‘The end is nigh’ property firm spreads bank fears

Patrick Dewhurst
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20

The end is nighEXPATS across the island were perplexed yesterday to learn that their bank deposits were worthless, Cypriot banks were on the brink of collapse and a further drop in property prices could lead to an imminent crisis.

They received the stark assessment via an email from BuySell sales director Chris Hajikyriacou, encouraging some 15,000 recipients to withdraw their savings and invest in gold… or property.

Hajikyriacou’s email said: “Your valuable cash or bank deposits are just a piece of paper or a worthless number on your bank statement… if you have deposits you should be psychologically ready to lose your money, unless you protect your wealth with some smart moves.”

He warned further that: “Cash in the bank is very vulnerable. If your bank collapses, your valuable lifetime deposits will disappear.”

The email was posted in one busy Cypriot internet chat forum, and while some readers quickly dismissed it as an attempt to boost property sales, the Cyprus Mail heard from one property expert that the message had caused quite a stir among the local expat community: “selling through fear, uncertainty and doubt is something that was practiced in the 1980s,” he said.

Association of Cyprus Banks boss Michael Kammas was quick to dismiss the email.

Kammas said: “I have seen the email and it is really not worth paying attention to. I am going to check with the external lawyers regarding the content.”

Asked about the email, the author, Hajikyriacou told the Cyprus Mail yesterday: “The end of the road is coming… now might be the best time to invest savings because the property market is devalued.”

This market devaluation, he says, is problematic because it has created a situation where residents are servicing mortgages for properties that were overvalued when purchased between 2003 and 2005. Hajikyriacou claims many of these people are simply leaving their properties and mortgages unpaid – and in the meantime banks are spending large sums trying to track them down.

“Imagine you paid €120,000 for an apartment that is valued at €60,000. If you have only put down €10,000 then you will want to pull out.”

With banks unable to recoup the money lost to property developers and buyers who took out the mortgages, a run on the banks, he said, would be “catastrophic”.

Hajikyriacou was unable to give any figures about the number of people who might have large sums of cash in the bank to invest, or the amount saved.

Asked about the factual basis for the claims in his email, Hajikyriacou said: “Unfortunately I don’t have the figures but many people are telling us that they are unable to pay their mortgage, and if the number is high enough then it could be catastrophic for the banks.”

However, he did give two anecdotes that he thinks are indicative of banking sector instability.

The first relates to an acquaintance whose bank would not let him withdraw €200,000 of his own money, the second when one bank allegedly refused to allow the sale of four properties for €10,000 less than the value of the mortgage.

This is in spite of an alleged 25 per cent to 35 per cent drop in property prices. Hadjikyriakou said that in the coming weeks he planned to reveal more information about the troubled state of the property and banking sectors.

Residential property construction continues to slow

David Crowther
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0

ACCORDING to figures released today by the Cyprus Statistical Service, 669 building permits were authorised in February 2011, a fall of 3.1% over the 813 authorised in February 2010, comprising:

  • Residential buildings – 490 permits
  • Non-residential buildings – 108 permits
  • Civil engineering projects – 36 permits
  • Division of plots of land – 59 permits
  • Road construction – 6 permits

The total value of these permits reached €193.9 million and the total area 204.7 thousand square metres.

During the first two months of this year, 1,337 building permits were issued; a fall of 6.6% compared with the first two months of last year. The total value of these permits fell by 27% and their total area fell by 34.1%.

Focusing on the 490 permits issued for the construction of residential buildings, these were approved for 941 dwelling units – 364 single houses and 577 multiple housing units such as apartments and other residential complexes.

Compared to the February 2010 total of 1,691 dwelling units, this represents a fall of 44% and an overall year-to-date fall of 42%.

Building permits issued in Cyprus - February 2011
Source: Cyprus Statistical Service

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

Property sales slip to lowest level since January 2009

Nigel Howarth
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5

ACCORDING to the Department of Lands & Surveys’ figures published earlier today, the number of property contracts deposited at Land Registries throughout Cyprus in April was 542 compared with the 675 deposited in April last year; a fall of nearly 20%.

During the first quarter of 2011 property sales have fallen by more than 16% compared to last year and are just 4% higher than the number sold during the first quarter of 2009 (which was the poorest year for sales since 2002).

Sales during the first quarter were down in all areas. The areas worst affected by the downturn are Larnaca and Famagusta, where sales are down 35% and 22% respectively compared to last year. Sales in Paphos fell by 14%; in Limassol they fell by 11% and in Nicosia, the capital, they fell by 10%.

The level of unemployment and the fact that home loans in Cyprus are amongst the highest in the eurozone have contributed to the downturn in domestic sales.

However, from the figures published by the Department of Lands & Surveys, it is the domestic demand for property that is faltering; foreign demand for property Island-wide is steadily increasing.

