Cyprus property prices down

Alan Lawton
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SPEAKING earlier today Chairman of the Cyprus Land and Building Developers Association, Lakis Tofarides, confirmed that the prices of main residences in Nicosia, Limassol, Paphos and Famagusta have decreased by more than 10%.

Mr. Tofarides also predicted that prices will not drop further in the urban centres and urged citizens to continue to invest in property.

He stressed that land prices remain stable. “The value of land, which once represented 18% of the total value and now represents 45%, will not drop”, he noted.

“The state receives more than 27% on the price of land. Therefore, if we add the doubling on the value of land and the doubling on the state revenues, you will understand why the cost of construction surged by 20% in the past 10 years”, he said.

Speaking within the framework of the 5th Land Development Conference, Mr. Tofarides said that the government’s measure for the strengthening of the House Financing Organization through granting €200 million for lending purposes is wrong as it does not contribute to the market’s revitalization. The Chairman recommended increasing the ceiling of income criteria from €40 thousand to €50-60 thousand.

“So far, the Organization has only granted €35-40 thousand”, he added.

He also recommended that the government should be more flexible in relation to interest rates. “For example, when income is no higher than €40 thousand, the beneficiaries should borrow without interest for the next two years, while when the income stands at €60 thousand, they should borrow without interest for one year”, he noted.

Mr. Tofarides also proposed the abolition of the Cyprus Organization of Land Development and the acquisition of services by the private sector.

“We do not agree with this one-sided treatment of one more professional sector. I am sorry to say that it is not in line with the EU and the market has hundreds of professionals that face many problems. Why not give the money to them?”, he wondered.

Cyprus marina progress reports

David Crowther
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yacht-marinaBUREAUCRATIC delays and legal obstacles holding up the new marinas planned for Cyprus have been overcome to some extent and things appear to be moving forward.

Negotiations with Vouros for the Larnaca marina should be completed within the next six months – and negotiations for the marina planned for Agia Napa are at a similar stage. However plans for the Limassol marina are still on hold with the legal service of the Republic, while in Paphos the situation is in the hands of the Tenders’ Council.

Ayia Napa

After more than six years, the Commerce Ministry approved yesterday the start of the negotiations for the Ayia Napa marina with the bidder.

Commerce Ministry General Manager, Efstathios Chamboullas told StockWatch that the Ministry has already prepared the preliminary terms for the negotiations with the joint venture, which is composed of Caramondani Bros, Atlas Pantou, G&A Toumazis, Fama Marina and Famagusta CCI.

“The terms have been sent to the administrative committee, which will set the date of the negotiations”, he said.

The project will be in Ayia Thekla with under a Build Operate Transfer (BOT) contract; its cost is expected to reach €100 million.

Its start will depend on the finalization of the negotiations.

Limassol

The Limassol marina is still on hold because the Attorney General is still looking for the ‘golden mean’ that will satisfy a series of clarifications on specific issues.

Mr. Chamboullas believes that the procedures will be concluded by the end of September and that the project will begin; Lemesos Marina has already secured a license.

Paphos

Things are more difficult in Paphos due to the appeal of Poseidon Grand Marina of Paphos to the Supreme Court. On July 17 the Court unanimously cancelled the decree of suspension of execution of the decision of the Tenders’ Revisionary Council.

After this development, the Tenders’ Council and the administrative committee must decide which of the two will handle the case and will decide whether the successful bidder comprising CYBARCO PLC, Francoudi & Stefanou Ltd, ????? ?.?.?., J & P AVAX S.A., J& P LTD, Pandora Investments Public Ltd and C.A.D.S. Holdings Ltd will continue with the procedure or not.

Report on destruction of sea caves at Paphos

Bejay Browne
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Pegia sea caves on the west cost of Cyprus north of Paphos
Peyia sea caves on the west cost of Cyprus north of Paphos

ALLEGATIONS of destruction and illegal activities in the sea cave area of Paphos have been confirmed by an environmental report.

Cypriot Deputy George Perdikis announced that an investigation carried out by the state environmental protection agency found numerous cases of illegal activity at the Paphos beauty spot.

The case was brought to light after local residents complained about the destruction.

