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FCO raises warning level

Nigel Howarth
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ON THE EVE of the European Court of Justice ruling on the Orams case, the UK Foreign and Commonwealth office raised the warning level to Britons who have bought or who are considering buying Greek Cypriot owned property in the areas of the island under Turkish occupation.

This revised advice can be found on the British Foreign & Commonwealth Office (FCO) website on its Travel Advice for Cyprus page in the General – Purchasing Property section; a summary follows:

Purchasing property

THE OWNERSHIP OF MANY PROPERTIES IS DISPUTED IN NORTHERN CYPRUS, with many thousands of claims to ownership of properties from people displaced during the events of 1974. Purchase of these properties could have serious financial and legal implications.

Buying a Greek Cypriot owned property in the Turkish occupied areas without the owner’s consent is a criminal offence, carrying a prison sentence of up to 7 years.

The European Court of Human Rights has ruled in a number of cases that owners of property in northern Cyprus prior to 1974 continue to be regarded as the legal owners of that property.

PURCHASERS COULD FACE LEGAL PROCEEDINGS IN THE COURTS OF THE REPUBLIC OF CYPRUS, as well as attempts to enforce judgements from these courts elsewhere in the EU, including the UK.

Property owners and potential purchasers should also consider that a future settlement of the Cyprus problem could have serious consequences for property they purchase (including the possible restitution of the property to its original owners).

In particular, prospective purchasers should consider the implications of any future settlement on land/property:

  • in the north that was Greek Cypriot owned
  • that was subsequently classified as exchange land/property by the Turkish Cypriot “authorities”.

On 20 October 2006 a criminal code amendment relating to property came into effect. Under the amendment, buying, selling, renting, promoting or mortgaging a property without the permission of the owner (the person whose ownership is registered with the Republic of Cyprus Land Registry, including Greek Cypriots displaced from northern Cyprus in 1974), is a criminal offence. This also applies to agreeing to sell, buy or rent a property without the owner’s permission.

The maximum prison sentence is seven years. Furthermore, the amendment to the law states that any attempt to undertake such a transaction is a criminal offence and could result in a prison sentence of up to 5 years.

EU court rules: Orams must demolish Cyprus house

Nigel Howarth
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THOUSANDS of property investors may be in danger of losing their homes in the occupied areas of Cyprus after the European Court of Justice ruled that a Greek Cypriot can reclaim land owned by his family.

Today, the European Union’s top court in Luxembourg said that a judgement from the Republic of Cyprus ordering a U.K. couple, Linda and David Orams, to demolish their house must be recognized by EU countries even if it concerns land in the occupied areas of the island.

Even if the European Court of Justice ruling cannot be enacted because the land is under Turkish Cypriot control, it means that Mr Apostolides will be able to pursue a claim for compensation in a UK court.

The Orams bought a £ 160,000 holiday home in Lapithos, which is an area of Cyprus that has been occupied by Turkish troops since 1974. A Cypriot court ordered them to tear down the property, return the land and pay damages to Meletis Apostolides, who was one of thousands of Greek Cypriots who fled his home when the Turkish forces invaded.

Mr Apostolides said he was “very much” pleased with the EU court’s ruling, and that it was “what we expected“.

He added: “This is a difficult issue that has to be decided by the courts.”

The Orams’ case, which has bounced from courts in Nicosia to London to Luxembourg, has far reaching implications for many of the 22,000 foreign investors, mostly from the U.K. The European court’s decision could open the way for hundreds of other Greek Cypriots to demand restitution for properties they were forced to flee when the Turkish forces invaded.

