Possible ‘Development Bank’ to manage NPLs

Nigel Howarth
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11

THE Bank of Cyprus has been reported to be on the verge of setting up a separate ‘development bank’ to deal with mortgaged properties.

State broadcaster CyBC reports that the proposal is expected to be discussed at a meeting today after board members have been briefed on a report prepared by a specialist from HSBC.

Following a meeting between himself, CEO John Hourican and members of the board with President Anastasiades, the Bank of Cyprus Chairman, Christis Hassapis, said that move was not designed to split the bank into a ‘good’ and a ‘bad’ bank

The meeting at the Presidential Palace was also attended by the Finance Minister Harris Georgiades. He said that the aim was to set up a new bank to deal with property development, adding that a 500 strong team of technocrats led by Euan Hamilton, former Deputy Chief  Executive of Royal Bank of Scotland, had already been established to handle non-performing loans (NPLs) amounting to several billion Euros.

Gold News reports that CEO John Hourican advised journalists that that he had not experienced any political pressure on the issue of NPLs.

According to Gold News, Hourican told journalists “I think is really important that you understand that we are dealing with every borrower in a very specific and deliberate way, to recover the bank`s position and to ensure that we treat them fairly.”

There’s a consideration in a professional way by the board of the bank of the various options that are available to us and this is a matter of discussion and debate and we have not concluded on what we are need to do but we are looking at all options as you would expect us to do.”

We have stabilized the asset quality of the bank during the last six months and it is our job to explore all options to try and accelerate the progression of the bank against its recovery plan. We are running ahead of our recovery plan today and it is our job to try and accelerate that journey to ensure that we contribute to the recovery of Cyprus.”

Cowboy Builders investigate British developer

Nigel Howarth
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4
Cowboy Builders investigate British developer

DOMINIC Littlewood and a team from Cowboy Builders Abroad visited Cyprus to look into the problems that Adrian Mills, a British developer, left behind when he fled the island in 2009.

Adrian Mills, the Managing Director of MDE Nest Homes, never completed the development of “Valley View” at Nata, leaving the site with no roads or mains electricity.

In 2005 Tom and Irene Owens bought a 3-bedroom timber-frame bungalow off-plan from Nest Homes and their son bought the one next door; neither of the properties was properly damp-proofed. And as the rot set in Tom and Irene’s son and his wife were forced to leave their home and their daughter now lives with her grandparents.

Another couple spent more than £50,000 repairing their house to make it habitable. When they took delivery Mills told them the electricity would be connected “in a matter of weeks”; it never arrived.

The development is built on bentonite; a clay that absorbs huge amounts of water, expanding by as much as 15 times its original volume and shrinking back as it dries out. It is used in the oil industry as a lubricant and is a principal ingredient in cat litter.

Due to subsidence and rot caused by the damp conditions, most of the houses are uninhabitable and have been abandoned; they now lay deserted to rot.

Mills also sold properties at Choletria on the other side of the valley from Nata. Work on these never started and all that identifies ‘Laoni Hills’ is a rusting advertising board at the entrance to the site.

A couple who bought a property off-plan on this development became friends with Adrian Mills, even loaning him £20,000 to keep his company afloat; money that has never been returned – or the money they gave Mills to build their home.

The site at Choletria had planning permission for a single house, but Adrian Mills sold seven plots there for more than £600,000.

Before fleeing Cyprus Mills was summonsed to court several times for bouncing cheques. Eventually a warrant for his arrest was issued, but the police couldn’t find him.

Dominic tracked down Mills and invited him for an interview. You can watch the interview – it’s about 28 minutes into the video below.

You can also see the repairs that the Cowboy Builders team made to Tom and Irene’s home to help alleviate their problems. (As Tom and Irene do not have the Title Deeds to the property and are therefore not its owners, the repairs the team were able to make were limited).

The Channel 5 programme below runs for 43 minutes, but due to restrictions it may not be available at your location.

[youtube=http://www.youtube.com/watch?v=xxAuzbzF2_M&w=470&rel=0;&showinfo=0]

MEP questions clearance of Title Deed backlog (updated)

Nigel Howarth
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31
Robert Study an MEP for the East of England
Robert Study MEP for the East of England

UNDER the terms of the Memorandum of Agreement (MoU) Cyprus has agreed to eliminate the Title Deed backlog to less than 2,000 cases by the fourth quarter of 2014.

Robert Sturdy, a UK MEP representing the East of England, has asked the European Commission for an update on the current state of affairs, with reference to a change in the MoU reducing the agreed target to applications that have already been received.