Large amounts of construction and demolition waste have been dumped in the area and pipes leading to the sea have also been laid. These were found next to a new building site.

In addition, other works, which provide easier access to the sea, were also apparent.

Perdikis expressed his astonishment that so much illegal activity could take place in one area and urged the relevant government departments to apply the law to ensure the environment was protected.

Andreas Evlavis, the Paphos district secretary of the Green Party told the Cyprus Mail, “It seems as if no-one is taking responsibility here. The mayor of Peyia has passed the buck onto the district office, saying any action is down to them. It all appears to be a game.

“The environmental agency could punish the culprits but it appears that even they’re not doing anything about the dire situation.”

“As well as causing irreparable damage to rock formations, they had also laid large pipes going into the sea.”

Evlavis said, “Someone has made a path into the sea, a small harbour and wave breakers and there are also pipes in place. Who knows what they might be carrying.”

Evlavis pointed out that although the complaint of the Greens has been proved, this provides little relief for the situation.

“Our worry is over what will happen now. The area mustn’t be left like this. We want it to be returned to its former state, and the punishment side is down to the law.”

Evlavis suggested a comprehensive solution by the mayor, the government and local authorities to “keep their eyes and ears open” as concerns Cyprus coastline. He believes the only option open now is to use inspectors who would visit coastal areas such as Chlorakas, Peyia, Emba and Kissonerga on a daily basis and carry out extensive checks.

“We need to prevent disasters from occurring and not to try and fix something which has already occurred. If we don’t do something now, day by day the coastal areas of Paphos will be destroyed.”

The sea caves area of Paphos is regarded as one of the most splendid areas of Paphos and Evlavis believes it is “slowly but surely being destroyed”.

The Paphos District Office representative for beaches, Andreas Charalambous, was equally upset.

“I have been to see this problem for myself and it’s terrible.”

He stressed, “I believe that my bosses are aware of the case and have handed the file over to the police, and then the matter will go to court.”

© Cyprus Mail 2009

Stimulate Cyprus property sales by lowering prices

Editorial
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THE ASSOCIATION of Land Developers has sent a memo to President Christofias with its proposals for stimulating demand in the housing market. The international economic crisis has put the sector under immense pressure with negative consequences for state revenue, it noted. The chairman of the association also requested a meeting with the President to discuss the proposals.

The memo contained some useful ideas. It suggested that the responsibility of issuing of title deeds could be given to the private sector, which would speed up procedures, at no additional cost to the taxpayer, and boost government revenue. It also made a series of proposals relating to VAT such as the waiving of transfer taxes, when VAT was paid; another was the simplification of the regulations for claiming back VAT for a first home. Eligibility for a housing loan from the state organisation should be extended to couples with a joint annual income of up to €60,000, instead of the current €40,000.

These are sensible proposals but would not boost demand on their own. First, property prices, which are still excessively high – particularly in the Nicosia district – need to come down another 10% to 20%. But developers are quite clearly not prepared to cut their prices in order to kick-start the local market. Instead their association suggested that the government reduce capital gains tax, from 20% to 10% for a given period, which would “allow transactions at more reasonable prices”.

This says it all. The association is aware of the need for transactions at more reasonable prices, but it wants the state to make this happen by reducing the capital gains tax so that the current, inflated prices are not affected.

Developers’ plans to get through the recession, without significantly cutting prices, was evident in the memo which spoke about reversing the prevailing negative climate. It said:

“This could be achieved by a conscious effort by everyone (public personalities, private sector organisations, etc) to get the message across that now is a good time to buy because prices have already come down.” It is quite astonishing that the association is prepared to put such a view on paper, implying that high property prices are simply a matter of the wrong perception.

The truth is that the prices developers are quoting, few people are prepared to pay. It is the law of demand and supply. Economic conditions have changed dramatically in the last year and people are not prepared to pay the same prices today.

If the land developers want to stimulate property demand, there is just one way of doing so – lowering prices.

They cannot expect to make the same profits they were making two years ago.

©2009 Cyprus Mail

Fears of more unemployment in construction industry

Alan Lawton
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REPRESENTATIVES of the Cyprus Contractors Federation met with leaders of the Democratic Rally party for talks on the serious problems faced by the Cyprus construction industry.

