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Building permit numbers up in October

David Crowther
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ACCORDING to the Cyprus Statistical Service (CYSTAT), there was a small increase in the number of building permits issued in October 2008 compared with the number issued in October 2007. 844 building permits were issued during October 2008, up 47 on last year.

These building permits provided for the construction of 2,088 dwelling units, which is also up from the 1,775 in October 2007.

During the period January – October 2008, 7,291 building permits were issued, compared with 7,963 during the corresponding period of 2007; a drop of 8.4%.

Building permits constitute a leading indicator of future activity in the construction sector.

Buying usurped property does not pay

Nigel Howarth
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AN adviser to the EU’s top court says a ruling against the British owners of a property in Turkish-controlled northern Cyprus should be recognised. The Court of Appeal of England and Wales had requested a legal opinion from the European Court of Justice.

Linda and David Orams are engaged in a long-running legal battle with Meletios Apostolides, a Greek Cypriot who claims the land their home stands on.

Breakaway Turkish-held northern Cyprus is not internationally recognised.

The Orams, a retired couple from Hove in Sussex, got a favourable ruling in 2006 from the UK High Court, which said they could keep their villa in northern Cyprus.

But Mr Apostolides appealed, insisting that the land was rightfully his because his family had been uprooted from it by the Turkish invasion in 1974.

The UK High Court ruling came after the Nicosia District Court, in the Republic of Cyprus, had ruled that the Orams should demolish their house, return the land and pay “rent” for the time they lived there.

The Advocate General, Juliane Kokott, has now advised the European Court of Justice that the Nicosia court “has jurisdiction in relation to the property dispute, irrespective of the fact that the Republic of Cyprus does not exercise effective control over Northern Cyprus“.

Her opinion is not binding on the European court’s judges, but in most cases they follow her recommendations.

Ms Kokott was asked to interpret the EU’s Brussels Regulation in this case – a regulation dealing with the recognition and enforcement of judgments issued by courts in other EU member states.

Test case

The Republic of Cyprus joined the EU in 2004, even though it does not control the northern part of the island.

Property disputes are one of the main obstacles to efforts to reunify Cyprus.

EU law was suspended in northern Cyprus for the purposes of Cyprus’s accession, but the advocate general argues that the Orams’ civil case still falls within the scope of the EU regulation.

“The fact that the [Nicosia court’s] judgment cannot actually be enforced at this time does not, in the Advocate General’s opinion, relieve courts in other member states from the obligation to recognise and enforce the judgment,” a statement from the European Court of Justice said.

It is seen as a test case because estate agents in northern Cyprus have sold many holiday homes to British citizens. The European court’s rulings are binding on EU member states.

The judges in Luxembourg have started considering the Orams’ case and they may take three to six months to reach a verdict, a court spokesman told the BBC.

BBC © MMVIII

Cyprus property forecasts for 2009

Nigel Howarth
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IT APPEARS that the Cyprus property market is going though its worst period for the last ten years with most of those involved in the sector predicting that the current price falls will continue and may even accelerate in the coming year.

The news comes from a new survey carried out by StockWatch which questioned 22 Cyprus property developers & estate agents about the performance of the sector over recent times and their forecasts for its future.

Almost all of those who took part in the survey support the view that property prices have fallen and the majority believe that things will get worse in 2009.

As previously reported, the StockWatch report is based on the actual experiences and predictions of property developers and estate agents. These conflict with the view of the Central Bank of Cyprus which has reported that prices of resale and new properties have increased by 10% in 2008 following a 15% increase in 2007. (The Central bank has been particularly cagey about releasing details of how it calculates it figures, saying only that its index is based on “estimates of the value of properties used as a security for the granting of loans by the banks.“)

The majority of those who took part in the StockWatch survey consider that the turning point came with the collapse of Lehman Brothers in the US and the expansion of the financial crisis into Europe and the UK, where the majority of those buying property in Cyprus are based.

