Two day construction worker strike

Alan Lawton
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2

CONSTRUCTION industry workers will start a two-day strike tomorrow to protest what they say is the refusal of employers to enter into a dialogue on renewing collective agreements.

They also claim that certain employers have expressed a view that any collective agreement cannot be signed until after a possible Troika memorandum has been signed.

Building contractors called on their colleagues to join the protest, saying that the current level of unemployment in the construction industry is due to the financial crisis and the employment of illegal immigrants.

Ruling party AKEL (Communist) expressed their solidarity with the strike welcoming the unity of the labour movement on the issue.

Following the strike the construction industry unions will meet to decide their next move, which may include indefinite strike action.

Spain battles Cyprus for overseas property investors

Nigel Howarth
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6

Cyprus and Spain fight for investors
IN EFFORTS to offload the massive debts that are crippling the Spanish banks, the country’s government plans to offer residency permits to overseas property buyers who spend more than more than €160,000.

Spain is targeting Russian and Chinese investors but it is believed that the scheme will be made available to all third country nationals (those from outside the EU).

In an article in the ‘The Times’, Spanish Trade Minister Jaime Garcia-Legaz was reported as saying “We have proposed to the other ministries that for residents who acquire a home in Spain for more than €160,000 that will automatically entail a residency permit.”

So far Spain has issued temporary visas to third country nationals enabling them to stay in the country for 90 days. The exact details of the proposed scheme have yet to be published, but it looks certain that the 90 day period will be extended for those who spend more than €160,000 on purchasing property.

Cyprus has a similar residency scheme for third country nationals. But the minimum investment in property has been set at €300,000, almost double that proposed by Spain; it is also targeting wealthy investors from Russia and China.

Both Cyprus and Spain have similar problems resulting from their banking sector’s high exposure to the property market, which surged at the start of a decade and which collapsed in 2008.

According to reports, the number of overseas investors who bought in Spain in 2011 was up 6 per cent compared with 2010. Purchases by Russians accounted for almost 28 per cent of foreign sales with the Chinese accounting for 4 per cent.

Contractors left unpaid for government projects

George Christou
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5

THE Cyprus government has repeatedly said it was not going to default, but there are growing signs it is only paying salaries and leaving other debts unpaid.

Companies that have completed government jobs are still waiting for payment; others are still awaiting VAT refunds.

One big construction firm which built a road in Nicosia is still waiting for more than a million euros, despite completing the project 18 months ago.

The government found a pretext relating to the technical specifications to avoid payment and even after a compromise deal was reached, the state has still refused to pay.

But it seems to make no difference if a finished project complies with all requirements.

Work on the Paphos sewage project was completed and the government took delivery but it is still refusing to pay the contractor the final 5 per cent, it owes.

The authorities have told the company that it has no money and will settle the debt, with interest, when funds are available.

“The interest we will receive at some time in the future is no consolation,” said the company’s executive. “Our problem is cash flow. We need the money now to pay wages and our suppliers. Non-payment causes us huge problems.”

A smaller contractor that has been working on a government project in Dhali is now looking to secure a bank loan in order to complete it because he has run out of money and has received no payment from the government.

As a result he has been unable to pay his sub-contractors who had done part of the electrical engineering work.

The sub-contractor, who is owed €15,000 by the government, is now unwilling to run the risk of buying the electrical units he was contracted to install because he does not know when he will be paid for them.

“If tomorrow I am obliged to make redundant my three employees, because I have no money to pay their wages, whose fault will it be,” he asked.

Companies are also complaining about significant delays in getting VAT refunds.

The VAT service did not immediately respond to a call seeking comment.

In mid-October, court bailiffs seized seven vehicles belonging to the government at the behest of people owed money by the state for land appropriations it has yet to pay.

The application for the writs was filed by owners of land earmarked for the construction of the Paphos to Polis highway that has been put on hold by the cash-strapped state.

Bailiffs seized three vehicles belonging to the district’s public works department, one each from the forestry department and the land registry and two belonging to the electromechanical services.

Five proposals for property taxation

Nigel Howarth
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2

LAKIS Tofarides, the president of the Cyprus Chapter of FIABCI (the International Real Estate Federation), has called on the government to reform the island’s property taxation system in a way that will increase the flow of revenue into government coffers without suffocating the market.

Writing in the Financial Mirror, Mr Tofarides says that he has been following the thoughts and proposals on property taxation that the government has submitted to the Troika (European Union, European Central Bank and the International Monetary Fund).

