Cyprus economy recovery fragile

Cyprus News Agency
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Cyprus economy recovery fragile
Cyprus economy recovering but fragile
European Commissioner for Economic and Financial Affairs Pierre Moscovici

THE CYPRUS economy is recovering, however it is still fragile, with risks linked to both the weak external environment and domestic imbalances, European Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici has said.

Speaking to a group of Cypriot journalists attending a seminar in Brussels on Tuesday on “Single Market: Tax Justice and Tax Fair Competition”, Moscovici also referred to Greece, noting that the Commission’s wish is to strike a deal by the end of the year in relation to the Greek debt “with IMF on board”.

Referring to Cyprus the Commissioner pointed out that the key issues remain its level of private debt and non-performing loans. The high private debt weighs on consumption and on the ability of businesses to invest and grow, he said.

“It is one of the reasons why Cypriot banks are burdened with the highest level of non-performing loans in Europe,” he explained. This, he added, limits the lending capacity of banks, weighs on their profitability and ultimately on their capital adequacy. It is therefore vital to implement and ensure the full effectiveness of the insolvency and foreclosure framework, improving them where necessary.

The Commissioner acknowledged the fact that the country has made significant progress during the programme, saying that Cyprus downsized and stabilised its financial sector, consolidated its public finances and initiated major structural reforms. Of course, he stressed further, “we know that this necessary adjustment had a high social cost”.

Today, he went on to add, Cyprus’ economy is recovering, thanks to strong tourism activity and private consumption, and supported by declining prices. However, he made it clear that the recovery is still fragile, with risks linked to both the weak external environment and domestic imbalances and pointed out that to improve growth and employment prospects, Cyprus needs to complete the pending structural reforms as well as implement fully the Action Plan for Growth.

On the fiscal front, he said that Cyprus may have a primary surplus of 2% of GDP in 2016. It is crucial that this prudent fiscal stance is maintained in the coming years in order to bring down public debt from its currently high level. Cyprus is out of the programme and its excessive deficit procedure has been closed, he added, noting that nonetheless fiscal risks remain significant, there is no room for complacency and fiscal discipline should be maintained.

Furthermore, Moscovici made special reference to unemployment in Cyprus, noting that it is decreasing, and could fall to about 12% by the end of this year.

“This is good news, though the still very high youth and long-term unemployment call for strong and targeted employment policies,” he noted.

The EU Commissioner noted that Cyprus has tremendous growth potential, pointing out however that it still needs to implement some key reforms in order to unlock that potential. “Much remains to be done to modernise public administration, improve the business environment and the enforcement of property rights, attract foreign investors through privatisation, and stimulate innovation. These reforms are necessary for Cyprus to fully reap the benefits of difficult adjustment of the last few years and to secure strong economic foundations for the future,” he said.

Developer fined for misleading home buyers

Staff Reporter
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Developer fined for misleading home buyers

A REAL ESTATE developer has been slammed with a €100,000 administrative fine by the Cyprus Consumer and Protection Service (CCPS) for misleading buyers who bought apartments but never received their Title Deeds.

The complaint was filed with (CCPS) by home buyers in December 2013. The case focused on the commercial practices which Pafilia Cyprus Property Developers had used back in 2007 in selling flats to them.

The buyers who purchased apartments from the company accused the seller of hiding important information, such as the fact that there were mortgages on the properties already.

This meant that the buyers could not actually get a hold of their Title Deeds until the developer could pay off debts.

In other words, they were not the official owners of the properties they had bought with their own money. But in their home countries, they said, as soon as someone pays for a property in total, they get the Title Deeds regardless of any outstanding balances owed by the developer.

They also accused Pafilia of supplying them with misleading promotional material, said to have included information mentioning that law in Cyprus was based on Anglo-Saxon law.

The company maintains that the buyers were fully informed, citing Pafilia’s own loan for the property which came from the same bank as that of their clients.

The developer also said they had a lawyer go over the details with the buyers, explaining the situation in Cyprus which was different from that depicted in the pamphlets.

Pafilia also says buyers are not impacted in any negative way by not having their own separate Title Deeds, saying that reselling the property is still possible under their current registration with the Land Registry.

