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Cyprus property prices up in third quarter

David Crowther
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HOUSE prices in Cyprus, in the third quarter of 2008, remain resilient despite the worsening global economic conditions. From July to September 2008, the BuySell Home Price Index recorded a total increase of 1.5% compared to the last quarter. However, the year-on-year rate of increase decelerated (compared to the last two quarters), coming down to 9.0%.

Home prices depicted a marginal decrease of 0.4% during the first month of the quarter, following the small decline of the last quarter. However, house prices increased in August and September by 1% each month, driving the year-to-date increase to 4.4%. The BuySell Home Price Index closed at 145.23 units (September 2008) bringing the Average Home Price in Cyprus to €193,323.

The BuySell Home Price Index was created and is updated monthly on behalf of BuySell Cyprus Real Estate by MAP S. Platis. The Index is announced quarterly and depicts the movement of prices at which residential properties are sold in Cyprus, based on the extensive BuySell Cyprus Real Estate database.

For more information on the methodology of the Index and on Hedonic Prices please refer to: The “Asking Price and Transaction-based Indices for the Cyprus Housing Market (Rebased)” by Dr. Stelios Platis and Marios Nerouppos of MAP S. Platis (available at www.mapsplatis.com/research).

The BuySell Home Price Index constitutes the only valid gauge of the Cyprus housing market and is considered as an effective tool for home buyers, sellers and investors.

Reproduced from the 3rd Quarter 2008 Press Release published by MAP S.Platis.

Cyprus property: should we fear a slump?

Stefanos Evripidou
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AS the world’s largest economies settle into a global recession, the Cyprus property market sends out mixed messages on how it’s confronting the crisis, with analysts divided on whether house prices are actually going up or down.

One real estate consultant argues the international financial crisis has hit the foreign buyers’ property market hard, pushing prices down by up to 20 per cent, while a home price index released yesterday revealed that house prices were still climbing last month, though at a slower pace.

An economic analyst attributes the doom and gloom picture of the Cyprus property market to developers who are asking “ridiculous prices” and seeking concessions from the government.

Parliament was informed on Tuesday of a 40 per cent decrease in property purchases. Domestic cement sales fell 11.4 per cent in August compared to the same month last year. The number of building permits issued in the first eight months of this year showed a drop of 12.7 per cent compared to the corresponding period the year before, a leading indicator of future activity in the construction sector. The number of units provided by the permits also fell by 9.5 per cent compared to last year.

So, with international banking giants pushing forward a global recession, and construction in Cyprus seeming to slow down, what can we expect from house prices on the island? Should Cypriots follow the lead of the British and French and invest in a safe box, hidden in granny’s room, or is the property market forging ahead in spite of the global crisis.

“Cyprus is doing extremely well in 2008 in all areas. You cannot compare it to 2007 when we had a 4.4 per cent economic growth rate, one per cent above potential growth,” said economic analyst, Dr Stelios Platis.

The latest results of the BuySell Home Price Index prepared by MAP S. Platis showed that house prices continued to rise in September, despite the worsening global conditions.

The index revealed a one per cent increase in house prices compared to the previous month and a nine per cent year on year increase for September. The latter reflects a gradual slowdown in price increases since January, when the year on year increase was more than double that.

“There was no drop in prices. Cyprus continues to defy the international crisis up until the third quarter. There was some reduction in the number of sales but in terms of falling house prices, on average, we are not seeing this,” said Platis.

“My estimation is the year on year increase will go down from nine per cent by the end of the year, but not to zero, and at least in line with inflation,” he added.

The economic analyst insisted that the price index constituted “the only valid gauge of the Cyprus housing market“.

“It’s based on actual selling prices of houses advertised by BuySell and its associates. Even the Central Bank uses estimates in its figures,” he noted.

Platis argued house prices had no reason to drop as property owners were not desperate or pushed to sell during a slowdown like they are in the UK or US.

Real estate consultant Antonis Loizou did not share the same view as Platis on current market trends.

“In a nutshell, the Cyprus market comprises of 80 per cent Cypriots and 20 per cent foreigners. Foreigners account for a huge chunk of the market and 70 per cent of those are British.

“Right now, we are experiencing a very sharp drop in demand where the British market is concentrated, like Paphos and Protaras. We have no problems where the Russians are concerned,” he said.

According to Loizou, the drop in foreign demand for property has led to price decreases for apartments of 20% in Paphos and around 15% in the Famagusta area. 90% of property buyers in Paphos are foreign, explained Loizou. Nicosia prices remained stable while Limassol saw a 10% increase in prices overall.

Platis pointed the finger at developers in explaining the bleak picture being painted.

“Sometimes there are motives behind developers in portraying the industry in crisis. They want to build higher buildings, pay less taxes and portray real estate as the last source of income for the economy which is now dying and needs help,” he said.

MAP S. Platis recently conducted a study on initial home asking prices, compared to final selling price.

“People have been asking ridiculous prices. Developers are willing to settle for less but they are lowering prices from a very high level,” said Platis.

“The asking price index in September alone dropped 9%. Imagine how far up it was, especially in those areas where people are claiming prices are falling.

