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Property tax revenues crash

Nigel Howarth
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The Cyprus Government coffers are in dire trouble as a result of the crash in property sales.

Figures released by the Inland Revenue Department on Tuesday show that Capital Gains Tax revenues in January and February this year crashed to €9.6 million from the €57 million over the same period last year; a fall of more than 83%.

The reduction in Capital Gains Tax revenues is considerably higher than the 68% drop in property sales, confirming the fact that property prices in Cyprus are continuing to fall.

And falling property prices may continue according to recent research carried out by the Economic Research and Planning Department of Marfin Laiki Bank. More than half the Cypriots who responded to its Cyprobarometer-2008 survey believe that property prices will fall over the next 1-2 years.

The Finance Ministry estimates that the slump in the Cyprus property market will overturn the 0.5% GDP surplus and result in a general slowdown in the economy.

Cyprus marina developments stalled by bureaucracy

Nigel Howarth
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ALTHOUGH it has been 20 years since initial studies were prepared, not one of the five big marina projects in Cyprus has got underway. The Limassol marina seems to be the only one moving forward, but quite slowly.

The marinas are key in efforts to improve the island’s tourist product and attract high revenue-earning tourists. However, one year before the expiry of the ten-year Cyprus Tourism Organisation (CTO) strategic plan, construction work on any of them has yet to start.

On top of the bureaucratic delays, the financial crisis has lead to financing problems for would be buyers. StockWatch has spoken with the authorities regarding the status of the various projects.

According to CTO Chairman, Panos Egglezos, the plan for the marinas dates back to early 1990. “The first study was carried out in 1992 by a foreign expert. The expert pointed out the areas that could host the marinas. However, the gigantic bureaucratic procedures do not allow the enforcement of the projects“, he said.

Commerce Ministry General Manager, Efstathios Hamboullas, explained the problems faced by each of the projects. The Commerce Ministry is responsible for four of the projects, while the Transport Ministry is responsible for Larnaca.

Limassol

The Limassol marina, which is expected to cost around €300 million, is being undertaken by Lemesos Marina Ltd and will be constructed under the DBFO (Design-Build-Finance-Operate) method.

“The project is currently seeking to secure the necessary licenses, consents and approvals from all governmental departments. It is not expected to start before autumn as the application must be approved by a series of government departments, such as the Urban Planning, the Ports’ Authority, the Merchant Marine, the Public Works and the environmental authority, while an environmental study must be secured as well,” Mr. Hamboullas said.

According to the contract, the harbour works and the development of the land space must be executed simultaneously over a three year period.

Lemesos Marina Ltd, which has undertaken the project for 53 years, comprises of Cybarco of Lanitis Group, J&P-Avax SA, J&P Joannou & Paraskevaides Ltd, Cads Holdings Ltd, Francoudi & Stephanou, Athena SA and Limassol Marina Development Company Ltd.

The marina will be built near the old port and will have a capacity of around 1000 vessels. The 40,000m2 of land will be developed to include 2,200 villas and flats, 75 shops, parks, restaurants, cafes, as well as spaces to berth vessels in the gardens of the villas.

Paphos

The Paphos marina, which is expected to cost €300 million, is held up in the Supreme Court following appeals by the failed bidders.

Looking back over the course of the case, Mr. Hamboullas explained that although the bids received from the three bidders were evaluated in June and the preferred bidder (Pandora Investments, Cybarco, Francoudi & Stephanou, J&P-Avax, Cads and Athena SA) was selected, the two failed bidders appealed the decision to the Revisionary Authority. Last November the Authority ratified the appeal made by Poseidon Grand Marina of Paphos. The third company that bid for the project was Pafilia.

The case has been referred to the Supreme Court after the appeal of both companies, who are against each other. According to Mr. Hamboullas, after the latest developments it is difficult to predict when the case will close.

The project of 1,000 vessels will be constructed in Kissonerga and will also include land development.

Ayia Napa

The strange thing about the the Ayia Napa marina is that although the construction of the road network between Ayia Napa and Ayia Thecla (where the marina will be located) has started, the tender documents are still with the Attorney General.

The cost of land development and the marina of 600 vessels will reach €200 million. The development of the 30,000m2 of land included in the overall project will be undertaken by Caramondani Bros, Atlas Pantou, G&A Toumazis, Fama Marina and CCI of Famagusta for 53 years.

