Meeting between the official delegation of the emirate of Qatar and representatives of the Republic of CyprusSource: Cyprus Press & Information Office – Photograph by: George Hadjipavlou
QATAR has signed a deal with Cyprus to develop a hotel, office and residential complex in the capital Nicosia, targeting rising numbers of visitors to the east Mediterranean island.
According to reports, Qatari Diar Real Estate Investment Company and the Cypriot government agreed to set up a joint venture for the development of a leisure complex, with the initial investment exceeding 150 million dollars.
The agreements and memoranda were signed at the Presidential Palace in Nicosia during official talks between delegations of Cyprus and Qatar, headed by President Demetris Christofias and the Emir of Qatar Sheikh Hamad Bin Khalifa Al Thani.
Officials said that the first phase will include a five star hotel, while the second phase will comprise apartments and offices. The capital contribution from each side in the venture was still under negotiation. Each side will hold 50 percent.
The area allocated for the complex is close to the commercial hub of the capital and is expected to cover 50,000 square metres of construction.
The joint venture agreement was one of several signed on Wednesday between the Cypriot government and Qatar, whose ruler Emir Sheikh Hamad bin Khalifa al-Thani headed a large delegation on a visit to the island.
A PAPHOS-BASED development company warned on Tuesday that it would be forced to lay off hundreds of employees if the government did not examine its long-delayed applications, and issue permits for various big projects.
“They have us pinned down,” Alpha Panareti Public Ltd manager Andreas Ioannou told the Cyprus Mail. “We cannot maintain the company – the personnel – anymore.”
On Monday, some 600 company staff, including management, staged a protest outside the Paphos town hall in a bid to highlight the situation.
Board chairman Neophytos Ioannou told the assembled crowd that the company has not secured any town-planning permits in the past two years despite submitting applications for large and important projects like a small marina, a golf course, a desalination unit, two electricity production units using renewable energy sources and other ventures.
The company blamed the delays on bureaucracy and the frequent change in policies of various government departments.
“Unemployment could have been contained and the marker could recover if the government immediately issued permits for all these projects within the framework of legality and good governance,” the chairman said.
Andreas Ioannou said the company could be forced to lay off 700 to 800 of its 1,000 employees if the situation continues.
“It has been two and a half to three years and still going,” Ioannou said.
It could also stop giving work to around 1,000 associates.
He said in the case of the small marina, the company had been told by the authorities to find a recognised company and pay it to check the bottom of the sea for antiquities, without guarantee that it will be granted.
“You are the state, conduct your checks and let us know,” Ioannou said.
Responding to the claims, the Interior Ministry issued an announcement saying that in no case there has been excessive or unjustified delay by any of its departments in examining the applications.
Concerning the golf course, the ministry said that the application faced various problems and the company was obliged to fill it in order to conform with the conditions set by the government.
Nonetheless, government departments have expressed serious reservations concerning the possibility of contamination of the Kouris reservoir by the golf course, the ministry said.
“Other applications by the same company present complications to varying degrees or compound evaluations are necessary due to their possible effects,” the ministry said.
The marina application is with the Trade, Industry and Tourism Ministry and its examination will proceed when the company submits the additional information that was asked.
A SERIOUS stock overhang, weakening occupational and investment demand and the consequences of a worsening Greek banking situation do not bode well for the Cypriot real estate market, made worse as speculative supply kept being added ‘long after demand had begun to weaken, an analyst report has concluded.
“We are convinced the Cyprus property market faces further downward price adjustments on top of those already recorded,” said Savvas Savouri, partner and chief economist at Toscafund Asset Management LLP in a market report.
“Spain’s ongoing problems should be seen as a warning of what awaits Cyprus. Whilst the investment outlook for vacation and retirement related real estate is a worry across all of continental Europe, in the Cypriot market participants Jo not seem to have awoken to the, threats,” Savouri noted in his report, an advance copy of which was obtained by the Financial Mirror.
Cyprus faces downward property price corrections
“Whilst we hold concerns for vacation and retirement real estate across all of Europe, for Cyprus our alarm is heightened by the pervasive influence of Greek banks. Their arrival was of course at first favourable, bringing as they did capital that made its way into the property sector. However, their involvement when Greece itself is facing serious economic challenges risks making a bad situation worse.
As Greek banks become ever more distressed from their domestic and Balkan-wide loans, Cyprus will be unable to avoid being sucked of liquidity. From already depressed levels Cyprus faces downward property price corrections,” Savouri warned.