The company had been cooperative during the investigation of the complaint, according to the CCPS.

© Copyright Phileleftheros

The full text of the CCPS investigation and decision (in Greek) may be found by clicking here.

Chinese investor interest grows

George Telaveris
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Chinese investor interest grows
Chinese investor interest grows
Source: South China Morning Post

THE OFFER of passports, a recovering economy and a business community that is ready to sell at the right price are all combining to attract Chinese investors to Cyprus.

“Chinese investors are fast catching up with Russians when it comes to Cypriot passports,” a finance ministry source told the Cyprus Weekly.

The citizenship by naturalisation scheme was originally open to those investing €5 million in certain investments.

The amount has recently been cut to €2.5m but for a narrower range of investments, with the aim of supporting the real economy. Bank deposits no longer qualify, for example, and there is a cap on government bond investments.

Whereas Russians already have well established communities and a business presence on the island, new Chinese investors keep a much-lower profile. Visitors from China were limited to just 27 people in August according to the Statistical service.

“Most of the Chinese businessmen are already well-established in a world metropolis like London, so some of them do not even intend to make a serious use of their property even as a holiday resort,” an experienced real estate agent told the Cyprus Weekly.

Casino on the spot

That does not mean Chinese investors are not contributing to the economy, however. Business people from the world’s second-largest economy have been investing in hotels, for example.

A Chinese consortium plans a five-star hotel in the Sotira area of Famagusta, while Macau-based Melco is a strong contender for the Republic of Cyprus’ first casino resort.

“Melco is looking forward to continue exploring the emerging gaming jurisdiction and collaborating with the Cyprus Government for what it considers to be in the best interest of Cyprus,” Lawrence Ho, Group Chairman and CEO of Melco, told the company’s shareholders in a statement.

The Melco-Hard Rock consortium is competing against NagaCorp, a company with Malaysian interests based in Cambodia that also depends to a great extent on Chinese tourists.

“The Group believes that its strategy to diversify its business geographically and expand into new casino markets will drive revenue growth in the long term,” NagaCorp stated in its 2016 interim report few days ago.

Philippine-based Bloomberry officially announced earlier this week that it has withdrawn from the Cyprus casino race, thereby confirming the Cyprus Weekly’s earlier exclusive report.

Chinese interest in investment abroad had been fuelled by the surprise currency devaluation a year ago in an attempt by the central bank to boost the country’s exports.

“Cash is still leaking out of China, and low interest rates in the US and EU have forced Chinese businessmen to explore less-traditional options like Cyprus,” a person within the consultancy industry told the Cyprus Weekly.

Chinese companies have announced deals on overseas assets worth $157.2 billion so far this year, according to Bloomberg.

© Copyright Phileleftheros

Foreign buyers driving property recovery

Cyprus News Agency
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Foreign buyers driving property recovery

Cyprus property market recoveryCYPRIOTS’ interest in the property market remains low, unlike foreigners who have been the driving force, leading the market to a significant rise during the past few months.

Cyprus’ Real Estate Agents Association Chairman Marinos Kynegirou has told the Cyprus News Agency that, despite announcements from the banks for attractive loans, lending has been particularly complicated and difficult, and as a result Cypriots’ preferable solution is renting amid difficult economic conditions. At the same time, Cypriots who have money appear to be hesitant to buy property due to the recent financial crisis.

However he noted that there is a significant rise in the demand by foreigners, which as Kynegirou says, is expected to gradually push upwards real estate prices. Kynegirou believes that now is a good period for someone to invest in real estate, as the prices have stabilised and deposit rates offered by banks are almost nil.

He pointed out that in order to boost the market, the banks must facilitate more the applicants.

“The banks used to lend everyone in the past, while now they give everybody a hard time for any kind of loan” he said.

Foreigners who bring money from abroad and want to open an account with a Cypriot bank also face difficulties, he added. Kynegirou said that in this respect, the banks have gone from one extreme to the other but they have to become more accessible. He noted that it is much easier to transfer money from abroad to a foreign bank operating in Cyprus, rather than to a Cypriot bank.

The incentives provided by the Interior Ministry, mainly to attract foreign buyers, seem to have been the catalyst that pushed up the property sales, according to the Chairman of the Cyprus Real Estates Agents Association.