Only one person who took part in the survey believes that prices have not dropped; most of them agreed that falling prices mainly affect the popular seaside towns such as Paphos, Larnaca and Famagusta; areas that are heavily dependent on British buyers. Some of them believe that there has also been a downturn in the Limassol market, while others stressed that prices in the area have steadied. Their views on the market in Nicosia differed as demand for property in the capital city is mainly driven by the domestic housing market.

Most agents and developers expect that things will deteriorate in 2009. One respondent believes that the situation will stabilize and another one believes that the market will recover after the spring.

“Things will deteriorate and we should not be naïve. The banks already push the borrowers, while they have stopped granting loans. Moreover, some lose customers due to that stance“, one of the businessmen surveyed noted.

According to latest Inland Revenue figures, activity in the property sector dropped by more that 60% during the two months following the collapse of Lehman Brothers.

A large number of houses and apartments remain unsold. It seems that the British are selling their houses at a reduced price to take advantage of Sterling’s low value compared to that of the Euro.

But unlike the British, the domestic market appears be on hold.

“The psychology due to the rumours for a drop in property prices together with the lending difficulties keep the would-be buyers on hold for better opportunities“, the businessmen said.

Even the Limassol-based businessmen who took part in the survey said that things are similar there. “The number of Russians who buy is small and they are those who prefer luxury apartments or houses by the sea“, stated one businessman.

The businessmen are of the opinion that that many developments will not be completed. A developer from Larnaca accused the banks for granting loans to inexperienced developers easily, who expanded to mountainous regions and many houses have been abandoned unfinished.

However, some of those surveyed expressed their satisfaction with the latest developments “since things will be clarified in the profession“.

Many developers stopped building new projects and have not renewing contracts with their subcontractors, those employed in the property sector face job losses.

“What goes up, comes down and the crisis will bring prices to normal levels“, one real estate agent concluded.

Cyprus banks to cover exposure in property sector

David Crowther
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UNDER pressure from the slowdown in the Cyprus property sector, it is expected that the commercial banks will be called on to cover their big lending exposures the sector next year. In its latest economic bulletin the Central Bank of Cyprus refers to the credit risks that the banks have undertaken over the past few years as being a result of their increased lending to property developers and real estate agents.

In September 2007, loans to companies actively involved in the property construction and management sectors amounted to 15.8% of all loans to Cypriots. This represents an increase of 22% over the year which, according to calculations carried out by StockWatch, corresponds to an increase of €4.1 billion. A year ago the banks’ exposure stood at €5.1 billion a year ago; today it exceeds €9.2 billion.

The activity in the sector has fallen by 30% since 1st January, as demonstrated by the reduction in Capital Gains Tax revenues.

The sharp drop in the sector’s activity is expected to push up bad debt provisions, as it restricts the ability of property developers and real estate agents to serve their loans.

However, the bank managements are worried about the course of the prices, particularly in housing properties. In a bulletin released on Friday, the Central Bank supports the view that property prices in Cyprus grew by 10% against 15% but avoided revealing details of how its figures are calculated.

The Central Bank of Cyprus forecasts differ from those of the property developers and estate agents, The vast majority of whom believe that the price of housing properties in seaside areas have dropped up to 20%.

Irrespective of the course of prices, the Central Bank believes that the big lending exposures are the major risk that the commercial banks face. “The credit risk is still the most important risk that the banks are exposed to“, the bulletin said. Other risks are related to the €22 billion that the banks have deposited to banks abroad, the increased cost of absorption of deposits and the expansion to uncertain markets in Eastern Europe.

As a result, the Central Bank is expected to ask certain banks to increase their supervisory capital, which “must be maintained in order to cover possible unexpected future losses to certain isolated banks“, the Central Bank concluded.

Property secrets

Nigel Howarth
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secret-plansTHE FOLLOWING article in the Sunday Mail caught my eye. It almost seems as if some of the authorities in Cyprus are keeping information about property developments ‘secret’; away from the enquiring eyes of the public.

