Nightmare slump in sales continues

Nigel Howarth
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13

LATEST figures from the Department of Lands and Surveys reveal that a total of 285 contracts for the sale of property were deposited at Land Registry offices across the island in September compared with the 442 deposited in September 2012; a fall of 36% from last year’s low levels.

Of those 285 contracts, 73% (208) were deposited on behalf of domestic buyers, while 27% (77) were deposited in favour of overseas buyers.

September’s slump in sales was attributable to a 43% drop in domestic demand; overseas demand remained unchanged from last year.

Sales fell in all districts, with Paphos being the hardest hit with sales dropping by 56%. Sales in Famagusta fell by 44%, those in Larnaca by 36%, while sales in Nicosia and Limassol fell by 18% and 9% respectively.

Cyprus property sales (total)total

During the first nine months of 2013, total sales are down 45% compared to the same period last year having fallen from 4,876 to 2,634.

Pundits predict that the property market will continue to operate at very low levels due to the lack of liquidity and uncertainty about the future. And as we reported yesterday, Moody’s believes that the Cypriot banks may require a further €1.5 billion on top of the €2.5 billion already allocated as the value of assets [mainly real estate] deteriorate amid the severe recession.

Domestic sales

Domestic sales during September were down 43% compared with September last year, having fallen to 208 from 365; sales were down in all districts.

Paphos was the hardest hit with sales dropping by a whopping 76%. Sales in Larnaca fell by 40%, those in Famagusta by 31%, while sales in Nicosia and Limassol fell by 20% and 13% respectively.

Cyprus property sales (domestic)

During the first nine months of 2013, domestic sales have slumped 49% compared to the same period last year having fallen from 3,846 to 1,947.

Overseas sales

Sales to the overseas market remained the same in September as September 2012, with 77 properties being sold.

Although sales in Famagusta and Larnaca fell by 75% and 10% respectively, sales in Paphos and Limassol increased by 25% and 12% respectively, while sales in Nicosia remained at the same level as last year.

Cyprus property sales (overseas)

We understand that the increased sales in Paphos and Limassol are mainly as a result of Chinese nationals buying residential properties costing more than €300,000 to secure visas and also Arabs who are fleeing the upheavals in their countries.

During the first nine months of 2013, property sales to the overseas market have slumped 28% compared to the same period last year having dropped from 1030 to 737.

The rise and fall of the real estate market

AT THE start of the 21st century property sales began to increase as more overseas investors were attracted to the island once its accession to the European Union had been confirmed.

The increased demand resulted in higher prices – particularly in the price of land, which rocketed making the purchase of a home unaffordable for many domestic buyers. Domestic sales peaked in 2004 and have fallen from nearly 12,000 to less than 2,000 in the first nine months of this year.

Sales to the overseas (mainly British) market flourished with more than 11,000 being sold 2007. But the economic downturn in the UK together with the Title Deed-cum-fraud mess resulted in a collapse in sales which, apart from a ‘dead cat bounce’ in 2010, continues to this day with just 737 properties being sold to non-Cypriots during the first nine months of 2013.

Cyprus property sales since 2000

Although the previous government introduced a new Specific Performance law to provide additional protection to those buying property, the new law has done nothing to inspire confidence in the market.

And perhaps not surprisingly, a statement in 2009 by the former Interior Minister Neoclis Sylikiotis that “property investment is much safer in Cyprus than anywhere else” fell on deaf ears.

The figures above show that the Cyprus government and the island’s real estate sector have to do much, much more before the property industry can haul itself out of the abyss of its own making.

Banks may need a further 1.5 billion Euros

Editorial
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6

CYPRIOT banks could need a further €1.5 billion of capital to cope with a rise in bad loans in a rapidly contracting economy, credit rating agency Moody’s Investors Service said on Thursday.

Moody’s said the Mediterranean island’s banks and cooperative lenders were likely to need the money on top of the €2.5 billion of EU support already earmarked for the banking sector.

Cyprus shut one its largest banks and forced depositors to forfeit savings to recapitalise a second bank in March, as part of a €10 billion aid package from international lenders after the country was hit by the euro zone debt crisis.

Moody’s, which put Cypriot banks on a “negative” outlook in May 2009, said in a report it anticipated a 12 per cent contraction in economic output this year, considerably worse than lenders’ estimates of an 8.7 per cent decline.

The agency estimated that problem loans increased to around 26 per cent of gross loans at the end of 2012, and would increase to over 35 per cent by the end of this year. It did, however, say there was limited publicly available data on the matter.