Court of Justice of the European Communities – Press Release

Press and Information

PRESS RELEASE No 39/09

28 April 2009

Judgment of the Court of Justice in Case C-420/07

Meletis Apostolides v. David Charles Orams & Linda Elizabeth Orams

A JUDGMENT OF A COURT IN THE REPUBLIC OF CYPRUS MUST BE RECOGNISED AND ENFORCED BY THE OTHER MEMBER STATES EVEN IF IT CONCERNS LAND SITUATED IN THE NORTHERN PART OF THE ISLAND

The suspension of the application of Community law in the areas where the Government of the Republic of Cyprus does not exercise effective control and the fact that the judgment cannot, as a practical matter, be enforced where the land is situated do not preclude its recognition and enforcement in another Member State.

Following the intervention of Turkish troops in 1974 Cyprus was partitioned into two areas. The Republic of Cyprus, which acceded to the European Union in 2004, has de facto control only over the southern part of the island while, in the northern part, the Turkish Republic of Northern Cyprus has been established, which is not recognised by the international community with the exception of Turkey. In those circumstances, the application of Community law in the northern area of the Republic of Cyprus has been suspended by a protocol annexed to the Act of Accession.

Mr Apostolides, a Cypriot national, brought an appeal before the Court of Appeal (England and Wales), in the course of a dispute between himself and a British couple, the Orams, seeking the recognition and enforcement of two judgments from a court in Nicosia. That court, sitting in the southern part of Cyprus, ordered the Orams to vacate land situated in the northern part of the island and to pay various sums. The Orams had purchased the land from a third party in order to build a holiday home on it. According to the findings of the Cypriot court, Mr Apostolides, whose family was forced to leave the north of the island at the time of its partition, is the rightful owner of the land. The first judgment, given in default of appearance, was confirmed by another judgment ruling on an appeal brought by the Orams.

The national court referred to the Court of Justice a number of questions concerning the interpretation and application of the Brussels I Regulation1. It asks, in particular, whether the suspension of Community law in the northern part of Cyprus and the fact that the land concerned is situated in an area over which the Government of Cyprus does not exercise effective control have an effect on the recognition and enforcement of the judgment, in particular in relation to the jurisdiction of the court of origin, the public policy of the Member State in which recognition is sought and the enforceability of the judgment. In addition, it asks whether the recognition or enforcement of a default judgment may be refused, on account of the fact that the document instituting proceedings was not served on the defendant in sufficient time and in such a way as to enable him to arrange for his defence, where the defendant was able to bring an appeal against that judgment.

1 Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters

First of all, the Court declares that the suspension provided for in the Act of Accession of Cyprus is limited to the application of Community law in the northern area. However, the judgments concerned, whose recognition was sought by Mr Apostolides, were given by a court sitting in the Government-controlled area. The fact that those judgments concern land situated in the northern area does not preclude that interpretation because, first, it does not nullify the obligation to apply the regulation in the Government-controlled area and, second, it does not mean that that regulation must thereby be applied in the northern area. The Court therefore concludes that the suspension of Community law in the northern area provided for by the protocol annexed to the Act of Accession, does not preclude the application of the Brussels I Regulation to a judgment which is given by a Cypriot court sitting in the Government-controlled area, but concerns land situated in the northern area.

Next, the Court states, first, that the dispute at issue in the main proceedings falls within the scope of the Brussels I Regulation and, second, that the fact that the land concerned is situated in an area over which the Government does not exercise effective control and, therefore, that the judgments concerned cannot, as a practical matter, be enforced where the land is situated does not preclude the recognition and enforcement of those judgments in another Member State.

In that connection, it is common ground that the land is situated in the territory of the Republic of Cyprus and, therefore, the Cypriot court had jurisdiction to decide the case since the relevant provision of the Brussels I Regulation relates to the international jurisdiction of the Member States and not to their domestic jurisdiction.

The Court also states, as regards the public policy of the Member State in which recognition is sought, that a court of a Member State cannot, without undermining the aim of the Brussels I Regulation, refuse recognition of a judgment emanating from another Member State solely on the ground that it considers that national or Community law was misapplied. The national court may refuse recognition only where the error of law means that the recognition or enforcement of the judgment is regarded as a manifest breach of an essential rule of law in the legal order of the Member State concerned. In the case in the main proceedings, the Court of Appeal has not referred to any fundamental principle within the legal order of the United Kingdom which the recognition or enforcement of the judgments in question would be liable to infringe.

