Top 10 stories from Cyprus Property News in 2011

Nigel Howarth
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SINCE the start of the year, Cyprus Property News has received more than 640,000 readers and as we approach Christmas we are publishing a list of the top ten stories that have attracted the most interest from our readers during the year.

Perhaps not surprisingly many of the top 10 are related to problems in the market due to tumbling house prices, the economic situation and efforts to resolve issues blighting the property sector.

1. Bank starts action against developers and buyers

In the number 1 spot this year came the news that the Alpha Bank had started legal proceedings against a number of developers and their clients involving the non-payment of Swiss Franc mortgages.

2. Britons face big losses as prices tumble

Research by Investors Chronicle showed that British owners of second homes overseas faced ruinous losses on their investments after plunging prices in foreign markets had wiped as much as £24bn from the value of their homes abroad.

3. Another Eurozone country bites the dust

An analysis of the unique nature of Cyprus’ collapsing housing bubble and how the Title Deed nightmare was unravelling the finances of home buyers, developers, banks, and the government.

4. City law firm to protect Cyprus buyers rights

News that a leading UK law firm in the City of London was working in association with a Cyprus law firm in Limassol to look into and give advice on claims of mis-selling in the Island’s property market.

5. The Cyprus Property Action Group returns

The Cyprus Property Action Group (CPAG) re-launched its website with information and advice on how to address the risks and deal with the nefarious business practices that plague the Island’s property industry.

6. Foreign currency mortgages turn sour

Buyers advised to take out home loans in Swiss francs to buy property in Cyprus were struggling to repay and faced repossession and ruin as exchange rate movements sent their mortgage repayments soaring.

7. Title Deed legislation will destroy property market

Details emerged of the proposed amendments to Cyprus’ property laws confirmed that developers would not be held to account for their actions and that it would be left to those who have bought property to pay for their misdemeanours.

8. Cyprus government abolishes property transfer fees

In a measure designed to stimulate growth in the Island’s property sector, Cypriot MPs unanimously agreed to abolish or reduce Property Transfer Fees for a period of six months. After much delay, the changes were implemented one month later.

9. Plans to build world’s tallest statue at Monagroulli

Perhaps the strangest story of the year was that the International Club Philanthropists and Patrons of Europe had unveiled plans to build an international convention centre on Cyprus’ southern coast incorporating a record-breaking 135 metre high statue of an angel.

10. We will get your Title Deeds for a price

Hundreds of people were targeted by organisations offering to submit applications to the authorities on their behalf for the issuance of their deeds at a cost that ranged between €1,000 and €4,000 plus VAT.

Cyprus’ popularity slips two places

Nigel Howarth
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CYPRUS’ popularity as a destination for overseas property investors has slipped two places according to the November ‘Top of the Props’ chart published by themovechannel.com, which looks at the number of on-line enquiries for property in different countries around the world.

The most popular destination for overseas property investors in November was the USA, with Spain in second place. France and Portugal came in third and fourth, followed by Italy, Brazil, Bulgaria and Turkey, with Cyprus and Greece coming in at numbers nine and ten respectively.

The full breakdown of the Top 40 from TheMoveChannel.com is as follows:

RankCountryShareChange
1USA16.28Up 1
2Spain15.63Down 1
3France7.93Non-mover
4Portugal6.91Non-mover
5Italy4.62Non-mover
6Brazil4.49Up 4
7Bulgaria3.62Up 2
8Turkey2.63Down 2
9Cyprus2.39Down 2
10Greece2.04Up 1
11Cayman Islands1.83Up 11
12Cape Verde1.8Up 5
13Barbados1.74Non-mover
14Germany1.56Non-mover
15Thailand1.54Down 7
16Malta1.41Down 4
17Poland1.26Up 1
18India1.18Up 1
19Morocco1.17Down 4
20UAE1.13Up 3
21Croatia0.95Up 3
22Canada0.94Up 3
23Egypt0.77Down 7
24St Lucia0.75Up 5
25Montenegro0.57Up 7
26Czech Republic0.53Up 21
27Hungary0.51Down 6
28Indonesia0.49Up 3
29Philippines0.47Up 11
30Mexico0.43Down 3
31Belize0.42Up 8
32Australia0.36Down 4
33Jamaica0.31Down 3
34Slovenia0.3Down 8
35Switzerland0.29Down 15
36Romania0.22Up 12
37Cambodia0.17
38Saudi Arabia0.14
39Malaysia0.12Down 6
40Dominican Republic0.12

Worst property markets of 2011

AN article published in the Overseas Property Professional lists the five worst places in which to invest according to Colordarcy’s managing director, Loxley McKenzie.

