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Bank tightens credit risk rules

David Crowther
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Later this month, it is anticipated that the Central Bank of Cyprus will issue ‘guidelines’ requiring the commercial banks to better manage credit risk. (In an earlier article, “The Property Bubble“, Dr Alan Waring reported that the executives of one bank had been summoned to a ‘crisis meeting’ to discuss plans to deal with a possible wave of loan defaults by property developers).

It has been reported that these ‘guidelines’ will place demands on the banks to operate within the framework of an approved credit strategy and to determine the policy and the procedures for the management of the credit risk.

The guidelines will also define a set of ‘rules’ for recognising, measuring, observing and reducing credit risk, as well as the responsibilities of the Bank’s Board of Directors and other high-ranking officials regarding the management of the credit risk.

In addition, the guidelines will require banks to introduce an independent unit to secure the suitability and enforcement of the principles for the management of credit risk and will also recommended the introduction of internal rating of the lending based on the credit risk.

In recent times, loan growth in Cyprus has been accelerating at an alarming rate. In May, it stood at 33.47% against 35.35% in April 2008 and more than double the 15.83% in May 2007.

Will this move by the Central Bank mean that the commercial banks will have to scrutinise property developers’ loan applications more closely – and their management be held responsible for loan making decisions? If so, I envisage a further drop in building permit applications, which are already down by more than 15% on last year.

Parador Properties goes into voluntary administration

Nigel Howarth
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Parador Properties, which had a number of overseas operations, including Cyprus, has gone into voluntary administration.

The company was once considered to be one of Europe’s top estate agents. It used to fly prospective purchasers to their desired destinations and offered advice about specific areas and communities. Simon Lambert and managing director Jack Hamilton founded Parador in 1998.

Parador’s PR company, Quay West Communications, announced: “It is with regret that Parador Properties has announced that, due to the downturn in the overseas property market, it has gone into voluntary administration. This does not affect property purchases by any of its clients, as all contracts were made between the individual client and the builder; Parador Properties acted only as an introductory agent.”

Top 8 questions to ask estate agents

Nigel Howarth
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Top 8 questions to ask estate agents

There is a huge oversupply of new property in Cyprus at the present time. Compared to last year, the number of new villas, apartments and other dwellings being built for which building permits have been issued has fallen by nearly 17 percent.

There’s also a glut of second-hand/resale property on the market. I’ve just had a quick look on the Internet and one property marketing company alone has more than 7,000 properties on its books with prices ranging from 48,000 Euros to over 7,000,000 Euros – something for everyone’s taste and pocket!

So given all the potential problems associated with buying new property, why not consider looking at what’s available in the resale market? There are a number of benefits:

  • The buying process is very quick in Cyprus and you could take possession of your new property within a matter of weeks of signing the contract.
  • You will see exactly what you are getting for your money.
  • The garden may be planted and landscaped ready for your enjoyment.
  • For various reasons, some people need to sell up quickly. They will often include their furniture and other useful extras such as household appliances, satellite dish, television, etc. as part of the deal.
  • The price you pay will be substantially less than buying an equivalent new property off-plan from a developer.
  • If you choose carefully and buy a property in an area that’s already been developed, you’re unlikely to be bothered by a developer building a block of apartments in front of you and blocking your view or by the never-ending stream of construction traffic and work going on outside your front door.
  • The all important Title Deed may be available at the time you buy – in which case you will are guaranteed to avoid the various property scams practiced by the more nefarious developers that I’ve written about elsewhere in this magazine.

Of course, there are some disadvantages to buying a resale property. It may need to be modernised, repaired or refurbished – and it’s a good idea to have any property you’re seriously considering professionally inspected and valued before making a firm offer.

Questions to ask the estate agent

When discussing the purchase of a particular resale property with an estate agent in Cyprus, there are a number of questions you should ask. Here are my top 8.

Question 1 – Why is the owner selling?

If you are lucky, the agent may reveal more than he should about the seller’s circumstances and motivation for selling. A motivated seller is more likely to accept an offer below the asking price.

Question 2 – How long has the property been on the market?

Has the property been ‘sticking’ on the market? Is the seller getting desperate to sell? Why is the property not selling? Are there any problems with the property which the agent is not telling you about?

Question 3 – When does the owner need to move out?

Is there an urgent deadline which could be an advantage in negotiating a lower price for the property? If the owner has to move somewhere else they will be keen to sell and get everything settled before they go. If the property is rented and the rental agreement is coming to an end, the seller will not want to keep the property empty for too long after the tenancy has ended.

Question 4 – What is the minimum price the seller will accept?

