ALTHOUGH the figures point to a sharp decline in activity in the property sector, property sales during June staged a slight recovery, boosting expectations amongst some analysts that a slow recovery in the property market may soon get underway.
In a statement to StockWatch, Chairman of the Pancyprian Association of Building Contractors Sotos Lois said that Cypriots are grabbing opportunities to buy apartments and houses in seaside areas, which are being offered for sale at attractive prices. The slight recovery in sales is also linked to lower interest rates for housing loans being offered to Cypriots, especially young couples.
According to the contracts of sale deposited at the Land Registry, the drop in activity in the property sector in June fell slightly to 45.7% compared to -53.2% in May, -54.9% in April, -56.33% in March, -64.7% in February and -71.6% in January.
Overall, the total number of property sales in the first half of this year stands at 3,591. This is 58% lower than the 8,610 sold during the first half of 2008.
DESPITE receiving two injections amounting to €2 billion in early 2009 from the government, liquidity in the Cyprus banking system continues to remain extremely low.
Since the start of the year deposit interest rates have fallen by more than 300 base points, which has resulted in a reduction in the flow of deposits into the system.
Since early 2009, €1.4 billion of additional deposits have flowed into the system, pushing their total to €55.6 billion by late May. However, the net inflow is less that the €2 billion government injections in January and April.
So far this year, residents of Cyprus have deposited €1.4 billion, non-resident EU nationals deposited €0.2 billion, while non-EU residents withdrew €0.2 billion.
By the end of March 2009, the banks had allocated loans amounting to €5.9 billion to companies actively involved in the property sector, including more than €3.1 billion new loans to land developers and real estate agents.
The total loans in the system reached €55.6 billion in May from €54.4 billion in December 2008.
In May, the “liquidity level” in the banking system (deposits minus loans) stood at just €1.8 billion against €1.99 billion in April and €8.5 billion a year ago.
Following on from the article “HM Government replies to Lord Jones“, the British Government has said that it will not close down the UK offices of Cypriot companies selling property or ban the promotion of Cyprus property at exhibitions of overseas property held in the UK unless it receives evidence of illegal behaviour.
In an answer to Lord Jones of Cheltenham’s question in the UK House of Lords which appeared in Lords Hansard yesterday, HM Government goes on to say that the British High Commission in Nicosia continues to support the work of the Cyprus Property Action Group.
Many of those in the property industry were angered by Lord Jones’ question:
Lakis Tofarides, Chairman of the Land and Building Developers Association, told the Cyprus Mail “I have read what Lord Jones said and frankly I think it is a little bit out of proportion, exaggerated actually. This is not a matter of British versus Cypriots, it’s a problem which affects us too“.
A well known developer told the Cyprus Mail “He has not helped, but I think it’s about getting his name in the newspapers. The reputations of our companies are being dragged through the dirt daily in England, however, we must do something to give people confidence now or we will all suffer very badly,“
But there were also a number of supportive comments:
“I agree, until these property developers can act in a professional manner and stop their lies, deceit and start putting their customers before profit then they should be put out of business and feel the cold draught of the recession,” said one Paphos resident.
Another Paphos resident said: “Many of them (property developers) have become far too greedy and have also destroyed the environment of the island without giving a damn about the long-term effects!“
The General Secretary of the Pancyprian Hoteliers’ Association (PASYXE), Zacharias Ioannides said that “We have lost the honesty as a state. It is really unacceptable that the British buy villas and when they decide to leave the island they cannot do so because the have no title deeds. The competent state services are timid since they failed to find a solution so far“.
However, increasing pressure on the Cyprus Government is starting to have a positive effect:
A report in yesterday’s StockWatch the Cyprus Interior Minister, Neoclis Silikiotis has stated that 10,000 Title Deeds will be issued by the end of the year followed by a further 10,000 in 2010. The report also stated that the total number of Title Deeds still pending is 120,000 (an increase of 20,000 in the figures reported by the Land Registry last October).