Question for written answer E-002584-14
to the Commission
Rule 117
Robert Sturdy (ECR)Subject:  Cyprus title deeds  As a condition of the bailout given to Cyprus by the Troika, a memorandum of understanding (MoU) setting out economic policy conditionality was drafted. Part of the MoU stipulated that the Cypriot authorities had to eliminate the title deed issuance backlog to less than 2,000 cases by the fourth quarter of 2014.I understand from previous information given by the Commission in response to written questions that resolving the title deeds issue requires deep structural reforms in the housing market and the immovable property regulation. However, it has come to my attention that there has been a change in the agreement and that the MoU now requires only title deeds already lodged with the Land Registry to be completed.Following up on previous questions on this issue, I would like an update on the current state of affairs.1. Can the Commission confirm whether the MoU has been changed so that only title deeds already lodged with the Land Registry must be completed?

2. Does the Commission estimate that Cyprus will meet the deadline of the fourth quarter of 2014?

Answer given by Mr Kallas on behalf of the Commission (added)

While the Memorandum of Understanding (MoU) agreed between Cyprus and the ESM has introduced a clearer definition of title deed ‘backlog’, it did not change the overall objective. The MoU (paragraph 5.3) clearly states that the backlog is the sum of two items:

(i) Title deed applications that have already been lodged with the Land Registry; and

(2) Pending title deeds that are eligible for ‘ex-officio issuance’; This means any title deeds that can be issued technically, even if no application has been lodged with the Land Registry yet.

However, please note that this paragraph only refers to title deed issuance, which is mainly an administrative challenge. In contrast, the transfer of title deeds from developers to home owners is an integral part of paragraph 1.29 in the MoU [1].

Cyprus is making progress towards meeting the deadline of the fourth quarter of 2014 which is monitored closely and assessed during the regular programme implementation reviews.

[1] Support Group for Cyprus, first Activity Report: helping Cyprus pursue reforms and restore growth

See also: Memorandum of Understanding

Property sales jump (updated)

Nigel Howarth
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3
Property sales jump (updated)

MARCH property sales statistics published by the Department of Lands and Surveys show an increase in the number of contracts for the purchase of property deposited at Land Registry offices across Cyprus compared to March 2013.

During March a total of 344 contracts for the sale of commercial and residential properties and plots of land were deposited at Land Registry offices across Cyprus; an increase of 20% on the 286 contracts deposited during the same period last year.

Of those 344 contracts 70% (242) were deposited on behalf of domestic buyers, while 30% (102) were deposited in favour of overseas buyers.

Although property sales in Nicosia fell 23%, they increased in all the other districts.

Sales in Limassol increased 85% to reach 100 compared to the 54 sold in March 2013. Sales in Famagusta went up 85%, while those in Larnaca and Paphos increased by 29% and 4% respectively.

Cyprus property sales - March 2014

Overall sales during the first quarter of 2014 are down 6% compared with the first quarter of last year.

Domestic sales

Domestic sales in March increased by 13% compared with the same month last year, rising to 242 from 212.

With the exception of Nicosia, where sales declined 28% compared to March 2013, sales improved in all districts.

Limassol experienced the greatest improvement with domestic sales up 78%, reaching 71 compared to 40 in March last year – and after an abysmal performance in February, sales in Famagusta increased 67% compared to March last year. Meanwhile, sales in Larnaca and Paphos rose by 17% and 14% respectively.

Cyprus: Domestic property sales March 2014

During the first quarter of 2014, domestic sales are down 11% compared to the first quarter of 2013 having fallen from 1,013 to 948.

Overseas sales

Sales to the overseas market in March improved 7% over last year rising to 102 from 72.

With the exception of Paphos, where sales weakened 8% compared to March 2013, sales improved in all districts, albeit from very low levels.

Larnaca led the charge with sales increasing 114% to reach 15 compared to the 7 in March last year. Sales Limassol increased by 107%, while those in Famagusta and Nicosia increased by 100% and 75% respectively.

Cyprus: Overseas property sales March 2014

During the first quarter of 2014, sales to the overseas market are up 7% compared to the first quarter of 2013 having increased to 268 from 251.

Escape to Limassol

Nigel Howarth
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19

Limassol village house AnogyraEPISODE 12 of the BBC 2 series ‘Escape to the Continent’ broadcast last evening featured a couple from Cornwall considering a permanent move to the west of Limassol.

The presenter, Nicki Chapman, explained that the average price of a 3-bedroom detached property in the Limassol area was just over £200,000 (October 2013); £50,000 cheaper than the average price of a similar property in the UK. She explained that as the Cyprus housing market was still weak, buyers were in a strong position.