Selling or filling tourist and retirement property in Cyprus now means competing against Spain, Croatia, Bulgaria, Turkey, Lebanon and even Dubai and Florida.
Outside the eurozone there is a growing likelihood that Croatia, Turkey and Bulgaria will become ever more competitive relative to Cyprus.
Since 2009Q1 there has been no official Cypriot property price index. Any honest assessment of pricing since then would find widespread breaching of loan-to-value (LTV) covenants, said the Toscafund report.
The market quite simply is far from having reached a bottom
“Whilst we suggest the price correction may take two years or more, the process could be swifter. Our emphasis is the quantum of price correction more than its length. Those who view recent weakness in Cypriot property prices as an opportunity to pick up value will find no shortage of sellers. The market quite simply is far from having reached a bottom,” noted Savouri.
Buy-to-let collapse
Like Spain, Cyprus recorded a considerable boom in construction as its market for holiday and retirement property grew. Indeed, even into 2009 when Cyprus appeared to shrug off the recessionary conditions taking hold elsewhere, the positive first quarter growth was largely due to speculative construction. In effect, even as demand fell, supply kept coming.
Having declined by almost a fifth between 2008 and 2009 tourist levels have continued to slide. The income demanded by Cypriots and non-nationals who adopted speculative “buy to let strategies” have fallen in turn.
This is particularly alarming since at 122%, Cyprus’ private sector has one of the highest ratios of household debt to GDP, the report said. With so many personal loans secured on property and funded out of tenant income, the banking system is as vulnerable to loan non-performance as covenant breaches. In short, the IMF’s somewhat ambiguous prediction of a “tepid but uncertain recovery starting in 2010” is overgenerous at best, Savouri added.
Equity market
The Cyprus Stock Exchange (CSE) should be considered a barometer for the Cypriot economy, not least because three banks – Bank of Cyprus, Marfin Laiki and Hellenic Bank – make up almost 90%. In fact the CSE is Europe’s most concentrated equity benchmark, even ahead of the Greek ASE whose top ten constituents account for almost 95% of the index and five of which are banks.
The concentration of the Nicosia and Athens exchanges to banks, some with dual listings, is something which threatens a sharp equity market correction.
The worsening economic prospects in Greece and Cyprus must at some point hit the banks. If the CSE were to fall as sharply as we fear, any decline would worsen the wealth shocks coming from falling real estate prices and damage already poor fundamentals across the wider economy, the Toscafund report added.
An already steep fall in property prices would become a rout
There is also the concern that banks would demand loans be recapitalised or foreclosed in an effort to recoup some value through quick sales.
An already steep fall in property prices would become a rout, with weakness in Greece feeding into Cyprus through a number of channels, concluded Savouri.
Toscafund is one of London’s largest hedge funds and private equity firms. In 2006 it played a significant role in facilitating the Marfin purchase of Laiki Bank.
THE RIGHTMOVE website recorded a 60% year-on-year increase in the number of overseas property searches in March.
Destinations in Portugal saw a 6.3% increase in searches compared to the previous month, fuelled by particularly by a 106% spike for Costa Verde, as well as 16% rises for Lisbon and the Silver Coast.
“Portugal has surged past Australia and reclaimed its fourth place in our chart as the seasonal peak in emigration interest fades,” said Rightmove’s head of overseas, Robing Wilson.
Turkey and Cyprus also rose in popularity compared to the previous month and year, with Mugla and the Aegean in Turkey recording 16% and 12% monthly rises, respectively, and Paphos in Cyprus seeing 12% more interest compared to the previous month.
“Historically, Italy has rounded out the top five countries, but strong performances from Cyprus and Turkey could see an upset as interest builds into summer,” said Wilson.
The biggest increases of all were for Malta, up 21% compared to the previous month, and Germany, up 17%. Spain, France and the USA retained the portal’s top slots.
Currency driven
The trend was backed up by foreign exchange broker Moneycorp, which saw an 18.5% rise buyers and sellers for Portugal and a 16.6% rise for Cyprus compared to the previous month.
“The GBP/EUR rate improved during March and is currently showing more signs of life, pressing higher towards the €1.15 level,” said Moneycorp’s head of private clients, David Kerns.
“Compared to February’s low of just under €1.10, properties within the Eurozone would have appeared a more attractive prospect for euro buyers in March which could account for the rise in enquiries that Rightmove Overseas has seen.”
FIVE experts presented their views at a special Cyprus International Institute of Management (CIIM) event on Monday, April 12, on the hot and widely discussed issue of raising the taxation on property to increase much-needed government revenues in these turbulent economic times.