Reuters

More arrests in property scam

Nigel Howarth
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4

POLICE have arrested two AKEL party officials and a businessman in connection with the real estate scam involving the staff pension fund of the Cyprus Telecommunications Agency (Cyta).

Venizelos Zanetos and Christos Alekou, both members of the politburo of AKEL have been arrested, along with businessman Antonis Ioakeim.

Ioakeim is a 25% partner in Wadnic Trading Ltd., a property company owned by Nikos Lillis, chairman of the pro-Akel football club Alki, which sold the land for more than €20 million after buying it from its Turkish Cypriot owner for only a few hundred thousand euros.

Investigators said that €254,000 was deposited in the bank account of the Larnaca AKEL branch by the company involved in the scam.

The director of the company, Nikos Lillis, has been in custody for some time on suspicion that he had bribed two police officers, Costas Miamiliotis and Lefteris Mouskou (who are also being held in custody) to falsely assert that the original owner of the land, a Turkish Cypriot, had been living in the government controlled areas of Cyprus.

Sources said that Lillis, who turned whistle-blower after others tried to blame him for the whole deal,  may be called to testify as a witness for the prosecution at the trial of those held on suspicion of improper action in connection with the land purchase, including CyTA president Stathis Kittis.

Communist party AKEL, whose administration brought the Cyprus economy to its knees, denies any official involvement in the deal.

When will they ever learn?

Stefanos Evripidou
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24

Chinese-dragon-470REAL ESTATE agents were warned yesterday that “appalling practices” of the past have damaged Cyprus’ reputation while similar unprofessional behaviour in the real estate sector today is threatening to destroy the emerging and promising Chinese market.

The message was delivered by Interior Minister Socrates Hasikos and general secretary of the Chamber of Commerce and Industry (KEVE) Marios Tsiakkis at the annual general meeting of the real estate agents association (SKEK) in Nicosia yesterday.

In his address, Tsiakkis highlighted the recent interest in Cyprus real estate from the Chinese market and called on everyone to handle the new opportunity responsibly and prudently.

“I want to take this opportunity to draw your attention to a number of complaints that have already been reported to us about unprofessional behaviour by Cypriot property sellers to Chinese buyers and call on you to give this issue the proper attention,” he said.

“As a country, and you as an industry, we cannot afford to let a small group of non-professionals destroy – at the altar of easy money – an emerging and very promising market which if handled correctly and responsibly can act as a powerful injection for the suffering Cypriot economy.”

Tsiakkis called on the government to take new measures to boost the property market.

“The imposition of new taxes on immoveable property, without curbing non-productive state spending, does not contribute to raising state revenue, or to growth of the economy. These times we are living require more sophisticated approaches to exit the crisis and return to growth,” he said.

He also noted that the real estate sector was the most affected by the crisis as reflected in the property sales recorded in all districts.

Unfortunately, the impact of the economic crisis, the overheated property sector, current banking problems, and lack of liquidity in the market have brought the sector to its knees, he said.

Also addressing the AGM, Hasikos said despite the protracted crisis, Cyprus continues to offer a consistently high and favourable business environment and an excellent network of services that make it an important financial and business centre of the Eastern Mediterranean.

“However, I must underline that unfortunately the good reputation of Cyprus as a destination for investment in real estate has been adversely affected in recent years by the appalling practices of people and businesses, which in many cases exposed the Republic to foreign investors,” he said.

Hasikos called on the real estate association to work both domestically and abroad to restore the name of the Cypriot market.

Outlining government plans for the ailing sector, the minister said his ministry was focused on “promoting radical solutions to the problems facing the sector to give a real boost to growth in the country”.

He expressed hope that significant changes to the real estate and town planning laws “will fundamentally solve the ailments of the past, not only to protect and enshrine property buyers but also to help restore the good name of the Cyprus real estate market abroad”.

Some of the changes required by the memorandum signed with the troika include: the re-evaluation of property values at today’s prices; compulsory registration of contracts of sale within six months of their conclusion; access of the banking sector to the digital archives of the Land Registry; and accelerated procedures for issuing title deeds so that pending title deeds by the end of 2014 are not more than 2,000.

“Our goal is to implement our commitments within the agreed time scales, which are pressing and demanding,” he said.

He expressed the government’s determination to succeed as future loan disbursements depend on it, but also because it considers implementation of the new measures will help rationalise the functioning of the real estate sector.

SKEK chairman Angelos Georgiou warned that certain legal amendments parliament keeps passing are worsening the situation in the real estate market.

Addressing Hasikos, he said the decision to revise the criteria for fast-tracking residence permits for foreign investors in Cyprus has upset the industry, turning things on their head.