Furthermore, as regards the enforceability of the judgments concerned, the Court states that the fact that Mr Apostolides might encounter difficulties in having the judgments enforced cannot deprive them of their enforceability. Therefore, that situation does not prevent the courts of another Member State from declaring such judgments enforceable.

Lastly, the Court states that the recognition or enforcement of a default judgment cannot be refused where the defendant was able to commence proceedings to challenge the default judgment and those proceedings enabled him to argue that he had not been served with the document which instituted the proceedings or with the equivalent document in sufficient time and in such a way as to enable him to arrange for his defence. In the case in the main proceedings, it is common ground that the Orams brought such proceedings. Consequently, the recognition and enforcement of the judgments of the Cypriot court cannot be refused in the United Kingdom on that ground.

Unofficial document for media use, not binding on the Court of Justice.

Languages available: CS, DE, EN, EL, ES, FR, HU, IT, NL, RO, PT, SK

The full text of the judgment may be found on the Court’s internet site http://curia.europa.eu/jurisp/cgi-bin/form.pl?lang=EN&Submit=rechercher&numaff=C-420/07 It can usually be consulted after midday (CET) on the day judgment is delivered.

For further information, please contact Christopher Fretwell Tel: (00352) 4303 3355 Fax: (00352) 4303 2731

Pictures of the delivery of the judgment are available on EbS “Europe by Satellite”, a service provided by the European Commission, Directorate-General Press and Communications, L-2920 Luxembourg, Tel: (00352) 4301 35177 Fax: (00352) 4301 35249 or B-1049 Brussels, Tel: (0032) 2 2964106  Fax: (0032) 2 2965956

Limassol marina runs aground

Nigel Howarth
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PLANS for the new Limassol marina have run aground temporarily according to a report in today’s Cyprus Mail. The town’s mayor Andreas Christou has confirmed that the project, which is expected to cost around €170 million, is having difficulty raising the necessary funding.

Talking to the Mail, Mr Christou said “There are certain issues in relation to the guarantees that the banks are asking for the Limassol Marina project. A dialogue has started between the contractor, the government and bank representatives so that we can find a solution and start the project.”

Adding “It was inevitable that we would have difficulties with the banks. It was not something that surprised us, the investors or the government.”

The Cyprus banks have expressed an interest in lending for the project. However, in light of the current financial crisis, they are looking for more guarantees – possibly from the government.

“It is possible that they want more state guarantees. It may possibly be related to the period of crisis that we are going through.

“Until recently the potential of selling flats and residences that would be constructed was considered sufficient guarantee. But apparently the downturn in the Cyprus property market is causing banks to ask for more,” he explained.

The mayor highlighted the fact that the creation of the marina could give a much-needed boost to the market by creating jobs and increasing the potential for tourism.

“We are interested in starting work immediately because the period that we are going through, when labour can be employed for such a demanding project, would ease pressures that are already appearing in the labour market and would enrich our tourist product.”

Once the project gets underway, the marina is expected to be completed in two years and the surrounding residential area in six to seven years.

Nicosians buy up British holiday homes

Nigel Howarth
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Estate agent George Mouskides has confirmed that there is a growing trend amongst British home owners in Protaras to sell their properties due to the economic crisis at home.

Speaking to the Cyprus Weekly last week, Mr Mouskides said “The trend began about a year ago with Britons not buying property in the area. The second step was to sell off what they owned, because of the financial problems they face due to the economic crisis in the UK.”

A number of British home owners in the popular coastal resort of Protaras face difficulties with paying their mortgages and after feeling the pressure, are selling off, he added.

This has created movement in the property market there over the past few months, with Nicosia residents, mainly civil servants on steady incomes and able to obtain mortgages, buying up these holiday homes, Mouskides said.