The event was organized in co-operation with RICS Cyprus, with POLITIS newspaper as media sponsor.
Speaking to a packed audience of realtors, accountants, lawyers and CIIM students and friends, the five experts approached the subject from different angles, presenting their views on property taxation in relation to their field of expertise. They were:
Dr Michael Sarris, former Minister of Finance and World Bank executive;
Jerry Schurder, FRICS, Head of Rating Gerald Eve LLP;
Panikos Tsiailis, Chartered Accountant, Partner at PricewaterhouseCoopers Cyprus;
Andreas Demetriou Barrister, FCI. Arb. Chartered Arbitrator, Partner at Ioannides Demetriou Law Offices LLC;
Dr Theodore Panayotou Director of the Cyprus International Institute of Management.
Proceedings
Dr Sarris outlined the general principles of real estate taxation and referred to the situation in Cyprus today, highlighting ways and measures that could achieve an increase in government revenues while modernizing real estate taxation.
Dr Sarris suggested that the property taxation system should be linked to a wider reformation of the public sector, by transferring real estate taxes to municipalities to strengthen their sources of stable income, linked to services they provide.
Jerry Schurder presented the property tax system applied in the UK and described the local council tax on property, as an effective and relatively just system of property taxation, although it needs more frequent revaluations, which can be cost-effective through the use of Computer Assisted Mass Appraisals (CAMA) and Automated Valuation Models (AVM).
Mr Schurder also referred to property taxes paid by businesses in the UK and suggested the design of a new system incorporating regular revaluations, transparency, simplicity, reliefs and exemptions.
Panikos Tsiailis analyzed the way tax on immovable property is calculated today for corporations and individuals, based on three different sets of laws: the income tax law, the special defence contribution and the capital gains tax law, which create many complications and difficulties.
Mr Tsiailis proposed a number of measures to simplify things, like the abolition of the capital gains tax, the introduction of a ceiling in the taxation of individuals and the design of a new tax return form to include all taxes.
Dr Theodore Panayotou spoke on the possibility of property taxation serving more purposes than simply filling the coffers of the government with revenues. Dr Panayotou suggested the creation of a property tax system which will apply higher rates to individual or corporate developments which are negative for society and the environment, and lower rates for those developments which have a positive impact.
Dr Panayotou propagated a differential taxation system which will not discourage economic activity, will minimize negative externalities and maximize positive ones, encourage infill development and discourage urban sprawl and energy wasteful patterns of development.
Andreas Demetriou presented the legal issues in property development in Cyprus and outlined the basic characteristics of the Cyprus land law and land registry system, both stemming from colonial legislation; the land registry system being particularly unique in that it traces all land titles back to the date of the “General Survey” conducted by the British when they acquired Cyprus in 1878.
Speaker presentations
To read the speakers’ presentations in full, please click on the links below.
The costs of owning a communal swimming pool in Cyprus are escalating
A LONG-IGNORED law passed in 1992, which designates all shared swimming pools as subject to the same strict regulations as public pools, is coming back to haunt property owners and developers in Paphos.
The law stipulates that pools shared by more than one family are classed as public swimming pools and therefore must comply with specific regulations such as providing a lifeguard, separate male and female toilets, showers and footbaths.
Aware that complying with the regulations would entail a massive increase in communal charges for hundreds of property owners and make buying in complexes with shared pools far less attractive, local authorities have long turned a blind eye to enforcing them.
Not any longer, however. Municipalities have now been put under pressure by the Interior Ministry to demand companies provide them with all the necessary documents to prove they have complied with the regulations before they can issue an operating licence. Perhaps even worse is that without this operating licence, a housing complex will not be issued a completion certificate and thus no Title Deeds.
Developers, individual property owners and local municipalities alike are now desperately trying to press the Ministry of the Interior to change the law, which they believe hammers another nail into the coffin of the property market.
Peyia has a large population of British residents as well as locals, many of whom own property with a shared swimming pool. A report in 2008 listed a whopping 49 pools in Peyia which are classed as public pools, only seven of which have permits. In Paphos generally there are 267 of which only 54 are licensed.
“This is a really big headache, and I have been in contact with the permanent secretary of the Ministry of the Interior, Lazaros Savvides, since 2007. But I have yet to hear anything back from them,” said Peyia councillor Linda Leblanc.
Leblanc said she had received many complaints over final completion certificates concerning properties in Peyia municipality.