Knowing the bottom price which the seller will accept will help you formulate your offer. If a property has been on the market a while, most agents will be very forthcoming with this information.

Question 5 – What do you think the property will actually sell for?

This is a bit of a ‘fishing expedition’. What you are looking for is signs that the agent has a different opinion as to the true value of the property.

Question 6 – Who valued and priced the property?

Another ‘fishing’ question to follow-up from the last. If the seller priced the property and the agent thinks it’s too high, then when you place a lower offer, you stand a very good chance of having the agent bat your corner. If the agent has priced the property then they probably will stand by their valuation and push you to offer close to it.

Question 7 – What other properties are there in competition to this one?

This is a very useful question provided you get an honest answer! The agent is looking to close a deal, not open everything wide open with a whole load of new options. You are likely to get an honest answer by taking the property details sheet into a rival’s office and asking them! The information you gather will be important in justifying any offer you make.

Question 8 – What extras are included in the sale price?

Some properties are sold complete with furniture and other useful extras such as household appliances, satellite dish, television, etc. And if the owner is keen to sell quickly, it’s not unknown for them to include a car. (A friend in my village bought a resale property and all the seller took with him when he left was a suitcase full of clothes. Everything else he left behind).

Click here to download a list of legally registered real estate agents in Cyprus (produced by the Estate Agents Registration Council).

Extract adapted from: ‘Buying a Home in Cyprus: A Practical Guide to Successful Real Estate Purchase’ your ultimate guide to buying property in Cyprus.

Property insulation scam

Editorial
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Scam AlertTHE Cyprus Green Party General Secretary, George Perdikis, yesterday claimed properties were being sold under the pretext of being insulated, when they in fact weren’t.

He claimed that financial interests were hidden behind a recent alteration of regulations for house insulations.

“Following the intervention of higher interests, the laws on insulation have been altered in a way that affects the quality of the insulation, resulting in us not having insulated homes so that certain people can profiteer at our expense,” said Perdikis after yesterday’s House Commerce Committee meeting.

“The Committee was presented with the truth surrounding a very serious issue,” he added.

The Commerce Ministry, said Perdikis, had admitted that the regulation had been amended following interventions by certain bodies – who he wouldn’t mention – and “we are not satisfied with the explanations given”.

According to data from last year, said Perdikis, correct insulation could offer each home a €1,500 profit every year.

He concluded, “Hiding behind all this is the fact that certain financial sectors of the market intervened to make insulation regulations less strict.”

Copyright © Cyprus Mail 2008

Property construction continues slowdown

Nigel Howarth
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ACCORDING to figures just released by the Cyprus Statistical Service, CYSTAT, output in the property construction sector continues to slowdown. The number of building permits issued during the first four months of 2008 fell to 2,788 – a reduction of 15.2% over the same period last year when 3,286 were issued.

Although the number of building permits has reduced, the area of licensed projects covered by those building permits in Larnaca and Paphos increased by 12.6% and 13.6% respectively, compared to those in Famagusta and Nicosia which decreased by 26.7% and 21%.

Overall, the 2,788 building permits issued in the first four months of 2008 account for the construction of 6,603 dwelling/housing units compared to 7,275 during the first four months of 2007 – an overall reduction of 16.7% on last years figures.

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

Top 41 water saving tips from Paphos

Nigel Howarth
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Cyprus is suffering a water shortage crisis with many towns and villages being cut off for a number of days each week.

In belated efforts to resolve the crisis, the Government is planning a new sea water desalination plant, buying giant drilling equipment dig deeper boreholes in the search for water, and fresh water is being shipped to the island from Greece.

(The cost of the fresh water that the Government is shipping in from Greece is many times more the current crude oil price, which currently stands around $141 a barrel).

The following list of 41 water saving tips was prepared by junior pupils attending the American School of Paphos. It formed part of a prize-winning project that the pupils entered at a recent Environmental Fair run by my Rotary Club (Limassol Berengaria Cosmopolitan).

Water usage – facts and figures

  • To flush the toilet uses 7-10 litres of water.
  • A normal 5 minute shower uses 35 litres of water.
  • A bath or power shower uses 80 litres of water.
  • A washing machine cycle uses 70-120 litres of water.
  • A dishwasher uses 25-60 litres of water.
  • A dripping tap can waste 25 litres of water a day.
  • A running tap uses 10 litres of water a minute.
  • Hosepipes and sprinklers use 1,000 litres of water per hour.
  • On average, we each use a total of 150 litres (10 buckets) of water each day…
  • A swimming pool looses 150 litres of water a day through evaporation.