Paralimni

Paralimni is waiting for the final decision of the City Council after the request for the construction of an anchoring space instead of a marina, based on a special law that was approved a year and a half ago.

The cost of the project in Ayios Nicholaos is estimated at €100 million and will be able to host 260 vessels.

Larnaca

The Transport Ministry is responsibile for the construction of the Larnaca port and marina.

According to General Manager of the Ministry, Makis Constantinides, the case is still in the hands of the ad hoc committee after the Revisionary Authority’s decision to ratify the appeal made by A. Vouros Consortium following the Tenders Council’s decision to select Larnaca Zenon as the preferred bidder.

A. Vouros Investments Ltd comprises of Singapore Cruise Center Pte Ltd, DP Architects Pte Ltd, Ioannou & Paraskevaides Ltd, J&P – AVAX S.A, Ioannou & Paraskevaides (Overseas) Limited, Ariadne Australia Limited and Cybarco Plc.

Zenon comprises of Bouyques Batiment International (17,5%), Iacovou Brothers (17,5%), Amsterdam Logistics Group B.V. and Lievense Consulting Engineers (port of Amsterdam, 2%), Louis Public Company Ltd (22%), Costa Cruises (Italian subsidiary of the US Carvinal Cruises, 10%), Marinaman Ltd (8,5%), Petrolina (Holdings) Public Ltd (17,5%) and General Constructions Company (5%).

The project is expected to cost €200 million and will be of capacity of 1000 vessels. The 26,000m2 of land will be developed to include hotels, flats, parks, bicycle lanes, shops, restaurants and cafes. The strategic investor will undertake the project for 35 years, while the hire/purchase of the other constructions will be for 90 years.

Costs of owning an apartment in Cyprus

Nigel Howarth
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IF you have bought or are buying an apartment in Cyprus or a property in some other form of complex, it will probably have a number of areas that you share with the other owners.

A building in Cyprus that consists of at least five self-contained units is considered in law as being jointly-owned. Such buildings may include:

  • Apartment blocks.
  • Terrace/town houses.
  • Maisonettes.
  • Building complexes.

Buildings consisting of two to four units may also be registered as commonly owned on application to the District Lands’ Office by a majority of the owners of the units.

If you own property in such a development, you are required by law to contribute to the insurance, maintenance, repair, restoration and management of the jointly-owned parts of the building; in essence those parts that you share with the other owners. These may include entrance halls, stairways, exterior walls, swimming pool, tennis courts, etc. (whether you make use of them or not).

The law

All jointly-owned buildings must have a management committee which regulates and manages all relevant affairs.

The proportion of the share of each owner in the expenses is prescribed by the Regulations based on the area of each unit.

The regulations are submitted at the Lands Office of the District, where the jointly- owned building is located, and are registered by the Director with an entry made in the Land Register. These regulations govern the relations among the owners of the units, determine their rights and obligations and should also make provision for the control, operation, administration, management and enjoyment of the units and of the jointly-owned property.

The Director of the Department of Lands & Surveys has the power and/or the obligation to intervene in matters concerning the management of any jointly-owned building only upon an application filed with the Lands Office of the District where the property is situated and upon payment of the relevant fees by the applicant/owner of any unit.

Application forms

In an effort to assist both the owners of the units and the management committee, the Department of Lands & Surveys has prepared application forms for:

  • Appointing a Temporary Management Committee.
  • Appointing a Management Committee.
  • Registering the regulations.
  • Calculating the area of the units.
  • Determining the share allocated to each unit.
  • Applying to the Director to call a General Meeting of the owners of the units.

Further information

The English language version of the Jointly Owned Buildings Law of 1993 is a must read for those who have bought or are thinking of buying a property in a jointly-owned building such as an apartment, a terrace/town house, a maisonette, etc.

Cyprus to relax rules for Iranians buying property

Editorial
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CYPRUS Minister of Commerce, Antonis Paschalides, has said that Cyprus wants to facilitate the stay of Iranians who buy a property in Cyprus provided that the value of the house exceeds a certain amount and that the funds used for the purchase of the property come from abroad.

The Financial Mirror has learned that Iranians buying property in Cyprus in excess of EUR 350,000 will be eligible to obtain residency status.