In my previous life I served as a local councillor and spent a number of years on the Council’s planning committee. Many members of the public attended our meetings where they asked questions about what developments were planned for our area. There was a separate planning information desk in the Council offices available to the public, that was manned during office hours. Furthermore, details of all planning applications were available on-line and available to anyone around the world.

If the Peyia Municipality can afford to spend €2,000,000 this year (a third of its budget) on its local football club and their stadium on top of its €250,000 annual grant, and €94,328 as an extra bonus to a former inspector of the Development Council who retired in 1994 at the age of 60, perhaps it could invest some money into improving the services it offers to the general public?

Municipalities keeping public info private are acting illegally

MUNICIPALITIES refusing to disclose information about planned development projects to interested citizens are breaking the law, ombudswoman Iliana Nicolaou has said. Nicolaou looked into the matter after a number of residents of Peyia complained that local authorities were not forthcoming with such information.

The right of access to public records is enshrined in the Constitution, and also spelled out in laws pertaining to the Department of Town Planning.

When Peyia residents wanted to find out whether a plot of land adjacent to their property was slated for development, they were apparently told that this information was on a ‘need to know’ basis.

Remarkably, protection of privacy was one of the reasons cited by the municipality in restricting access to this data.

But the ombudswoman also discovered a more mundane reason, namely, that the municipality lacked the resources or manpower to properly maintain an archive.

Whenever information was provided, this was done verbally. But when someone asked to actually see documents, he or she was told to visit the developer, who keeps the originals.

In his response to the ombudswoman, the mayor of Peyia offered this explanation: “Our municipality is inundated daily by a plethora of Britons, Frenchmen, Russians, Germans, Swiss etc, who introduce themselves as buyers, owners or tenants asking for information and copies of construction permits…

“To this end, and in order to decongest the various services… the board of the municipality has decided to provide oral information only to those who furnish proof that they are indeed owners of real estate“.

And the best part: “We feel that the board’s decision is intended to reduce time-wasting… due to the fact that various people visit the municipality asking for plans and information which, most of the time, do not relate to their own properties but are merely enquiries about other developments which are of interest to them.“

While acknowledging that practical difficulties may exist, the ombudswoman said this does not constitute adequate grounds for the municipality’s lack of cooperation.

In her opinion, anyone with a legitimate interest in a land development is entitled to this information, “even if that individual is not directly affected.“

“While not underestimating the lack of staffing or the workload of Peyia municipality, these problems do not justify such practices, which are characterised by a lack of transparency,” she noted.

All municipalities, she said, should have in place a comprehensive archive with copies of construction permits, architectural plans and the terms and conditions of land plots earmarked for development. This information must be made readily available to anyone upon request.

By Elias Hazou

Copyright © Cyprus Mail 2008

Cyprus property price confusion

Nigel Howarth
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ALTHOUGH it is generally believed that property prices in Cyprus have dropped by up to 20%, the Central Bank of Cyprus holds a different view. In its latest ‘Economic Bulletin‘ (in Greek) it reports that prices have slowed to a 10% increase from a 20% increase, which is in line with forecasts prepared on behalf of BuySell by MAP S.Platis.

This is in sharp contrast with the views expressed earlier this month by local property luminary Antonis Loizou  who emphasised the fact that prices of tourist properties have already fallen by as much as 20%. The views of Mr Loizou are shared by hundreds of other businessmen surveyed by Stockwatch over the past few months who believe that the Cyprus property sector is in for a long period of recession.

But despite being questioned many times about the methodology it uses to prepare these figures, the monetary authority is extremely reticent about revealing the details – saying only that its index is based on “estimates of the value of properties used as a security for the granting of loans by the banks.” (The Central Bank’s figures are based on the first nine months of 2008, before the latest phase of the credit crisis started).

The Central Bank also reports that “Despite the anticipated negative impacts on the construction sector, the slowdown of the property prices might be proved as a positive development so as to avert any possible overheating in the sector of housing properties“.

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