Cyprus comes in at number two behind the ‘number one disaster zone’, Ireland.

Even though the island is “a long-time favourite with British investors, even its biggest advocates are losing interest,” says McKenzie. “A stagnant economy and its vulnerability to the Greek crisis with two of its largest banks exposed to a total of €5 billion really doesn’t bode well.”

Cyprus is followed by Greece, Bulgaria and the Czech Republic.

More on this story at Colordarcy shames the five worst property markets of 2011.

Fitch places Cyprus on rating watch negative

Alan Lawton
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IN A MOVE that increases the probability that Cyprus may face a downgrade in the near-term, Fitch ratings agency placed six countries in the Eurozone (including Cyprus) on risk watch negative last Friday.

Fitch expects to complete the review by the end of January – and if that review concludes that a downgrade is warranted, it is likely be limited to one or two notches. Cyprus is currently at BBB, two notches above junk status.

Fitch also placed on rating watch negative Belgium (currently AA+), Spain (AA-), Slovenia (AA-), Italy (A+) and Ireland (BBB+).

In its statement Fitch said that the negative outlook was “prompted by the heightened risk of contingent liabilities to the French state arising from the worsening economic and financial situation across the Eurozone” and concluded that “a ‘comprehensive solution’ to the Eurozone crisis is technically and politically beyond reach”.

Government response

In response to the move by Fitch, the Finance Minister said that the government has taken all necessary and decisive measures for the fiscal consolidation of the economy and at the moment, there is no reason for concern.

These decisive measures are expected to help reduce sharply the budget deficit as a percentage of the GDP, overshooting the original objectives.

The statement pointed out that “Although the budget as submitted by the Government is the most tight budget over the past 35 years, the House adopted amendments to further cut costs, reducing the budget deficit for 2012 even more” and that financing needs for 2012 will be limited.

Failure to pay property fine prompts liquidation order

Alexis Pantelides
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THE FAMAGUSTA district court has ordered the winding up of the property development company, K & M Famagusta Developers and Construction Ltd, after the company was deemed “unable to pay its debts”.

The liquidation order was issued upon the failure of the company to comply with previous court decisions regarding a claim by one of the company’s customers that she was owed €50,000 by the company. Famagusta Developers has had several problems since it was set up in 2005 and was struck off the Contractor Registration and Oversight Council twice.

In September 2010, it was found guilty of breaching its contractual agreement with a British couple for a house in the Famagusta district. It was ordered to pay the couple €100,000.

The company’s director, Kypros Kyprianou was placed on the stop list and faced charges of fraud. This was just the latest of several other run-ins with the law.

According to the daily newspaper Politic, the applicant had paid Famagusta Developers €50,000 as a down-payment for an apartment in Paralimni that was eventually never built.

Despite the breach of contract, the company had refused to return the money to the woman.

The company was found guilty on December 6, 2010 and was instructed by a court order, issued on February 12, 2011 to repay the amount within three weeks from the decision.

When the company failed to do so, the applicant subsequently filed for a liquidation order against the company. There are several other suits against the same company for similar cases while there were also other liquidation applications pending against the company.

Kyprianou spent most of the 1990s in prison for fraud offences after his company, Kyprianou Estates, which operated throughout the 1980s, was reported for selling the same property twice.

He fled the island before the police investigation was complete but was arrested in Germany and extradited to Cyprus where he was jailed. He was released in 2000 before later setting up Famagusta Developers.

EU seeks answers from Cyprus on Title Deeds

Patrick Dewhurst
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EU Commission Vice President Viviane Reding - Photo: ec.europa.eu

CYPRUS is in trouble with the EU commission again, but this time it’s not the environment or financial mismanagement; it is property.