He also noted that Iranian businesspeople are interested in investing in the Cyprus tourist sector, in buying holiday houses, establishing industries in Cyprus and engaging in joint ventures with Cypriot businesspeople. During a visit to Tehran in early March, Paschalides signed an agreement on behalf of Cyprus and Iran on the protection of investments.

The Commerce Minister said approximately 1,000 Iranian tourists will arrive to Cyprus during March, which coincides with the Iranian Norooz, New Year celebrations.

© 2008 Financialmirror.com

Review of global property trends in 2008

Editorial
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It was a dismal year for house prices, according to publicly-available house-price time-series for the year 2008. Most worrying is that the downturn is still accelerating.

The collapse of the world’s housing markets in 2008 can be seen from three points of view, and unfortunately, all of them reinforce the bad news.

  • During 2008, the downward price momentum accelerated, as compared to 2007.
    Only 2 countries saw positive momentum in 2008 (a slower downward house price movement than last year, or faster upward movement), while 28 countries saw their housing market momentum deteriorating, compared to the previous year. The two countries with a positive momentum were Germany and Switzerland (please see accompanying tables, see column with the arrows).
  • During 2008, house prices fell in most countries.
    During 2008 only 8 out of 32 countries saw house prices rise, after adjustment for inflation, while 20 countries experienced house price falls.

    In contrast, during the year 2007, the downturn was just beginning, and only 6 countries saw house prices fall, while 24 countries saw house prices rise (all figures inflation-adjusted).

    Many house-price falls during 2008 were extremely severe. Countries with house price falls of over 10% during 2008 were Latvia (Riga) (37%), Lithuania (Vilnius) (27%), the US (20%), the UK (18%), Iceland (16%), Ireland (12%), and the Ukraine (Kiev) (12%) (all figures inflation-adjusted).

  • During the final quarter (Q4) of 2008, the downward price momentum significantly accelerated, as compared to Q3, suggesting that the situation is deteriorating.
    During 2008’s final quarter, 9 countries saw house price falls of 5% or more during just that quarter. Price drops of more than 10% during this single quarter occurred in three countries – in Latvia (Riga), which saw price falls of 15%, in Ukraine (Kiev) (13%), and in Hong Kong (15%). Other countries with Q4 house-price falls of 5% and over, included the UAE (8%), Lithuania (7%), Iceland (7%), Singapore (6%), Bulgaria (5%), and the UK (5%) (all figures inflation-adjusted, except UAE). These price falls were much greater than during the previous quarter, Q3. During that previous quarter, only two countries experienced house-price falls (inflation-adjusted) of 5% or more, and no countries experienced house-price falls of more than 10%.

Regional survey

hpc-nominalEurope has major problems
The Baltic countries of Latvia and Lithuania suffered the hardest price falls both in nominal and real terms. In Riga, Latvia, the average price of standard-type apartments plunged 37% during 2008. Prices have been going down in Latvia since late 2007, after a remarkable increase of about 70% in 2006. The most alarming decline took place in the 4th quarter, when prices declined by 15%, the steepest quarterly drop in real terms in any country. These price falls were triggered by increased interest rates, and by the tightened credit rules which Latvia imposed in 2007.

Average prices of apartments in Vilnius, Lithuania, fell by 27% during 2008. House prices started slowing in mid-2007, and crashed in early 2008.

House prices in the UK plummeted by 18% in 2008. Although mortgage interest rates dropped slightly, to 4.48% in December 2008, the number of loan approvals for house purchases fell 58% in 2008.

There is serious trouble in Iceland (house price fall of 16% during 2008), Ireland (12%), Ukraine (12%), Malta (9%), Portugal (8%), France (8%) Finland (7%), Norway (6%) and in Spain (6%).

North America’s woes
In the US, the centre of the global financial crisis, in 2008 house prices fell 20% according to the Case-Shiller house price index, which emphasizes urban areas. OFHEO and FHFB figures, which are associated with Fannie Mae and Freddie Mac loans and have somewhat lost credibility, suggest a smaller decline of 6% and 3% respectively, during 2008. The US government recently approved a $ 787 billion economic stimulus package, of which $275 billion will be allocated to rescue the ailing housing market.

Canada has been much less affected than the US.

Pacific heads down
Both Australia and New Zealand saw house price declines during 2008, of 7% and 8% respectively.