The Interior minister has also set up special team who overseeing teams of officials in each of the island’s district that are monitoring progress on the Title Deeds question.
IN three written questions tabled in the UK House of Lords earlier this month, Lord Jones of Cheltenham called on the British Government to take positive steps to protect the interests of British citizens.
Earlier today, Her Majesty’s Government replied to two of those questions:
Question from Lord Jones: “What steps they (Her Majesty’s Government) will take to warn those contemplating buying property in Cyprus of the risk of losing their homes when developers who have retained title deeds in order to raise further loans default on those loans.“
Answer by Lord Brett: “The travel advice on the Foreign and Commonwealth Office website (www.fco.gov.uk) advises those contemplating buying property in Cyprus to proceed with caution and to seek qualified legal advice from a source that is independent from anyone else involved in the transaction. It refers to the problems with obtaining title deeds and the risks which this causes.“
WE have already published the Government’s advice in this magazine, in the article “UK updates travel advice“
What the British Government may fail to appreciate is that many British citizens buying property in Cyprus are elderly and may not be as Internet savvy as the rest of the population. Perhaps it would consider using a small amount of the money it has managed to recover from over-zealous MPs allowance and expense claims to fund a series of warning notices in UK national and regional newspapers?
Question from Lord Jones:“Whether they (Her Majesty’s Government) will work with other European countries to urge the Government of Cyprus to prosecute individuals who have retained title deeds after completion of property sales in Cyprus to United Kingdom and other European citizens.“
Answer by Lord Brett: “The issue of whether or not to prosecute individuals who have retained title deeds after completion of property sales in Cyprus to UK and other European citizens is a matter of Cypriot law and therefore a decision for the Cypriot authorities.“
AT the present time, there is little (if any) EU legislation concerning ‘immovable property’, although this situation may change in the future.
On a more positive note, the EU Commission has requested Cyprus to provide it with detailed information on the legal provisions and practices regulating and operating in the sector – and has warned that it “will take the necessary measures if it can establish the existence of infringement of EU law.“
Ban Cyprus property companies and close their UK offices
We are still waiting for the British Government to answer the third and perhaps the most significant of the questions tabled by Lord Jones:
“Whether they (Her Majesty’s Government) will takes steps to close down the United Kingdom offices of Cypriot companies selling property and ban the promotion of Cyprus property at exhibitions of overseas property held in the United Kingdom; and what further steps they will take to protect United Kingdom citizens from individuals who retain title deeds after properties in Cyprus have been bought.“
As soon as we receive confirmation that the Government’s answer is publically available, you’ll read it here first – in the Cyprus Property News Magazine.
CYPRUS’ Interior Minister Neoclis Sylikiotis spoke bluntly yesterday about what has been done and what needs to be done to sort out the title deeds situation.
“We do not have a magic wand which we can wave in order to solve the problem just like that, especially when we are dealing with problems of omission and oversight that have been piling up over decades“, he said.
Addressing an audience of property sector professionals last night, which also included MPs and mayors, Sylikiotis said: “I think that until today, no-one has ever genuinely got to grips with the situation. We all criticise and say how terrible the situation is, but I wonder why nobody has done anything about it.”
Sylikiotis referred to the particular problem posed by the cumulative actions of land developers, which have resulted in a lot of attention being generated from the European Parliament, foreign ambassadors and the foreign press. He said that he recently gave an interview to The Times on the issue.
The seriousness of the current situation is creating dangers for the property market in the future
“The seriousness of the current situation is creating dangers for the property market in the future. I am obliged to ask very many of those involved in land development to co-operate above all honestly and swiftly with the state services, so that the tens of thousands of title deeds that have remained unissued for unjustifiably long periods can be issued as soon as possible.”
“It is no exaggeration to say that over 100,000 title deeds are not yet even in the system – they have not even been applied for. We have to start the certification approval process before the deeds can be issued. I can tell you that the Land Registry has been listing all the release certificates so that it can approach the owners of the big development projects, to see how to get those properties into the system and to start issuing the title deeds.”