The government is facing some tough questions from EU Commission Vice President Viviane Reding about the measures they took – or should have taken – to ensure property sales did not fall under the unfair commercial practice directive (UCPD).

Reding’s letter to the government follows a June petition by the Cyprus Property Action Group (CPAG) and 41 MEPs, calling for confirmation of whether withholding title deeds is a violation of the EU’s fair practice laws.

Responding to CPAG’s petition last week, Reding said: “…an administrative letter has been sent to the Cypriot authorities enquiring on the one hand, as to the actions carried out at national level to address the reported practices and… On the other hand, about the measures taken to ensure that consumers are adequately informed about the Cypriot law transposing Directive 2005/29/EC on Unfair Commercial Practices (the ‘UCPD’).”

EU has given the Cyprus government until early January to reply to the memo. “Should the information communicated be unsatisfactory, the European Commission is prepared to take further action as appropriate,” Reding said.

It is not clear what that further action will be, but according to CPAG leader Denis O’Hare, it could include sanctions and funding cuts, as happened in Bulgaria after it failed to tackle its own corruption issues.

O’Hare believes the government has not only failed to implement the directive, but that he also has evidence the government sought to suppress knowledge of it to consumers. This claim is also being investigated by the EU.

Reding’s letter could have arrived in the nick of time, as it coincided with one bank’s attempt to auction land (and houses built on it) it had mortgaged to a bankrupt developer, leaving the land’s residents facing repossession.

Until now, the government has always claimed that such buyers were protected once they have lodged their sales contract at the Land Registry.

Reding’s initial review of CPAG’s petition should be encouraging for the estimated 50,000 expats with outstanding title deeds in Cyprus:

Misleading
omission

“The lack of pre-contractual information to property buyers about the existence of developers’ mortgages on the Cypriot properties offered for sale, which is the crucial fact having led to the subsequent lack of delivery of the title deeds, would seem prima facie to amount to a misleading omission in the sense of Article 7 of the UCPD,” he said.

Early next year Reding will issue a report into the UCPD’s implementation in member states, listing the most unfair practices encounters, including in the property sector.

Once published it is probable that draft legal changes will be developed by the Commission and these will be voted on by the EU Parliament.

“At this stage we are fairly confident that the practice of withholding title deeds could be outlawed, something which could have a massive impact on the property industry in Cyprus – and most people would say about time too,” O’Hare said.

The full letter from Reding can be seen on updates section of CPAG’s website.

UK tax axe falls on overseas property investors

Editorial
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OVERSEAS property owners based in the UK are about to be targeted by a new HM Revenue & Customs “affluent unit”, which has been set up by the British government to address what it sees as tax avoidance by the rich.

A new team of 200 taxation investigators and specialists has been established by HMRC to identify wealthy individuals who, amongst other things, own land and property abroad … such as a holiday home.

OPP understands that the tax attack unit will concentrate on overseas property assets first, and then switch its attention to UK-based commodity traders (who have been accused of helping to drive up food prices,) before looking into the number of UK residents who hold offshore investment accounts.

HMRC says that it will be using sophisticated “data mining” techniques to try and track down people who own overseas properties, but do not pay the right amount of tax.

This might include someone who owns a villa in Spain which they are renting out, or an individual who owns a piece of land in France that is being used as business premises, said an HMRC spokesman. The experts will be looking for people who do not seem to be declaring the correct income and gains.

The new unit, which has been announced by the UK’s Chief Secretary to the Treasury, Danny Alexander, will focus solely on people paying the 50% top tax rate.

David Gauke, the exchequer secretary to the Treasury, said there would be “no hiding place” for tax cheats, adding that the UK government “is committed to tackling tax evasion and avoidance across all areas of the economy. That is why we allocated HMRC £917m to reduce the tax gap over the next four years. This new team is part of that investment.”

Ronnie Ludwig, tax partner at accountancy group Saffery Champness told OPP that “those who have been letting out their foreign property and declaring the rents received have nothing to fear, but those who own foreign property which has never been let out should be prepared to prove to HMRC that they have received no income from the property.”

“This will involve producing UK and foreign bank statements and being able to demonstrate that they could afford to purchase and maintain the property out of normal declared sources.”

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