Asia no longer insulated
Housing markets in Asia have not been insulated. Singapore, Hong Kong and Philippines recorded house price falls during 2008.

Singapore’s private residential prices dropped 9% during 2008, in sharp contrast to the 26% price increase of experienced during 2007. The developed countries’ economic troubles adversely affected Singapore’s exports, and during 2008, output in the manufacturing sector, particularly of electronics, precision engineering and chemicals, shrank by 10.7%. Singapore was officially in recession in Q3 2008.

Hong Kong has been badly hit by the crisis. House prices were down by an average of 6% in 2008. But during the last quarter, Hong Kong experienced a severe decline in prices of 14%.

In Makati, Philippines, prime 3-bedroom condominium prices fell by 2% during 2008, after an 11% price rise during 2007. Nevertheless construction of high-rise residential buildings continues, with residential condominium stock rising by 7% during 2008, according to Colliers Philippines.

Japan recorded modest Tokyo condominium price rises of 1.2% during 2008. On the other hand, land prices in Japan’s six major cities fell by 6% y-o-y to Sep-2008.

hpc-nominalIn Shanghai, China, house price rises slowed to 5% y-o-y by the end of 2008, after peaking at 30% year on year to May 2008. However Shanghai is likely to be somewhat exceptional, and Xinhua News Agency reported house prices declines in 70 major cities during 2008. Shenzhen suffered the hardest fall, with prices down by 18% during 2008

UAE on shaky ground
In Dubai, UAE, despite the bleak global picture, saw surprisingly large dwelling price rises of 41% during 2008. However during the year’s final quarter, prices fell by 8% in nominal terms. This downturn is attributable to strongly tightening lending criteria, an increase in interest rates, multiple layoffs, and alarm among buyers.

Forecast: No recovery in 2009
History suggests that in a crash, housing markets take many years from peak year to full recovery. In view of this and of the pessimistic IMF forecast for the global economy, no real recovery is likely in the global housing markets this year.

The IMF has predicted that the world economy will grow by 0.5% in 2009, the lowest level in 60 years. GDP in advanced economies is expected to decline by 2% during 2009. The United Kingdom and Japan will be hit the hardest. Output in the UK may contract by 2.8%, while Japan’s may fall by 2.6%.

Growth in emerging economies is expected to slow to 3.3% in 2009, down from 6.3% in 2008. Developing Asia is forecast to be the least affected, with growth of 5.5%. China’s economy is predicted grow by 6.7% in 2009, but this is a substantial decline from 9% growth during 2008.

We cannot be optimistic for five reasons:

  • Valuations still clearly remain stretched in most countries, in terms of price/rent ratios.
  • Economic growth is slowing or negative in many countries, which is negative for housing values.
  • There are no signs that banks are becoming more willing to lend.
  • The unprecedented nature of the financial system’s collapse has greatly added to the difficulties facing the world’s housing markets.
  • Some national governments are experiencing difficulty in refinancing their national debt, putting their currencies under pressure. Currency instability is likely to aggravate housing sector problems in countries where many loans were taken out in a foreign currency.

The positive news is that the US government and several others are acting with vigour, as has the IMF. Nevertheless, there is a long tough road ahead.

© 2004-2007 Global Property Guide. All Rights Reserved.

Plans for Cyprus tennis academy

Nigel Howarth
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The Cyprus Interior Minister, Neoclis Sylikiotis, has confirmed that Russian investors want to create an international tennis academy in Liopetri village.

Mr Sylikiotis said that businessmen from Qatar and Iran were also showing an interest in investing in Cyprus.

The Minister has already met with the Russian investors and said that the matter was now in the hands of the Town Planning Bureau.

“An effort will be made to create an international tennis academy in Cyprus in line with the standards of other similar schools abroad, so that young talents from Russia and other countries will come to the island to train.”

Mr Sylikiotis said that Cyprus was chosen for the investment, partly because of its favourable climate adding that such an investment would help boost the construction industry and tourism.

Referring to Qatar’s interest in investing in Cyprus, the Minister said that the government was encouraging such investments, because of the benefits they would bring in efforts to ease the impact of the world economic crisis.

Regarding the visit of Commerce, Industry and Tourism Minister Antonis Paschalides to Iran this week, Mr Sylikiotis said that it was to discuss the interest shown by many Iranian businessmen in investing in the island.

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