Source: Department of Lands and Surveys

Overseas sales

Property sales to foreign buyers increased in April with a total of 151 contacts in favour of foreigners being deposited compared with 127 in April 2010; up by 19%. Famagusta fared particularly well with sales to foreign buyers during the month rocketing 175%!

Unlike domestic demand, foreign demand for property continues to improve, perhaps encouraged by government statements that the recently amended laws will provide additional protection for consumers.

Over the first quarter of 2011, total sales to foreign buyers have increased by more than 16% compared to last year – and sales are up in all areas.

Larnaca leads the way with sales up 43%; followed by Nicosia (+21%), Paphos (+12%) , Famagusta (+10%) and finally Limassol (+4%).

Source: Department of Lands and Surveys

As we reported on Monday, BuySell Cyprus’ sales manager Chris Hadjikyriakos said that Russian buyers accounted for 60% of the company’s total sales compared with no more than 10% just three years ago.

Fighting a state-sponsored fleecing

Editorial
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22

A NEW kind of fraud is now manifesting itself, and it is sponsored by the state. A friend of mine was delighted when his developer called him to arrange an appointment with the Limassol Land Registry in order to collect his Title Deeds. It had only been five years since their contract was lodged and he and his wife were looking forward to the security of truly owning their property in Cyprus.

At the Land Registry they were dealt with by a very pleasant young lady who informed them that there was a problem with the valuation of their property and they would have to meet with her boss. He told them that their property had now been re-valued and was now worth a hundred thousand Euros more, which meant that they would have to find a further five thousand Euros in property transfer fees and that one of them should go to the bank and withdraw this money immediately.

Unfortunately for the Land Registry official, my friend was not born yesterday, has a colourful temperament and Birmingham street sense. He flatly refused, saying that he neither had the money, nor the inclination to participate in a fraudulent claim based on a mythical valuation that increased the value of property in a falling market. The official stated that they could not leave and it was the law that they should have their Title Deeds.

My friends refused and said they would only pay property transfer fees on what they paid for the property. They were left in his office for over half an hour, whilst a queue developed in the waiting room. The boss and the young assistant went away to consult his superior. How many bosses are we paying for with our taxes?

Eventually, nearly five hours after their arrival, my friends left the Land Registry having paid only the original sum for their Title Deeds. Therefore stubborn intransigence prevented this state sponsored fraud. Oh, and as an afterthought, the Land Registry pointed out that his property was comparable with the other two-storey properties with swimming pools in the same development. In reality he lives in a small bungalow with a compact garden too small to house a swimming pool.

Perhaps if some of the bosses in the Land Registry had done their jobs more thoroughly, they might have discovered this error!

See also: “Is a property only worth what someone will pay for it?“

 

Property sales will continue to fall

Nigel Howarth
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13

A RECENT mini-poll conducted by the Cyprus Property News showed that 83 percent of the 1,060 readers who expressed an opinion believe that property sales will continue to fall during the year.

Poll results – Property Sales in 2011

According to official figures published last month, overall sales during the first quarter of the year were down by more than 15% compared to the numbers sold during the first quarter of 2010.

The industry will be hoping that the recently amended legislation will encourage more buyers. And undoubtedly some of the new provisions will help to encourage the sale of new property. For example, buyers will now be able to pay the amount that developers owe on a property directly to the lender and their contract will take precedence over any mortgage owed by a third person on the property. This should enable them to avoid the pitfall that many others have fallen into, assuming that their lawyer investigates the mortgage situation and advises them correctly.

Although the number of British buyers has been declining for some time, it seems that the property market would be in a much poorer position if it were not for buyers from Russia who are taking more interest in the Island.

In a recent report Chris Hadjikyriakos, BuySell Cyprus’ sales manager, said that Russian buyers accounted for 60% of the company’s total sales compared with no more than 10% just three years ago. The number of buyers from Norway and Britons who have worked in the Middle East has also increased, but to a lesser extent.

Check out our latest poll on the right: “Who will benefit most from the newly revised property legislation?”

Title Deed problems resolved by new bills?

Nigel Howarth
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16

Title Deed Gordian KnotSPEAKING at a news conference, Interior Minister Neoclis Sylikiotis spoke of the progress made by his ministry over the past three years.

During his speech he made a particular reference to the “town planning amnesty” bills. These are the four bills that were recently approved by parliament to resolve what has come to be known as the “Title Deed-cum-fraud” mess that has blighted Cyprus’ once lucrative property market. (Deputies rejected a fifth bill amending the Island’s contract law).

According to Mr Sylikiotis “The approval by parliament of the four of the five bills will solve the Gordian knot for the thousands of title deeds that have been pending for years now.”

Although we have yet to receive a full assessment of the new laws, we understand that they do not address the most pressing problem; i.e. those who have been mislead into buying property built on land that the developer has previously mortgaged.

The new laws will give some relief for those whose properties suffer from minor planning infringements. But it appears that those with more pressing problems will get little comfort from the Interior Minister’s words.

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