Most are from buyers who live in complexes with a shared swimming pool and who are being denied certificates by local authorities on the grounds that their pools do not fulfil the requirements of the ‘public swimming pool’ as set out in the 1992 law.
“There is confusion over what is interpreted as a public pool. Shared pools are for the use of resident owners and their guests and are not open to the general public,” she said.
A spokesman for Vesta holidays, part of the Leptos group was particularly pessimistic. “This law is going to destroy the whole tourist and home purchasing industry of Paphos,” he said.
He confirmed that the law states there are only two categories concerning swimming pools in Cyprus. It says that private pools are for the use of only one family and public pools cover absolutely everything else.
“The law says that a private common pool is one used by more than one family and it comes under the umbrella of a public pool. The regulations say that we have to have a lifeguard, showers, toilets, new signs, footbaths, life buoys, oxygen bottles and so on,” he said.
“The expense for a lifeguard alone will be more than € 2,000 each per month,” he added “We have received a lot of complaints from property owners and management committees. We’ve applied to the state to try and change the law. It’s very strict and we will face a lot of problems especially now during the economic crisis, if added costs must be paid.”
Connie Singleton is the chairman of the owners association of Margarita gardens in Kato Paphos, a Vesta-managed complex.
“Our pool isn’t for the general public’s use. An outsider can’t use it. The pool is there for owners and their guests. In all these years, we’ve never had an accident or anything like that, and now we will have to employ a lifeguard.
“It’s so much more expensive for the owners, but I have been advised that the regulations have to be complied with or we will be in trouble.”
Leblanc said Peyia municipality was trying to give permits where it can as many people do not have Title Deeds.
“In Peyia we check each individual case to see what was specified in the planning permit. If there is no specification recorded requiring conditions on the pool, we are giving approval so that completion certificates on the properties may be issued. This has been based on legal advice,” she said.
But there are other problems concerning the thorny matter of the swimming pool legislation. According to the councillor, the law requires approval of a health inspector before approval may be granted by the planning authority.
“Peyia doesn’t even have a health inspector,” she said.
Peyia municipality has already sent out notices to pool owners and placed announcements regarding this law in newspapers.
The Vesta spokesman said that although the Paphos municipality had so far “closed its eyes” to the regulations this period was coming to an end.
“They have already given us many extensions, but there is now a time schedule which we have to comply with. Parliament needs to try and find a solution and change the law, or it will cripple us,” he said.
“Nobody will come and buy an apartment or a house which is part of a complex or has a shared pool. The expense will just be far too high.”
Editors comment
This is how the law relating to swimming pools currently stands:
Cyprus Law N.55(I)/92 paragraph 2 states that the term ‘public swimming pool’ also includes the swimming pools of buildings which are used by the owners of the units or their tenants.
Regulation Number 368/96 paragraph 47 (1) states that all the employees relating to the swimming pool have to obtain a health certificate, to be clean and to behave properly.
Regulation Number 368/96 paragraph 47(2) states that all the trained supervisors will be on duty during the operation and the use of the swimming pool. Their number is determined in accordance with the size of the swimming pool and the number of the persons usually using the swimming pool.
Regulation Number 368/96 paragraph 47 (2)(a)(i) states that for small swimming pools at least one trained supervisor is necessary to be appointed.
Regulation Number 368/96 Part VII paragraph 53 states that a license is needed for the operation of a swimming pool by applying to the relevant authority. The last decision is made by the Minister.
The saga
In November 2005 Lakis Tofarides, the Chairman of the Land and Building Developers Association, suggested the following measures should be taken to alleviate the situation.
“The swimming pools in apartment buildings and complexes to be considered private (not public) because the residents and their guests use them. At the same time, residents, in proportion to the number of persons living on the building/complex, could be trained as lifeguards. This means that if there are large families on the building, the number of persons to be trained would be decided accordingly”.
“As far as public pools are concerned, the number of supervisory staff needed (lifeguards, etc) should be reduced”.
In June 2007, the problems with the swimming pool laws were discussed with the Permanent Secretary of the Interior Ministry, Dr Lazaros Savvides, when Denis O’Hare, Linda LeBlanc and I met with him; we are still waiting for a reply.
In August 2008 it was reported that the Cyprus Government was looking to change the swimming pool laws. However, it appears from today’s news that no progress has been made.
Conclusion
Considering the downturn in property sales, it is surprising that the government is not doing more to encourage potential buyers to the island.
Rather than enforcing the present laws, which add significantly to the costs of managing and running shared swimming pools in apartment buildings and complexes, surely it should be looking at ways to reduce costs?