As a result, the arrival of Chinese investors in Cyprus has seen a sharp decline, he argued.

Brits continue to set up home in Cyprus

Ed comment

Once in the top three locations for British retirees and overseas investors seeking a place in the sun, Cyprus’ fall from grace was sudden and dramatic – precipitated by an investigative TV report by Andrew Winter (below) broadcast throughout the UK on Channel 4 in late 2007.

[youtube=http://www.youtube.com/watch?v=eLUDlI6CSCM&w=470&rel=0]

 

Here are a few quotes from Andrew Winter taken from his report:

“There are massive problems in Cyprus with Developers abusing property law to make huge profits for themselves…”

“…this cockeyed legal system allows unscrupulous solicitors and greedy developers to get away with fleecing unwitting house buyers”

Very little has changed since the report was broadcast with the Title Deed-cum-fraud mess together with the actions of nefarious property developers in collusion with estate agents, lawyers and bankers continuing to decimate the overseas property market and blacken the island’s reputation.

Will the developers, estate agents and their chums in the legal profession and banking ever learn from their past misdemeanours? Will the Cyprus government enact and enforce effective legislation to protect buyers from the ‘crooks’ and ‘charlatans’ or is Cyprus destined to become a permanent ‘no go area’ for property investors?

Free Swiss Franc loan seminar in Birmingham

Nigel Howarth
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1

JUDICARE, one of the companies helping people who bought property in Cyprus with Swiss Franc loans, is holding a free seminar at the Birmingham City Football Club for all concerned buyers and has issued the following announcement:

We understand there is uncertain and conflicting information being circulated and discussed in relation to the many varied and complex issues concerning property in Cyprus and Swiss Franc Loans.We are also acutely aware that it is sometimes difficult to distinguish between the approaches of various legal groups when a client’s only contact is via telephone or email. And so, with this in mind, we will be holding a free seminar for all concerned buyers of property in Cyprus on Sunday 20th October at Birmingham City Football Club.In attendance will be the Cypriot Barrister & Lead Counsel for all Judicare actions being taken in Cyprus, Mr Christos Triantafyllides.We will be providing all individuals who register their interest with an outline agenda of topics and questions, which we will cover in detail at the seminar, and there will also be an opportunity for any individuals or groups to ask additional queries or raise concerns directly with Mr Triantafyllides on the day.If individuals or groups have already engaged legal representation we of course wish them the best of luck with the legal challenges which lie ahead. However, if they are undecided or would simply like to hear our views on the basis and current position of our Actions in the Cyprus Courts they can register their interest here.

Immovable Property Tax vote set for Thursday

Nigel Howarth
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8

INTERIOR Minister Socrates Hasikos said on Friday that there are still a few problems to sort out with changes to the Immovable Property Tax (IPT) system.

To date, tax demands have been sent to all owners of properties whose 1980 value is €12,500 or more and the state has collected approximately €14.4 million in additional revenue against the target agreed with the troika of at least €75 million.

Additional staff have been appointed to the Inland Revenue departments dealing with IPT and there are no major delays.

However, a number of problems have surfaced.

One known issue was that people wanted to understand how their IPT liability had been calculated. Owners who have received an IPT demand can obtain a detailed breakdown by registering with JCC Smart and clicking on the Inland Revenue Department icon [see Get a detailed breakdown of your Immovable Property Tax bill] or they can turn up at the Inland Revenue office with their ID card for verification.

Chartered surveyor Pavlos Loizou of Leaf Research said that he was aware that some people who had sold their property had received a demand for IPT. (As the tax is levied on those who own property on the 1st January, some of these demands could be explained by property transfers that have taken place since the start of the year; 4,433 according to the latest figures from the Department of Lands and Surveys).

Another issue is that although the Cabinet agreed changes to the IPT law more than a month ago, the House of Representatives has yet to vote on the matter. The government wants:

  • To remove the minimum tax payment of €75.
  • To exempt owners of properties whose total 1980 value is no more than €5,000.
  • Owners of properties whose 1980 value exceeds €5,000 to pay tax on their total 1980 value and not benefit from the €5,000 exemption.

(Note that the law already includes exemptions for e.g. religious buildings and communal grazing grounds.)

However, opposition party AKEL is pushing for a higher exemption threshold of €40,000 with an adjustment in the tax bands to recover the loss in revenue – and to completely exempt all property registered as agricultural and livestock by the Cyprus Agricultural Payments Organisation on 1 January 1980.

It is expected that the House of Representatives will vote on the various amendments at its Plenary session this coming Thursday.

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