According to the Cyprus News Agency, Chairman of the Federation, Sotos Lois referred to the 2,500 dismissals in constructions and the dismissals in other similar sectors of activity.

“So far, 2,500 builders have been dismissed and many more employees in similar jobs such as painters, carpenters etc. have been dismissed too. This means that dismissals might exceed 5,000 in the industry”, he said.

On the question about the Federation’s forecasts for 2010, Mr. Lois said that the unemployed might reach 20,000. “Once we had said that we could reach 20,000 for all people who are related in the industry, the architects, the consultants, the engineers etc. I hope I am wrong,” he said.

On the other hand, the Democratic Rally party Vice President said that the impact on employment will be obvious in the next few months.

On the question to Mr. Lois on the Federation’s proposals, he said that several measures of tax exemption have been recommended, which “will not reduce the state revenues, but will increase them”.

Mr. Lois also expressed his will to have meetings with all political parties and Ministers to express his concerns on the future of the construction industry in Cyprus.

Cyprus government urged to cut property taxes

Nigel Howarth
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tax-cutIN A MOVE designed to help revive Cyprus’ floundering property market, the Land and Building Developers Association has renewed their appeal to President of the Republic Demetris Christofias to cut property taxes.

Yesterday, in an interview with the Cyprus Mail, the president of the Cyprus Land & Building Developers Association, Lakis Tofarides said:

“For 20 or 30 years, successive governments have been happy to milk the cow of property taxes and duties. Well, now we’ve got a serious problem, so we are proposing something that will address the situation. We used to have zero per cent unemployment, now we have over five per cent, and if we do nothing we are most likely heading for seven or eight per cent”

When he was asked why developers could not cut property prices to stimulate the market, Mr Tofarides replied: “Why doesn’t the government cut VAT on property deals?”

He went on to add that asking prices for property often result from the inflated costs of buying land. “When I started in the business 32 years ago, the value of the land in a development deal – excluding construction costs and profit – was 18% or less of the asking price. It is now 40%.”

In a recent letter to President Christofias’ office requesting a meeting, Mr Tofarides wrote that property development “is a fundamental pillar of the Cypriot economy, and has been hit hard by the global economic crisis.” The sector is said to have contributed some 20% to GDP and a turnover of more than €2 billion last year, with foreign exchange exceeding €800 million.

The letter to President Christofias outlined five proposals.

  • Property Transfer Fees should be exempt from VAT. “Cyprus is the only country which applies VAT to property transactions without [first] deducting property transfer duties,” he said and – referring to the average delay in issuing title deeds – he added that this move would “only affect state income after 5-10 years, by which time the economy will have normalised.”
  • The sliding scale for Property Transfer Fees to be modified and updated to reflect today’s property values. The letter pointed out that when the current scale of 3% for the first C£50,000 (just under €85,500), 5% for the next C£50,000 and 8% on the remainder was first introduced, “someone could buy a house for C£80,000-100,000”. Tofarides told the Mail that under the current system, someone who spends €100,000 on a property will pay around €4,000 in duties, but someone spending €500,000 will pay €60,000 in duties.
  • Regulations on VAT refunds on first homes to be simplified to “help Cyprus be competitive”, saying “the VAT allowance for first homes should be given to all Cypriots and other European Union citizens buying a permanent home in Cyprus.”
  • Capital Gains Tax should be halved from 20% to 10% for a finite period allowing land-deals to be done “at more logical prices” thereby enabling the state to tax the transaction on the full sales price rather than have money changing hands under the table.
  • Finally, Tofarides said that the fact that just €25 million has been used out of the €200 million offered by the government in the form of cheap loans to low- and middle-income families shows that this measure “clearly has not yet worked correctly”. He has therefore proposed raising the qualifying income threshold from €40,000 to €60,000 per year.

A possible reason for the “negative climate” in today’s property market appeared in a poll published by Politis newspaper yesterday. This showed that 42% of those who responded saying that they had postponed or cancelled purchasing a property were unable to secure a bank loan.

(As reported earlier, property sales to non-Cypriots are down by 75% this year, falling to just below 1,100 at the end of July from the 4,552 sold during the same period in 2008. Tax receipts resulting from the sale and acquisition of property have plummeted this year by more than €200 million.)

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