“The British often buy property off plan and as a result Nicosia buyers are getting new properties for which they would have paid much more, had they bought them straight from a developer,” he said.

There are also a number of British investors who own at least 10 properties in Cyprus and 85 in the UK, who are now deciding to sell two or three on the island.

Property prices in Protaras are down 25%-35% on average compared to last year, while this year’s month-on-month sales transactions are a quarter of last year’s.

Properties in Protaras are also sold through property auctions which take place about every two months, giving buyers more possibilities to avoid bargaining negotiations with quick and transparent procedures.

“An auction is a quicker procedure to buy or sell a property without it necessarily meaning that you buy at a lower price. The advantage of an auction is that it is a quick procedure, completed within about 30 days, and without having to go through lengthy bargaining discussions,” Mouskides said.

He is optimistic that the property market in the coastal resort will sustain its mobility until the summer, with a large number of Nicosia residents buying properties there by then.

“The market will continue its activity but at reduced prices and by the summer a large number of British-owned properties will be sold to Nicosia buyers, as banks are now offering better loan schemes and prefer to lend money to locals rather than foreigners. This trend will continue until resale properties run out. We will then be talking about brand new properties and different prices,” Mouskides said.

Cyprus property action group – update

Cyprus Property Action Group
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This update out of neccessity is a little lengthy, however we feel that you will recognise our need for this when you eventually reach our call for joint action at its conclusion.  In this update we will be covering the ever growing risks to buyers and what we can all do jointly to obtain assistance from the EU Parliament.

Government Failure to Act

We delivered our CPAG Report “Cyprus Property Pitfalls – a Time for Action” to the Cyprus Government on January 2nd 2008.  The report, which was commissioned by the then Finance Minister Michael Sarris, is a shocking indictment of the scandalous practices of property developers of this country, aided and abetted by many dishonest lawyers and supported by the irresponsible and unethical lending of the banks. The Government have still not had the courtesy to respond to the CPAG Report – nor have they refuted any of the shocking findings, including the mass Immovable Property Tax fraud by developers.

The Cyprus Government is responsible for the lack of regulation and law enforcement in the property sector.

This Government, who along with previous administrations are fully responsible for the lack of regulation and law enforcement in the sector, must now take full blame for any bad publicity regarding Cyprus property as a result of their abject failure to act in the best interests of the people of this country, remembering that many thousands of Cypriots are also caught in the infamous Title Deed Trap.

Even now they are content seemingly to mislead the UK Government and EU Commission regarding possible legislation to address the massive problems here.  All this whilst worried buyers, both Cypriot and other EU citizens, agonise about when they will receive their Title Deeds for properties for which they have already paid in full and which are effectively being used by developers to obtain mortgages to fund their business exploits.

Note: As a sign of the times, we also have email evidence to show that one well-known estate agent informed would-be sellers that they will not even take on their properties to market because the developer has a mortgage on the site.  This is on top of the difficulty many buyers have in trying to sell without Title Deeds.

Title Deeds Seminar

A massive con trick has been perpetrated over the years by dishonest developers.

At the recent CPAG Seminar on the 26th March attended by 500 buyers, a show of hands established that the vast majority did not have Deeds.  A second poll showed that none of these buyers would have bought in Cyprus if they had been informed of the practice of withheld Title Deeds and developer mortgages.

In essence a massive con trick has been perpetrated over the years by the dishonest developers, aided and abetted by the legal fraternity involved in property, financed by unethical banks and allowed by grossly irresponsible Cypriot Governments. It is estimated that 100,000 properties are without Title Deeds and developers have taken out €4 billion of mortgages on the land on which these are constructed.

The Seminar attendees were informed by lawyer Tasos Coucounis, who kindly gave his time for free, of the legal recourses available to buyers to force the transfer of Deeds.

Unfortunately, this takes time and expense due to the antiquated justice system which is widely recognised as unfit for purpose. Moreover, the buyers could in all probability have to pay off the developer’s mortgages and taxes (if they could afford it) to achieve transfer and then be left with more years in court attempting to claim their expenses back from a now long gone developer !