Although he understands the need to guarantee and possibly increase government revenues in efforts to overcome the island’s present economic difficulties, Mr Tofarides believes that imposing high tax rates on property will be catastrophic for the real estate sector.

Higher taxes will result in many companies having to close and will increase the number of people unemployed. In addition to the jobs of tens of thousands of those who are directly employed in the construction sector, many other jobs will be put at risk in supply companies and property-related professions.

He is convinced that the pro­posed tax measures will further harm the island’s economic growth and will deal a further blow to the property sector, which has already been bit harder than any other business sector as a result of the recession.

Mr Tofarides suggests the following five changes to property taxation:

  • Reducing the taxable threshold for local property tax from €120,000 to €40,000, but the tax rate should not exceed 8‰. The tax should be based on each property separately and not cumula­tively (meaning that each property has its own tax).
  • A property that has been sold (deposit of contract of sale at the Land Registry Office) should be included in the buyer’s tax return.
  • A special taxing regime should be created for land develop­ment and construction companies, for projects that are under development.
  • The building factor should increase to cover the property’s mortgage value.
  • All these should be accompanied with a permanent reduction in the tax imposed when property is acquired (Stamp Duty, VAT and Property Transfer Fees).

Mr Tofarides concludes that if mistakes and rushed or easy solutions are avoided, the property sector can regain its position as the Cypriot econo­my’s workhorse. It will contribute to state revenues and open new job opportunities for thousands of workers and will rein­force the country’s effort to attract foreign capital and investment.

Moody’s places Cyprus on review for downgrade

Alan Lawton
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2

MOODY’S Investors Service announced yesterday that it had placed Cyprus on review for a possible downgrade.

The rating agency said that negotiations with the Troika could potentially be prolonged raising further liquidity risks.

It reported that that politically controversial measures such as significant changes in the structure of public expenditures (like the linkage between public-sector wages and inflation) and privatisations are high priorities for the Troika.

Even if negotiations were to be concluded in 2012, Moody’s considers it unlikely that any bailout money will be sent in 2012 because of the length of time that it takes for euro area national parliaments to agree to any new assistance programme. Moreover, the country’s political and election calendar, in particular the Cyprus presidential election due on 17 February 2013, materially raises the risk of a delay in agreeing the conditionality and disbursement of bailout money until late in the first quarter of 2013.

Moody’s said that Cyprus’ rating could be downgraded if there is evidence that the government’s access to short-term funding would be insufficient to meet its needs – or if it fails to reach an agreement with the Troika in a timely fashion.

The rating agency added that a second factor for its review was signs that Cyprus’ budget deficit will be significantly larger than expected. The magnitude of the government’s fiscal challenge is unlikely to decline materially even following agreement on an agreement with Troika because of the sheer size of the financial support needed for the banking sector.

More considering Cyprus as investment destination

Nigel Howarth
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8

AFTER years of languishing in the doldrums, the popularity of Cyprus as a potential investment destination for Brits planning to buy overseas property appears to be improving.

The October issue of the Top of the Props chart published by the overseas property portal themovechannel.com puts Cyprus at number 6 in terms of the number of enquiries made during the month.

The most popular investment destination was the USA, followed by Spain, Portugal and France. (These four countries accounted for 60 per cent of enquiries during the month).

Italy sneaked into fifth place and was followed by Cyprus and Turkey in sixth and seventh places respectively.

Rounding off the top ten was Brazil in eighth place, Bulgaria in ninth with the United Arab Emirates taking the final place in the line-up.

Rank
Country
Share
Change
1 USA 20.91 Up 1
2 Spain 19.9 Down 1
3 Portugal 10.02 Non-mover
4 France 9.17 Non-mover
5 Italy 3.01 Up 1
6 Cyprus 2.93 Up 2
7 Turkey 2.9 Non-mover
8 Brazil 2.51 Down 3
9 Bulgaria 1.61 Non-mover
10 UAE 1.38 Up 5

Meanwhile, based on research conducted with visitors to A Place in the Sun Live at Birmingham’s NEC last month, put Cyprus at number 7 in the top ten most popular destinations for British investors planning to buy overseas property in 2013.

Rank
Country
1 Spain
2 France
3 USA/Florida
4 Portugal
5 Turkey
6 Italy
7 Cyprus
8 Greece
9 Caribbean
10 Malta

Why is Cyprus’ popularity improving?

In 2011, the Cyprus government introduced legislation designed to improve safeguards provided to those buying property.

These changes, together with the strengthening of Sterling against the Euro, price cuts and the reduction of taxes associated with buying property may help to account for Cyprus’ increasing popularity amongst overseas investors.

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