…taking out a second or even third mortgage in order to recycle capital into other projects…
“We all recognise that in many cases there are various excuses and – I would say – pretexts put forward. We have to see things as they are, not try to bypass them. I think we are all familiar with some of the reasons behind the excuses, like taking out a second or even third mortgage in order to recycle capital into other projects, or postponing things to suit.”
He said that although a lot of people point the finger at the Land Registry, “and I am the first to acknowledge its problems” it has taken significant steps recently such as taking on extra staff.
“There are still a lot of things that need to be done to improve various services, but let’s not lose sight of how we are helping things improve,” he said.
Sylikiotis referred to the fact that in recent months he had set up special team made up of senior officials from each of the relevant departments of his ministry, who in turn are overseeing teams of officials in each of the island’s district which are monitoring progress on the title deeds question. He said that he already has lists of properties for which only the final certificate of approval is missing, and a file detailing the status of the 19,500 cases already in the system.
“I can assure you that we will work hard to ensure that by the end of the year, 10,000 of those cases will have deeds issued, with the aim of reaching 20,000 by the end of June 2010.”
Antonis Loizou, Managing Director of estate agents and chartered surveyors Antonis Loizou & Associates, said: “Although I greatly admire the Minister, and believe that he does mean business, I confess that I am not 100% convinced that the legislation that has been prepared will offer a practical way of solving the problem.” He said that the 11 certificates now required as part of the bureaucratic process need to be streamlined, and their issuance simplified.
Loizou said he disagreed with the view that most problems with the non-issuing of title deeds had to do with developers’ financial situation. “The main problem is the requirement for 11 certificates before you can reach the safe haven of the Land Registry“, he said, adding: “Just getting the municipal inspector on site can take a year, and if something needs correcting, he’ll take another year before he OK’s that. Then when you finally get to the Land Registry, you’re told there is a five-year backlog.”
Allowing developers to go bankrupt would send a clear message to the rest of the market.
Asked by the Cyprus Mail whether the government might consider some kind of guarantee in situations where heavily-indebted developers are holding up the deeds issue, Sylikiotis said that he was the last person to wish to see developers go to the wall, but if some of the smaller developers are now close to bankruptcy, then allowing them to go bankrupt would send a clear message to the rest of the market.
His own question, which he put to the British High Commissioner during their recent meeting, is: why have the various property-owners not taken to court those developers who they think are acting illegally by not arranging for their title deeds to be issued?
Time to wake up and smell the coffee Mr Sylikiotis!
Mr Sylikiotis is correct when he says that allowing developers to go bankrupt would send a clear message to the rest of the market.
It certainly would! If anyone were to lose their homes as the result of these bankruptcies, no-one would be foolish enough to risk buying property in Cyprus ever again. What the government must do is protect buyers who have been duped into buying mortgaged property by stepping in and preventing the banks from reclaiming the properties that have been affected. And if that means the government has to underwrite the banks’ losses, so be it.
Mr Sylikiotis asks why haven’t property buyers taken developers to court?
Why should they? According to Article 23 of the Constitution of the Republic of Cyprus, “Every person, alone or jointly with others, has the right to acquire, own, possess, enjoy or dispose of any movable or immovable property and has the right to respect for such right.”
If property buyers should be taking anyone to court it’s the Cyprus Government; it is they who have consistently failed to uphold the island’s constitution, not the property developers!
And if buyers were to attempt to seek redress through the Cypriot courts they would stand little chance of success.
According to a recent report in StockWatch, the Cyprus courts are in chaos. Restricted resources, antiquated infrastructure and failure to undertake responsibility have allowed the number of pending court cases to exceed 80,000. Can you imagine how long it would take the Courts to process another 100,000+ cases? Most claimants would be long dead and buried before their cases would be heard.
What hope is there for anyone using a justice system that is not fit for purpose?