Loss of Property

We are often asked how many buyers have already lost their properties by developer failure to repay their mortgages.  This is a difficult question to answer and the following example gives some of the reasons for this.

In 2002, a British couple bought a property on a single plot for CY£45,000 (€76,900) from a Paphos developer and then paid him CY£90,000 (€153,800) to build a villa.  In 2007, hearing that the developer was in financial difficulties, they mentioned this to their Paphos lawyer who started legal action to obtain the Title Deeds to the land.  At this juncture and to their surprise, they were informed that there was a developer mortgage on the land on which ‘their’ property was built.  Nevertheless, they were assured that it was “only around CY£10,000” (€17,000) and that the developer would pay it off – however the developer, who is in financial difficulties, shows no sign of being able to do this.

However, they took it upon themselves to visit the Land Registry to try to ascertain the true facts – only to find out that there was a mortgage of €59,800 against the land.  This was taken out just before they bought and they would definitely have refused to go ahead with the purchase if they had been informed of this at the time by their lawyer.

Although the court case drags on and they are paying out legal fees, they are uncertain as to what the status of the case is due to the lack of updates (despite asking) from their lawyer.  Not unaturally they are sick with worry over this situation they now find themselves in.

The bank suggested that this retired couple take a loan to pay off the developer’s mortgage.

Recently they visited the lender bank who informed them that the developer (who had around a dozen multiple dwelling sites when he got into difficulties in 2007) has not paid anything off the loan since 2002!  They were also informed that the balance has gone from the original €59,800 to a figure of over €85,500 with the added interest.

The bank helpfully suggested that this retired couple may want to take a loan themselves to pay off the developer’s mortgage as the bank could repossess the couple’s home at any time to recover any outstandings!

It is also clear  that the buyers on this particular developer’s other sites (e.g  a 14 dwelling site with a €683,000 mortgage) could be at risk, as could be many others, due to the ingrained secrecy in this industry coupled with the emerging practices of the Cypriot banks in allowing these unserviced debts to escalate.

Ethics and Cypriot Banks

Unethical banks can make a fortune by simply selling off the paid for property at any time to recover their debts – leaving the buyers homeless.

This sad story, amongst others, illustrates that the lending banks in Cyprus in the short term do not really care if the developers do not service their debts (for over 7 years in this case!) as the lender bank is secure in the knowledge that the buyers may have to pay off the developer’s loan to obtain Title Deeds. In the meantime these unethical banks can make a fortune (at little risk) and can simply sell off the paid for property at any time to recover their debts – leaving the buyers homeless!

That a bank can give a mortgage to a developer against the value of the land on which properties are built and then effectively hold the innocent parties (the buyers) responsible for the payment of the borrower’s debts in the event of default just beggars believe in any just or civilised country, especially an EU member state!

Moreover, within this whole cover-up situation there could be a ticking time bomb – and if the market does not recover any time soon, with no new buyers to pick up the bank repossessions, are these developer loans potentially banking toxic assets?

What’s Happening Elsewhere ?

We read with interest that according to a recent OPP (Overseas Property Professionals) magazine article, that due to the collapse in property values the Irish Government are taking on “€80 to 90 billion” of developer mortgages on developments in Ireland and overseas in order to protect their own domestic banking system.  The article did not mention toxic assets but nevertheless this is clearly the case with these developer mortgages and therefore the need to remove them from the banking system.

CPAG also notes with great interest that the European Parliament recently froze hundreds of millions of Euros in EU payments to Spain as a result of illegal and other practices in that country perpetrated against property buyers (please click to see the BBC article).

This was largely as a result of buyers petitioning the European Parliament through the official appeals channels open to all EU citizens (official EU Petition Summary).

Please see also EU citizens Fundamental Rights, especially the rights (Article 17) to property (click here) .

