  53  68  53  125
Paphos 2015 35 47 8 30 61 61 57 24 44 35 34 45
2016 20 28 47
 42
 15
 57 79 48  29  43  72  147
Totals
 2015 86 123 41 97 157 131 146 60 124 111 138 135
2016 67 74 157
 134
 58
 195
 191 105  129  161  188  354

Year to date performance

During 2016 sales to the overseas (non-Cypriot) market were up 34% compared with  2015, with sales reaching 1,813 compared with 1,349.

Sales since 2000

Sales in 2007, immediately before the property bubble burst, reached 21,245. In 2013 sales reached their lowest on record at 3,767. In 2014 sales rose 20% to reach 4,527 and in 2015 they rose 9% to reach 4,952.

In 2016 combined sales and ‘non-sales’’ reached 7,073, slightly more than 2011.

Cyprus Property Sale Transactions 2000 – 2016

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
Totals
 58,618 141,187 29.3% 199,805

It appears that a recovery in the property market is underway. But there is still a long way to go before sales reach 12,664; the number sold in the year 2000.

Cyprus property fraudster convicted (update)

Nigel Howarth
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4
Cyprus property fraudster convicted (update)

FRAUDSTER Sascha Morris who duped Cyprus property investors out of more than £5 million by promising them impossible returns has been convicted following a prosecution by the CPS Specialist Fraud Division.

Sascha Morris, 46, was convicted of two counts of fraud and another of fraudulent trading following a trial at Leeds Crown Court. She will be sentenced on 9 January 2017.

The court heard how Morris persuaded UK investors to part with cash for off-plan properties in Cyprus by promising false returns on quick sales. She also promoted non-existent relationships with holiday lettings firms said to be available to lease properties that were not sold. Investors were encouraged to put money in at the start of projects on the basis that they could sell before they were completed. When buyers were not found and the projects neared completion, the investors were pursued for further payments that they had never expected to make.

In another part of the fraud, Morris sourced more than £2.6 million from two groups of investors to a company she claimed would finance property developments. Each group thought their investment was underpinned by the value of the company but was unaware that the other group was involved and would be entitled to half of that value. When the schemes failed, the vast majority of the money was lost.

Simon Higginbotham, Specialist Prosecutor from the CPS Specialist Fraud Division, said: “Some of the investors targeted by Sascha Morris had to remortgage their homes or borrow large sums in order to raise money they had never expected to pay.

“Through careful analysis of the financial transactions the prosecution was able to demonstrate to the jury how Morris deliberately misled investors in order to achieve financial gain for herself.”

The conviction follows an investigation carried out by North Yorkshire Police’s Major Fraud Investigation Team.

Update 10.01.2017

Sascha Morris was sentenced to 8.5 years in prison at Leeds Crown Court yesterday for duping property investors out of £5 million. Good result!

Ambitious plan for Larnaca port unveiled

Nigel Howarth
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0
Ambitious plan for Larnaca port unveiled

Larnaca port marinaTHE TRANSPORT Ministry has unveiled its new plan to attract a strategic investor for the development of the Larnaca port and marina and includes berths for Giga yachts and cruise ships according to a report in the Cyprus Weekly.

Named Amphitrite, after the sea-goddess and wife of Poseidon, the plan analyses in detail the present conditions as well as the legal, economic and technical issues for the proposed development framework.

The study was undertaken by ERNST & YOUNG and SALFO and presents three different development strategies with investments ranging from €145 million to €235 million.

According to the report, the present infrastructure of both the port and marina are in poor condition, and major restructuring will be required.

Incentives and local planning

The study proposes the substantial revision the city plan to facilitate the development of projects desired by both the state and the city council and has suggested increasing the building coefficient from 30% to 40%.

The study has outlined the need for a suitable road network which will connect to the existing one but with priority given to pedestrians and easy access to the Phinikoudes promenade and bicycle lanes.

The report also makes clear the commercial use of the port and has designated the western part of the area as such pending an environmental impact study.

No oversized structure

The area available to the investor is 510,000 square meters and stretching from the port to the marina.

The report, based on local and international property markets with regards to size and competitiveness has recommended the construction of a large number of small to medium-sized apartments, a few luxury villas, a hotel, offices and a commercial centre

Despite the saturation of the Larnaca real estate market, interest in sea-front properties remains high especially if one keeps the government’s citizenship for investment policy.

Larnaca also has the advantage of not being a victim of seasonality like other tourist areas on the island, safety and its close proximity to the airport.

Sale prices and rentals

Apartment of 110-130 square meters with premium services will start at €5,250 m² while villas of 250-300m² with swimming pool are expected to start at €6,000m² while offices are earmarked for €3,200-€3,800m² or they can be rented for €12-€15m². Rentals in the 10,000m² commercial centre are suggested to be from €40-€55m²

Yachts and cruise ships

The first development strategy includes the creation of a marina to hold 750 50-metre yachts, 50-60 mega and Giga yachts and a 300m cruise ship.

The second choice provides 600 50-metre yachts, 25 mega or Giga yachts and a 250m cruise ship, while the third choice is identical to the second but has place only for 10-15 mega and Giga yachts.

The second choice, estimated at €150-€185million seems to be the most advantages of the three, while all three plans have 20,000m² available for apartments and villas, 7,000-10,000m² for offices, a commercial centre and a 250-bed luxury hotel.

Infrastructure to accommodate large ships is favourable

Cyprus is in a favourable position to act as a stop for cruise ships, being in the eastern Mediterranean, it is a single day’s sailing from destinations such as Rhodes, Crete, Antalya, Marmara, Alexandria and Port Said.

Although the prevailing political tensions in the Middle East have diverted cruise ships from Israel and Lebanon, the study is confident that the close proximity of the Larnaca port to the old town will and permits short trips around the island to archaeological sites etc.

At the same time, the large distances between destinations favours the creation of berths for 100m mega and Giga yachts in order to stock up on supplies and for refuelling.

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