It seems there are more developers than buyers now in the Cyprus market and the pieces of the pie are less,” he added.

Copyright © Cyprus Mail 2008

New EU rules agreed for timeshare property

Nigel Howarth
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THE timeshare holiday rights of some 1.5 million European families will soon be better protected, as MEPs in Strasbourg are expected to endorse a compromise reached between Parliament and Council on the new Timeshare Directive. The directive seeks to enhance consumer confidence and legal clarity, which are essential to the growth of this sector, via simplified EU-wide rules.

Timeshare deals, which allow buyers to occupy holiday accommodation for specific periods in alternation with others, have won millions of takers worldwide since the 1970s. They are often sold as a cost-effective alternative to renting, hotels or a second residence. According to the Organisation for Timeshare in Europe, in 2001 there were 1.452 holiday centres in 25 European countries, 1.4 million families using this kind of accommodation and 200,000 Europeans employed in the sector, with sales totalling €2.3 billion per year.  Most timeshare holidaymakers are from Germany or the UK, where most of the agencies are located, while most of the holiday centres are located in Spain, Italy, France and Portugal.

Why a new directive?

Since 1994, an EU directive has helped to harmonise timeshare rules across the EU, but litigation between operators and holidaymakers is still frequent, notably over conditions and quality of service.

Furthermore, new holiday products and services, similar to timeshare but not covered by the directive, have emerged. These include new types of holiday clubs giving holidaymakers reductions in the cost of their stays if they take out a subscription.  Some of these new contracts clearly circumvent consumer protection rules.

The revised draft directive, which supplements the general rules introduced by the recent directive on unfair commercial practices, will cover both timeshare packages and new products that so far have escaped any legislation.  Consumers will be better protected by rules that clearly state their rights, and will find it easier to go to court. Honest operators will no longer have to face unfair competition from fraudsters.

Content of the new directive

The directive lays down new rules on the right of withdrawal, choice of contract language,  pre-contractual information and a ban on taking deposits during the cooling-off period.

The directive’s scope is also broader than the old legislation. “Long-term holiday products” (holiday clubs), which were less common at the time the original directive was adopted, will fall within its ambit, as will re-sales and exchanges of timeshares.

It will cover not just traditional property timeshares but also boats, caravans and cruise ships marketed under timeshare or holiday club contracts.

The legislation applies to contracts for “more than one period of occupation” of the accommodation (i.e. repeated visits) concluded for a period of more than one year (previously three years).  Any ancillary contracts will be cancelled if the consumer withdraws from the main contract.

A key point introduced by MEPs is a provision for staggered payments for holiday clubs: buyers will pay equal yearly instalments rather than a lump sum up-front.

MEPs also successfully defended the 14-day cooling-off period granted to buyers after signing a timeshare contract, as proposed by the Commission, against Council’s wish to shorten it to 10 days.

Lastly, Member States will have to encourage the creation of effective out-of-court complaints and redress procedures for settling consumer disputes and must encourage traders to inform consumers of such procedures.

Tax on overseas property lettings

Nigel Howarth
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Our developer has advised us that our holiday apartment in Paphos is finished and we’ll be flying over to Cyprus next week to pick up the keys.

To help offset the mortgage payments, we plan to rent it out while we’re not using it. I’ve already spoken with a number of companies in the Paphos area who offer property management services and we’ll be investigating them further during our visit.

I appreciate that we may have to pay tax on the income we receive from any lettings, but where do we pay it? In Cyprus or the UK?

Answer

If you live and pay tax in the UK you must declare rental income from overseas property lettings on the foreign pages of your UK tax return. You can read more about this on the UK Directgov website at “Tax on overseas property lettings“

VAT on building plots from January 2009

Nigel Howarth
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We have just learnt that the EU does not intend to grant Cyprus a further postponement regarding the introduction of VAT on land sales. As a consequence, the purchase of plots will be subject to 15% VAT from 1st January 2009.

The news comes as a blow to the economy and the Cyprus property market, which has already been reported as being in a crisis.

Lakis Tofarides, the Chairman of the Pancyprian Land Developers Association, is reported as saying that the increase in the cost of land is the main reason for the huge increase in the cost for the first-time buyer and that the imposition of 15% VAT on properties will push the costs up even further.

The Cyprus Government has already introduced a housing grant in the form of a VAT refund scheme to help lower income first-time home buyers.

We will publish more information as the details emerge.

Building permits fall for eleventh month in a row

David Crowther
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ACCORDING to the Cyprus Statistical Service (CYSTAT), the number of building permits issued in August has fallen for the eleventh month in a row.

CYSTAT figures reveal that the number of building permits authorised during August 2008 stood at 504, compared with 558 in August 2007. These building permits provided for the construction of 931 dwelling units compared to 1,205 in August 2007.

The total value of these permits reached €151.3 million and the total area 188.5 thousand square metres.

During the period January – August 2008, 5,613 building permits were issued, compared with 6,433 during the corresponding period of 2007; a drop 12.7%.

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

According to Lakis Tofarides, the Chairman of the Pancyprian Land Developers Association “The building permits are not comparative for the real condition in the sector. Things are very difficult, since according to figures, the property sales on the island fall 30% – 40%”.

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