Next Steps

Thanks largely to the lobbying of many CPAG supporters, we now have regular contact with UK MEP’s within the European Parliament who are more than willing to champion our cause.  Quite naturally at the moment their main preoccupation is associated with electioneering for the forthcoming European elections and we wish them every success in being re-elected.

Nevertheless, in the meantime we invite you to assist us in attempting to emulate the buyers in Spain in the use of the Petitions process via the on-line Petitions procedure. Even if you are fortunate enough to now have Title Deeds, we believe that you too have a Fundamental Right (Article 44 ) to petition the European Union about these rights being denied to you in the past and we hope you will support this effort.

Petitions Procedure

ACT NOW

Petition the European Union Parliament!

Please click on the following link (petitions form) and fill in the form either in your own words which is preferable, or you may wish to cut and paste the suggested text below.  Please also be at liberty to change this in any way you wish to reflect your own sentiments.   You can also write direct to the Petitions Committee by post. *** Please note do not fill in the box “Name of the Association” as CPAG will be doing a more comprehensive input as part of our petition to the EU Parliament.

Suggested Text

I wish to petition the European Union Parliament regarding Article 17 (Property) and Article 38 (Consumer Protection) which are denied to property buyers in Cyprus by the practices of developers withholding Title Deeds to properties in order to take out mortgages on the land on which these are constructed. There is no legal obligation for the developer to inform the potential buyer of the presence of a mortgage when they are buying, nor is there any legal obligation for the buyer’s own lawyer to search for any mortgages.  As a result buyers are unwittingly caught in this risky predicament.  Whilst in this trap most are also routinely defrauded and otherwise financially exploited by developers under the threat of Title Deeds not being transferred. In the situation where there is a mortgage and the developer defaults on the mortgage the lending bank has the first priority on the land and all the properties on that land.

In this situation the lender bank has the right to sell the properties of the buyers to recover any debts of the original borrower and the buyers can lose their homes, which seems grossly at odds with Article 17.

Finally

It is sad, and it certainly gives no one at CPAG any satisfaction, that after nearly 2 years of lobbying Government we now have to resort to these other channels of appeal due to the failure of the Cyprus Government to act in the best interest of the people, both Cypriot nationals and the tens of thousands of foreign buyers who have done so much to support the economy over the years.

We now need your individual support to make this appeal to the EU Parliament as powerful as we can – don’t leave it to others – please act now !

Kind regards,

Cyprus Property Action Group

Stagnant construction & property sector

Editorial
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property-developmentTHE fast pace of growth in the construction and property sector of the past few years in Cyprus that generated millions in state revenue and private profits is a thing of the past.

Today, experts from both sectors are gloomy about the prospects and say a repeat of the previous ‘miracle’ is not possible in the immediate future.

Sales of property are significantly down from the middle of last year, construction activity is in retreat and all point to an uninspiring future.

So far, prices have held relatively steady, but experts say that the situation is becoming more serious, and pressure for price cuts more intense.

Cyprus is not Europe. In many European countries the situation is bleak as activity and prices have plunged to levels that leave little room for hope.

Charalambos Petrides, of Landtourist Estates Ltd, says that subdued purchasing interest on the island over the past few months is due to two main reasons – first, uncertainty over the economy in combination with financing difficulties, and secondly, the pressure on revenue in the main markets involving foreign buyers.

“People do not consider the current period as a good one for investments, unless exceptionally good opportunities appear”

A third reason, he adds, is the conviction of many Cypriots interested in buying a home that prices will fall significantly in the immediate future, a conviction which has led them to adopt a wait-and-see approach.

“There is interest to buy,” says Petrides, “but people are cautious.” More than 90% of the interest is for own homes, while the investment sector remains inactive.

“People do not consider the current period as a good one for investments, unless exceptionally good opportunities appear. When price rises are not visible in the future, then investors are hesitant.“

Sales of property

The Department of Land Surveys’ figures on sales leave no room for optimism.