David and Yiola, have retired from their careers in banking and are currently living in Cornwall in a converted farm house. Having visited Cyprus more than fifty times over the past 30 years, both were looking for a completely fresh start and consider Cyprus could be an ideal place for the next phase in their lives.

With a maximum budget of £450,000, David & Yiola were looking for a detached property with at least three bedrooms, a kitchen diner, good storage, outside space for their pets (three dogs and a cat), good views and set in a village location.

Nicki talked about a number of practical considerations worth noting:

“It is strongly recommended to find independent legal advice for any financial transactions undertaken.

“A lawyer should make sure that a property’s Title Deeds are made available as proof of ownership can be an issue on the island.

“A search should be carried out for any pre-existing mortgages on the property or land.

“Various additional costs will include legal, transfer and agent’s fees which are calculated on a sliding scale and can vary between 7% and 16% of the property’s purchase price.

“Finally, as inheritance laws are different to those of the UK, it’s worth considering writing a separate Will for any Cyprus-based assets”.

David and Yiola stayed in a rented house and visited the Apesia Hills Donkey Safari and Tracey’s Cookery School at Akrounta, where Tracey taught Yiola how to make spanakopita (???????????).

Meanwhile, Nicki visited the carob museum in Anogyra, where they make pastelli from carob ‘honey’ – and carob syrup, where she ate with the family and sampled their products.

David and Yiola viewed two properties in Pissouri, a house in Pachna, and finally a ‘mystery house’ – a 200 year old stone village house in the village of Anogyra.

Although they were impressed by all the properties they viewed, none of them offered sufficient outside space for their pets. Yiola said “if we didn’t have the animals the move would be very, very simple… we would have put in an offer on the mystery house.” – and David wanted to visit one of the houses in Pissouri again.

In an ideal world they would like to be living in Cyprus by October 2014.

The BBC programme below runs for 58 minutes.

[youtube=https://www.youtube.com/watch?v=gaHBSE-Mt7M&w=470&rel=0;&showinfo=0]

 
For further details and photographs about the 200 year old stone ‘mystery house’ in Anogyra and to contact the owners, visit Magnolia Property.

The fly in the ointment

Editorial
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3

arrogant developerTHE arrogance of some developers and the apathy of bankers seem to have no boundaries.

During a recent meeting of big developers, all those present were crowing about how they still had the banks eating out of their hands and giving them the red carpet treatment and how there was no way the banks will chase them for their non-performing loans. They seem to regard themselves as untouchable and indeed they have probably been encouraged in this view by the banks’ timidity in pursuing the NPLs.

It’s no wonder, then, that the Bank of Cyprus and the Co-op banks are in such dire straits. But will the Troika ever act to force the banks to go for repossession and liquidation? If they don’t, then by this time next year it will probably be Liquidity Crisis II for BoC. Is not a ‘fire sale’ clearance of liquidated unsold property stock preferable to failing to grasp the NPL nettle?

We’re pretty sure that the first major recovery action against one of the big developers will suddenly see a miraculous coughing up of unpaid bank debts by the other ‘poor’ developers. Those that won’t; or can’t, should go to the wall.

Secondly, the same developers at this meeting were also cock-a-hoop about their next mega project -Varosha’s return to the Republic by the Turks and a new-build bonanza in Famagusta when foreign buyers will come flooding in once again.

There are three flies in this ointment:

  • Varosha’s return is pure speculation and, even if it does happen, may still be some way off.
  • Who would be in a position to finance the developers for this? Certainly not the banks in the Republic In their foreseeable circumstances. It is unlikely that developers here would want to borrow from Turkish banks. And would foreign banks really be daft enough to fund a bunch of developers with such an appalling track record of incompetence, lack of integrity and NPLs?
  • Why on earth would any foreign buyers who for years have been confronted with all the horror stories on the Cyprus Property Scandal on the Internet, TV and newspapers ever give any new Cyprus prospect more than a second’s glance?

It’s high time banks took action

With the Registrar of Companies recently reporting that one in four construction firms in Cyprus are close to bankruptcy, it’s high time banks took action against the so-called ‘troubled’ developers who have locked up the land’s money supply simply because they are stubborn enough not to want to pay any of the money back.

Perhaps parliament should go ahead and name-and-shame all those who have enjoyed privileged loans from the banks, some of which were for personal use and vast amounts were written off, whereas small clients are forced to cough up cash they don’t have for a four-or five-digit amount that the banks was to recover.

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