Perhaps a more sensible question Mr Sylikiotis should be asking is why the Cyprus Government is refusing to take action against developers who are extorting money from buyers under the guise of ‘Immovable Property Tax’. Obtaining money under false pretences is a criminal offence and the government must direct the Police to investigate and prosecute offenders.
But to close on a positive note at least Mr Sylikiotis isn’t practicing the usual trick of pointing the finger of blame at everyone else for the problems, but he does seem rather naïve in his understanding of the issues and how to resolve them.
Maybe the Minister needs to wake up and smell the coffee!
Scales of Justice on the Dome of the Old Bailey – London’s Central Criminal Court
A CASE is coming up in the UK High Court against a Cypriot developer and Cypriot lawyers following the Cyprus government’s inability to resolve the existing backlog of thousands properties that have not had title deeds issued.
As a result, questions were raised last week in the House of Lords seeking a first round of punitive actions against Cyprus, despite government assurances to resolve the problem that has left hundreds if not thousands of Cypriot, British and other property owners at the mercy of crooked developers and colluding lawyers.
The landmark case could not have come at a worse time for Cyprus that has celebrated the legal victory against a British couple who have developed land in the Turkish-occupied north owned by a Greek Cypriot refugee and who are being forced to give up their assets in the U.K. as compensation.
Lord Jones of Cheltenham has asked the British government “what steps it will take to warn those contemplating buying property in Cyprus of the risk of losing their homes when developers who have retained title deeds in order to raise further loans default on those loans.”
Lord Jones has also called for steps to close down the U.K. offices of Cypriot companies selling property and ban the promotion of Cyprus property at exhibitions of overseas property held in the Britain. He wants to take further steps “to protect United Kingdom citizens from individuals who retain title deeds after properties in Cyprus have been bought.”
Finally, Lord Jones has asked the British government to “work with other European countries to urge the government of Cyprus to prosecute individuals who have retained title deeds after completion of property sales in Cyprus to United Kingdom and other European citizens.”
The UK Government is expected to reply to Lord Jones’ questions by June 25.
The cyprus-property-buyers.com website, created by disgruntled property owners and victims of corrupt developers, is spearheading the campaign calling for a ban of all Cyprus property companies and to close their UK offices.
“Already suffering from the effects of the global economic crisis and a tarnished reputation, Cyprus received another body blow in the British House of Lords,” the website reported.
“Following last Tuesdays bombshell that the changes to property laws being planned by the Cyprus government will bring no relief to existing buyers, British peer Lord Jones of Cheltenham has called on the UK Government takes positive steps to protect British citizens,” it explained.
As the website noted, “overseas property sales are a major contributor to the island’s economy. After Spain and France, Cyprus used to be the most popular place for Britons seeking a place in the sun and it has been estimated that over 60,000 have bought property on the island. Although their appetite started to cool at the beginning of 2004, Britons still make up the majority of overseas property investors.”
“Closing down Cypriot companies in the UK and banning the promotion of Cyprus property at overseas property exhibitions will have disastrous consequences on property sales and the island’s economic well-being,” the website added.
When a developer goes bankrupt an individual without a title deed faces the risk of losing everything. The banks have the right to claim the collateral and property buyers will be left homeless and tens of thousands of pounds worse off.
The main bone of contention is that in October 2005, the Government said it was going to plug loopholes in the law, introduce fines, and provide property buyers what it called “an arsenal of weapons against unscrupulous property developers.”
In September 2007, the government said it was going to look at providing greater security to homebuyers by enabling their contracts of sale to take precedence over the developers’ mortgages.
In June 2008, Interior Minister Neoclis Sylikiotis assured property buyers that newly proposed legislation to resolve problems in the property sector could be implemented by the end of the year.
In January 2009, the Interior Ministry gave its assurances to the British High Commissioner that it intended to introduce a Bill to address the title deed issue.
In April, Minister Sylikiotis qualified his earlier assurances to the High Commissioner by saying that the Bill will only apply to future cases.