On the contrary, if the figures are combined with the projections of the experts in the field, the picture is a very pessimistic one. The current, acute problem was visible from last March. The drop in the sale of property in March 2008 was the first in years and stood at a high rate of 30%. Since then the trend remains unchanged – down, down and down. The year elided with an overall drop of 31% over 2007 while the first three months of 2009 have followed suit. January, February and March this year have registered a drop of 65% over the same period in 2008.

Property sales down by 65%, construction activity down by 4.8%, and state revenue from Capital Gains Tax down by 83%

Sales to non-Cypriots that had maintained the sector’s momentum for more than three years are also disappointing. From 932 sales made in 2008, there were only 90 registered at the Land Survey Department in the first three months of the year.

The free Famagusta area has taken the biggest toll since only one piece of property was sold to non-Cypriots in the first quarter compared to 41 in 2008 and 69 in 2007. In other districts, sales were in double digits.

In Nicosia there were 19 sales in the first three months of 2009 compared to 211 in all of 2008, in Larnaca 12 compared to 153 the previous year and in Paphos 10 in the first three months of 2009 compared to 282 last year.

Building permits

Despite the gloom of the previous months, January figures on building permits gave a glimmer of hope for the construction sector.

At the start of an anticipated difficult year, the Statistical Survey announced an increase in building permits – an important indicator on future activity in the construction sector since their increase means a corresponding rise in activity.

According to the Statistical Service, last January the number of building permits rose to 694 compared to 687 in the same month in 2008. The rise of only seven licences may appear small, but it corresponds to €40.9m since the total value of the 694 permits stood at €234.1m compared to €193.2m in the corresponding month in 2008.

January’s building permits mean the construction of 1,585 homes of a total area of 2,789,000 sq metres compared to 1,229 homes of a total area of 2,498,000 sq. m in January 2008. Of the 694 building permits, 543 were for residential units.

The biggest increase in building permits was seen in Famagusta where it doubled – in January 2008 16 applications were submitted while in January 2009 the figure was up to 37.

There was an increase also in Nicosia (from 204 in January 2008, to 257 in January 2009) and in Paphos where the 132 permits of last January rose to152. Numbers for Larnaca and Limassol districts were down. In Larnaca, building permits this January stood at 119 compared to 128 in January 2008, while in Limassol the drop was dramatic as applications slumped to 129 from 207.

Lower state revenue

The slump in the property sector has taken its toll on state coffers. According to the most recent figures from the Inland Revenue Department in the first two months of 2009 state revenue from capital gains tax had plunged by 83%.

The state budget for 2009 projects revenue of €350m for the entire year, but it collected less than €10m from capital gains in the first two months, compared to the €57m it netted in the same period the previous year. Revenue from the stamp duty in the first two months was down by 44% to some €7m, compared to €12m in the same period in 2008.

Construction down

Another parameter confirming all the above is the fall in the construction production index.

In the last quarter of 2008, it was down by 4.8% compared to the corresponding period in 2007 showing that the slump intensified at the end of last year.

The retreat in construction activity is also reflected in domestic cement sales. These were 27.5% in the first three months.

Reviving the sector

These past two months, the government has unveiled a series of measures aiming to revive the property and construction sectors.

Already from the last months of 2008, it had made clear it wanted to speed up implementation of the state’s development programme with an additional €150m channelled into the 2009 budget for this purpose.

Emphasis was also given mainly to the construction and expansion of school buildings, the building of government premises, expansion of the road network and the promotion of social benefit projects. Renovation of state housing and the replacement of antiquated irrigation systems in 63 rural communities were also accelerated.

In the constructions sector, the government announced on February 3 that it would boost the House Financing Corporation with €200m so as to facilitate low and middle income families to acquire their own home.

The loans are interest free for two years and have favourable terms for the rest of the repayment period. This measure is expected to give impetus to the market for apartments since this is where young couples entitled to the loans on the basis of income-linked criteria are expected to turn.

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