January sales up

Nigel Howarth
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January sales up

PROPERTY sales in Cyprus rose 10% in January compared with January 2014, but although sales increased in Larnaca and Limassol, they fell in the other districts.

During January a total of 321 contracts for the purchase of commercial and residential properties and land were deposited at Land Registry offices across Cyprus; a 10% increase on the 293 contracts deposited during January 2014.

In percentage terms, Larnaca performed best achieving 90 sales; an increase of 73% compared to the 52 sold during the same period last year, while sales in Limassol rose 19% to reach 95 compared to the 80 sold in January 2014.

However, sales in Paphos, Famagusta and Nicosia fell by 20%, 11% and 8% respectively.

Cyprus property sales – January 2015

A recent article in Stockwatch referred to what it called a “slow correction in property prices” that troubles foreign investors, many of whom believe that property prices do not reflect the economic conditions.

It considers that investors believe that the vast over-supply in the property market will continue to push prices down in the coming years, especially after the vote of regulations for foreclosures and insolvency.

Foreclosures hurdle must be overcome

Nigel Howarth
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6
Foreclosures hurdle must be overcome

The foreclosures hurdle must be overcome says Jeroen Dijsselbloem EUROGROUP president Jeroen Dijsselbloem, who chaired yesterday’s Eurogroup meeting, said that the suspension of the foreclosures law by opposition parties was a hurdle to the Cyprus bailout programme.

“The foreclosure framework is the hurdle right now. This framework is needed to let banks clean their balance sheets and get back to their core business of lending money to the economy, given the very high ratio of non-performing loans. So this is an important element in the economic recovery program for Cyprus,” he said.

Adding that “If and only if this hurdle can be overcome, the program can be brought back on track. This is why we call on all involved Cypriot decision-makers to implement this framework as soon as possible.”

Echoing Mr Dijsselbloem remarks, Economic and Financial Affairs Commissioner Pierre Moscovici called for the law to be implemented without any further delay.

“I would also like to underline the importance of the authorities implementing without any further delay the Foreclosure Law, which has been suspended again recently by the Cypriot Parliament. This is an essential step towards addressing the problem of non-performing loans, which is the main challenge for the Cypriot economy at this time.

“So on behalf of the Commission also, I would like to strongly urge all actors in Cyprus to put an end to this uncertainty and to clear the way for a sustainable improvement in the health of the financial sector in Cyprus, which is the only way to steer Cyprus back towards jobs and growth,” he said.

Opposition parties, which have a majority in Parliament, have suspended the implementation of the foreclosures law until 31st March claiming that in doing so they are protecting ‘vulnerable groups’ until the insolvency framework is in place.

But many have questioned their motives suggesting that they are protecting big borrowers, mostly developers, and not ‘vulnerable groups’ as they claim.

Their motives were further questioned over the weekend by an article in the Greek-language newspaper Politis, which reported that 30 big debtors from 45 companies had non-performing loans amounting to €5.26 billion with the Bank of Cyprus; half of all the non-performing loans held by the bank.

In December, Cyprus Finance Minister Harris Georgiades said that the suspension of the foreclosures law “critically undermines our country’s credibility,” calling it “an unnecessary and unjustified act.”

Reacting to the suspension, the Troika of international lenders suspended the bailout programme until Cyprus complies with the terms it had agreed in the Memorandum of Understanding (MoU).

Deal on foreclosures may be close

Nigel Howarth
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Deal on foreclosures closeTHE SUSPENSION of the implementation of the foreclosures legislation by opposition MPs caused a rift between Cyprus and its Troika of international lenders resulting in the suspension of further bailout loan tranches until the matter had been resolved.

Opposition MPs voted to suspend implementation of the foreclosures legislation because the government failed to introduce the insolvency framework at the same time.

However the fifth bill of the insolvency framework proved equally controversial because political parties and the Troika could not agree on the thorny issue of guarantors for bad loans.

The troika argued that a bank cannot be entitled to less than it would be if properties used as collateral were to be foreclosed on and sold. But political party officials disagreed, arguing that the loan amount comprises not only the principal and the regular interest rate, but also often includes overcharges and they insisted that the banks should share some of the cost.

It appears that the stalemate has been overcome with the Troika and the Cyprus government having reached a compromise deal.

The deal will require guarantors to repay the difference between the assessed value of the collateral and the size of the loan they guaranteed – and not the difference between the loan they guaranteed and the price the collateral achieves at sale.

E.g. If the loan was for €150,000 and the assessed value of the collateral (property) is €120,000 but only sells for €90,000, the guarantor will pay €30,000 rather than €60,000.

Bank loans in Cyprus were often guaranteed by one or two family members and this compromise deal should ensure families are not unduly burdened with debt.