Try to do one thing each day that will save water. Don’t worry if the saving is minimal. “Every Drop Counts” and every person can make a difference.

Tips for saving water in the bathroom

  • Don’t flush needlessly – unnecessary flushing is one of the biggest wasters of water. Remember, if it’s yellow let it mellow if it’s brown then flush it down.
  • To restrict the amount of water when flushing either place a brick, a bottle filled with sand or ‘Hippo Bag’ into the toilet cistern.
  • Don’t leave the tap running while you clean your teeth or shave. If you leave the tap running you could be wasting up to 10 litres per minute.
  • Bathe your young children together, it’s fun too!
  • Having a three minute shower instead of a bath will use a third of the water and can save up to 500 litres a week.
  • When you are washing your hands, don’t let the water run while you lather.
  • Keep a bucket in the shower to catch water, as it’s warming up. Use this water to flush toilets or water plants.
  • Check to see if your toilet has a leak by adding a few drops of food colouring to your toilet cistern. Don’t flush the toilet for a while and if the food colouring shows up in the toilet bowl you’ve got a leak.

Tips for saving water in the kitchen

  • When boiling an egg or cooking in general save the cooled water for house-plants or the garden. They’ll benefit from the nutrients released when cooking.
  • You can use less water by turning the hot tap down, rather than the cold tap up, if you require cooler water.
  • Don’t use running water to thaw food. Defrost in the fridge overnight or defrost using your microwave.
  • Cook food in as little water as possible. This will also retain most of the nutrients, alternatively use a steamer.
  • Keep cool water in the fridge so you do not need to run water down the sink to have a cold drink.
  • Wash salad or vegetables in a bowl rather than under a running tap, then use water to water plants or flush toilets.
  • Don’t overfill the kettle when making a cup of tea. Only fill and boil what you need, this will also save money on your energy costs too.
  • Always run a washing machine on a full load and similarly only run a dishwasher when it is full. And do not rinse plates under the tap first.

Tips for saving water in swimming pool

  • Cover your pool. Covering the pool can save 95% of water lost to evaporation. It also reduces cleaning and can help prevent accidents.
  • Lower the pool’s water level to reduce losses from splashing. In general try to reduce splashing.
  • Keep the pool and filters clean to reduce frequency of filter backwash.
  • Backwash only when necessary. If you can run backwash onto lawns or collect for reuse.
  • Check your pool for leaks.
  • Maintain proper chemical levels and an adequate circulation time to reduce backwash.
  • Don’t keep getting in and out the pool. Your costume and body holds many litres of water, which is removed from the pool every time you get out.
  • Keep an eye on the water level when filling your pool. Forgetting to shut off fill water can make for a costly waste of water.
  • Increase shade. Covering your pool with a shade will further reduce evaporation as well as protecting swimmers from harsh sun rays.

Tips for saving water in the garden

  • To save water outside use a watering can or a hose pipe with a trigger nozzle instead of a sprinkler. Your hosepipe can use as much as 18 litres of water a minute.
  • Water your garden at dusk to reduce the amount of water that may evaporate.
  • Think about collecting rain water from your roof and downpipe in water butts or buckets.
  • Hoeing reduces water loss from the soil, stimulates the growth of plants and removes weeds that take up valuable water and nutrients.
  • Using mulch on the garden will help the soil retain water resulting in a reduced need to water the garden so often.
  • Use a broom or mop instead of a hose to clean your patios and save on average around 80 gallons of water every time.
  • Think twice before having a lawn laid, they are hard to maintain use a lot of water and there are many realistic synthetic alternatives.
  • When you next have a barbecue, encourage your friends and neighbours to be part of a water-conscious community.

General water saving tips

  • If you need to purchase a new water using appliance, check to see how water efficient it is.
  • Fix dripping taps – a dripping tap wastes at least 5,500 litres of water a year – that’s enough to fill a paddling pool every week for the whole of the summer.
  • If you have a fish tank, use the dirty water on plants, it is rich in Nitrogen and Phosphorous which provides an excellent fertiliser.
  • Fit aerator nozzles to taps, these reduce flow without compromising use.
  • Leak detectors installed inside the house protects your property from a leaking pipe.
  • Fill up a spray bottle with an inch of Dettol and use to clean surfaces etc. (it saves water, rather than constantly using and wetting a dish cloth).
  • Use grey water from household appliances such as tumble dryers and air conditioning units.
  • Take a few seconds before throwing used water away. Could you reuse it somewhere else – like watering plants around the house or in the garden.

Remember Every Drop Counts – Please don’t waste water!

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