“Foreigners buy, they have trusted the real estate market in Cyprus,” he said, adding that Russians, Chinese and Arabs are interested in buying real property in all the cities.

Russians are mostly interested in buying in Limassol, whereas Arabs eye the city of Larnaca. Paphos attracts mostly Russians and Chinese. The interest for the capital Nicosia is much lower.

Kynegirou said that sales of properties in August rose by 50% compared to the same month in 2015, while in the first eight months of 2016 there was an increase of 30% compared to the corresponding period last year. Sales to foreigners increased by 16.6% in the first eight months of 2016.

He precluded the possibility of a new property bubble in the future, explaining that the events that have led property prices to soar before the crisis, such as Cyprus’ access to the EU, cannot be repeated.

MPs warn banks over Swiss franc loans

Angelos Anastasiou
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MPs warn banks over Swiss franc loans

ALTHOUGH a decline has been recorded in controversial Swiss franc loans in the first half of the year, deputies on the House finance committee on Monday warned they might pass punitive legislation if banks failed to produce more drastic results.

Borrowers in Swiss francs from Cypriot lenders Alpha Bank, Bank of Cyprus, and, to a lesser extent, Hellenic Bank, found themselves in serious trouble when what they thought were loans under favourable terms turned sour, after the Swiss central bank in 2014 abandoned the peg it had imposed on the Swiss currency against the euro.

Affected borrowers claimed they had been misled as to the real risk of the transaction they entered.

Following pressure from the Central Bank of Cyprus (CBC), local banks pledged to engage with hit borrowers in order to ease their burden.

CBC official Yiangos Demetriou told the committee that in the first half of 2016 loans in Swiss francs declined by €274 million, from a total of €2.05 to €1.78 billion, but the larger chunk of the drop, almost 80 per cent, comprised business loans – as opposed to household borrowing – prompting protest by lawmakers.

“From the data available to us, it seems that the schemes offered by the banks work better for legal entities than households,” Demetriou told the committee.

“We will talk to the banks and exert more pressure, so that their offers and their behaviour improves.”

Of the remaining €1.78 billion over €1.1 billion were household loans, almost 80 per cent of them mortgages.

According to Demetriou, the recorded drop in loan balances is mainly due to repayment, but also to turning Swiss franc loans into euros or pound sterling.

To repeated suggestions by committee members that the matter should be regulated via legislation, the CBC official said that, if banks were forced to take on a disproportional burden of the loans, prompting capital needs, these could “end up being funded by the taxpayer”.

“Yes, the banks should face the cost, to the extent that no additional capital needs are created,” he said.

“If it is proven that they broke the law, they should face some consequences.”

Committee chairman Averof Neophytou said the House could help borrowers who found themselves in trouble, “without hurting those who took the biggest hit from this crisis”.

“The banks have a margin of 25-30 per cent to come up with some solutions. More than this and all we would be doing is shooting the legs of haircut depositors – again.”

DIKO MP Angelos Votsis said there was some improvement in the numbers, but not as much as the committee had hoped for.

“If the banks are saying they have done all they can do, then maybe we should go ahead and legislate,” he said.

Renewed interest in Larnaca airport

Nigel Howarth
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Renewed interest in Larnaca airport

Old Larnaca airport buildingTHE GOVERNMENT finds itself in an advanced stage of negotiations between a Cypriot and Chinese consortium which plan to use the old Larnaca airport as a wholesale commercial park and to re-export various products to the Middle East and EU member states, incyprus reports.

The Larnaca Chamber of Commerce (LCC) was informed of the developments during a meeting with President Nicos Anastasiades last week.

According to LCC president, Othonas Theodoulou, three offers had been submitted for utilising the old Larnaca airport, and the government has entered negotiations with one of the interested parties and hopes to complete the necessary negotiations as soon as possible.

Hermes, which according to an agreement with the government owns the old airport until 2031, has also shown interest in the future of the area.

A similar project allegedly said to yield a €600 million benefit for Cyprus, was derailed in 2012 when the Chinese firm, Far Eastern Phoenix was unable to secure a 50-year lease for the site due to various legal details.

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