Property deals stumble at prices

Editorial
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Property deals stumble at prices

Cyprus property deals stumble at pricesIN THE AFTERMATH of the Cyprus Investors Summit, during which 18 projects of several major developers were presented, official bodies are cautiously optimistic that foreign investors will proceed with great deals in the next few months.

But would-be investors representing large funds abroad and creditors of construction companies have a different opinion.

Although investors weighed carefully the big advantages of Cyprus as an EU Member State, the tax system, the highly skilled workforce and the high quality of services, the list of negatives includes uncertainty in relation to the future property prices.

In individual contacts with the heads of 18 development projects of the private sector and in their exploratory consultations with bankers and agents of the state and private sector, they said that the fact that property prices are tied to the distortion of the recent past is a negative element.

Although prices have fallen, they are still well above 2002 levels.

Based on official ECB data, residential property prices have dropped 29% since 2008 but still are 70% above 2002 prices.

Some investors believe that prices are artificially maintained at these levels from the inability of banks to engage in asset sales.

Moreover, the geopolitical and economic conditions, as they develop in the region with the uncertainty in Greece and the challenges of Ankara in the exclusive economic zone of Cyprus, create additional uncertainty in the investment environment.

Under the weight of the above, the investment funds raise an incentives issue.

In their interventions during the Cyprus Investors Summit, they wondered why the presentations were not accompanied by the provision of additional special incentives for investors who will reach an agreement.

The government says through the competent bodies that it has already given a significant incentive to real estate investments, such as the extension of the urban planning coefficient from 5% – 7%.

The Cypriot authorities note that if the agreements are reached, then the competent state departments will be able to give additional incentives.

So far, however, none of the expressed interest in relation to the 18 mature development projects presented at the conference has been developed further, except the announcement of D. Zavos group of companies that it has reached an agreement to sell a plot of land to foreign investors from the Middle East.

The plot, according to the announcement, is strategically located at the Limassol coastal road.

No further details were given.

The development projects presented at Cyprus Investors Summit are:

Shacolas Emporium Park & Limni Bay, Pafilia Tower & Limassol Landmark, Arist Venus Rock & Eagle Pine, Tofarco Lord Byron Towers, Leptos Estates Neapolis Smart Eco City & Blue Marine, Santa Rosa Tower, Makronisos Marina at Ayia Napa, Nicosia City Mall, St. Elisabeth Golf Resort, Vasa Golf Resort, Makedonitissa Estates Project, Elea Estate and Del Mar, which is a consortium of Leptos Group and Zavos Pavilion Business Centre.

Cyprus raises overseas transfer limit

Nigel Howarth
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3

Overseas transfer limit raisedEARLIER today, the authorities in Cyprus announced that they will raise the limit on overseas transfers; the changes come into effect on Monday 16th February 2015.

From that date individuals may transfer up to €50,000/month per person for each credit institution and/or payment institution out of the country, up from a previous €20,000 ceiling.

However, the export of Euro notes and/or foreign currency notes in excess of €10,000/person/journey abroad (or the equivalent in foreign currency) are prohibited.

Cyprus introduced capital controls in April 2013 to prevent a cash flight after the bailout forced the closure of the Laiki Marfin bank, and the Bank of Cyprus seized deposits to recapitalise.

The new decree will remain in force for 28 days, the ministry said.

Further reading

The Enforcement of Restrictive Measures on Transactions in case of Emergency Law of 2013 (Unofficial translation)

New home construction down 35 per cent

David Crowther
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New home construction down 35 per cent

THE NUMBER of building permits authorised in November 2014 stood at 408 compared with the 477 authorised in November 2013; a fall of 14.8%, according to figures released by the Cyprus Statistical Service.

Compared to November 2013, the total area of these permits fell 3.5% to 77.4 thousand square metres from 80.2, while their value fell 9.4% to €84.0 million from €92.8 million.

During November 2014, building permits were issued for:

  • Residential buildings – 287 permits
  • Non-residential buildings – 76 permits
  • Civil engineering projects – 23 permits
  • Division of plots of land – 19 permits
  • Road construction – 3 permits

New home construction

The 206 residential building permits authorised in November provided for the construction of 239 dwelling units comprising 144 single houses and 95 multiple housing units (such as apartments, semis, townhouses and other residential complexes).

Cyprus new home construction

Year to date performance

During the first eleven months of 2014, a total of 4,588 building permits were authorised; a fall of 7.3% compared to the same period in 2013. The total value of these permits has fallen by 25.4% and their total area has fallen 26.2%, while the number of new homes has fallen 33.1%

According to the Cyprus Statistical Service, building permits constitute a leading indicator of future activity in the construction sector.

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