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Cyprus property market heading for crash

Editorial
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Following the patterns recently reported in the Spanish property market that the housing market is on the brink of collapse, Cyprus the destination for many holiday home buyers from the UK is recording negative drops in value.

Much of the problem lies in the fact that the property developers in Cyprus have over developed certain parts of the island without due consideration to the demand and the costs in the region. Leading sellers of property BuysellCyprus have reported 2-3 per cent point drops in real estate in the island, whilst the occupied territories have experienced a complete drying up of demand for property given the issues of contested ownership.

Many of the large developers from Cyprus have resorted to expensive roadshows in the UK to attract custom and offer budget or free travel and accommodation.

Report from the London Greek News 26th April, 2007

Issue of Building Permit for Cyprus Property

Nigel Howarth
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I have read your book and as I understand it, Planning Permission must be granted before applying for a Building Permit.Is my understanding correct or can my architect apply for a building permit at the same time?

Many thanks

Answer

That’s right, your architect usually needs to have secured Planning Permission before he/she can apply for the required permit(s). But there are some exceptions where no Planning Permission is required.

The whole process of building a custom home is described on pages 93-103 of my book; the Planning System is described on pages 132-136.

If you want the specific detail of the issue of Building permits (in English) you can find it at: CITIZEN’S CHARTER – District Administration – Buildings – Issue of Building Permit

I’ve included it below for your convenience.

Issue of Building Permit for Cyprus Property

Each District Administration is responsible for the examination of the application for the issue of a building permit within the areas of its competence. For British sovereign base areas it is necessary to obtain the consent of the British Bases for the issue of such permit. The following documents must be produced to obtain a building permit.

A. Developments for which a building permit is required:

1. Application form (E.D.6) on which the applicant must fill in all the necessary particulars and which form must be signed by the owner (or owners).

1.1 Particular attention is given to paragraph 18 of the form which must be completed by the architects and submitted together with a copy of the professional license issued by the Cyprus Scientific & Technical Chamber.

2. Planning permission (in duplicate) Plans and Conditions as issued by the Town Planning authority.

3. Supplement to the architect’s drawings, static estimates and plans in duplicate.

4. Title of ownership.

5. In the case of any commitments, statement of non-objection by the creditor.

B. Developments for which no planning permission is required:

(see Schedule in paragraph 3.8)

1. Application form (E.D.6) on which the applicant must fill in all the necessary particulars and which form must be signed by the owner (or owners).

1.1 Particular attention must be given to paragraph 18 of the form which must be completed by the architect and submitted together with a copy of the professional license issued by the Cyprus Scientific & Technical Chamber.

2. Complete architect’s drawings, static calculations and plans of the proposed buildings in duplicate.

3. Survey plans of the parcel (the largest available scale of government surveying) showing where the location of the existing and proposed buildings.

4. Title of ownership.

5. In the case of any commitments, statement of non-objection by the creditor.

C. Requirements applying to the examination of applications under the Streets and Buildings (Regulation) Law for the issue of a building permit for buildings for which the “Town and Country Planning” order (housing development on plots) Specific Development order of 2000 (KDP 89/2000) by virtue of Article 23 of the Law)”does not prescribe the issue of a planning permission:
1. Application form (E.D.6) completed with all the necessary particulars and signed by the applicants.
2. Particular attention must be had to paragraph 18 which must be completed by the architects and be submitted together with a copy of the annual profession al practice license issued by the Cyprus Scientific & Technical Chamber.
3. Architect’s drawings in 4 copies.
4. Survey plans (by the Department of Lands) in 4 copies.
5. Slide of the area of extent in square metres with all the data required in 4 copies (planimetric drawing – calculation of building coefficient and percentage of coverage).
6. Supplement of architect’s drawings, static calculations and plans, electrical plans and sewerage plans in duplicate.
7. Solemn statement – Architect’s control statement in duplicate.
8. If the building is a prefabricated construction, the certificate of qualification for the specific type of construction must be furnished.
9. Title of ownership.
10. If there are any commitments, statement by the mortgagee that he/she does not have any objection to the development, submitted in 4 copies with the original.
11. Receipt of payment for the amount of £20 from the cashier’s office of the District Administration.

Developments for which no Planning Permission is RequiredFor applications in areas covered by the water supply network NO planning permission is required for certain forms of development in specified area of Village Committees as mentioned below:
a. Housing development up to four houses.
b. Commercial development of a total area covering less than 200 square meters.
c. Division of land in to plots for the construction of up to four houses.
d. Crafts industry causing a limited degree of noise pollution and covering an area of LESS than 100 square metres.
I. NICOSIA DISTRICT
1. Ayia Irini
2. Ayia Marina Xyliatou
3. Ayios Georgios Kafkalou
4. Ayios Ioannis Maloundas
5. Ayios Ioannis (Selamani)
6. Ayios Theodoros Soleas
7. Ayios Theodoros Tillirias
8. Agrokipia
9. Vizakia
10. Denia
11. Kato Moni
12. Kato Koutrafas
13. Kambi Farmaka
14. Kannavia
15. Kotsiatis
16. Mathiatis
17. Marki
18. Mitsero
19. Mosfileri
20. Nikitari
21. Xyliatos
22. Orounda
23. Piyenia (outside the coastal tourist zone)
24. Potamia
25. Potami
26. Sarandi
27. Shia
II. LIMASSOL DISTRICT
1. Ayios Demetrios
2. Ayios Theodoros
3. Ayios Therapon
4. Ayios Ioannis
5. Agridia
6. Akapnou
7. Apsiou
8. Ayios Thomas
9. Ayios Pavlos
10. Alektora
11. Arakapas
12. Vasa Kellakiou
13. Vikla
14. Gerovasa-Trozena
15. Dierona
16. Dymes
17. Eptagonia
18. Kaminaria
19. Kapilio
20. Kato Milos
21. Klonari
22. Kissousa
23. Lemithou
24. Mathikoloni
25. Mallia
26. Paliomilos
27. Potamitissa
28. Potamiou
29. Plataniskia
30. Prastio Kella
31. Sanida
32. Sykopetra
33. Sotira
34. Tris Elies
III. LARNACA DISTRICT
1. Avdilero
2. Agglisides
3. Alethriko
4. Anafotia
5. Vavla
6. Delikipos
7. Kalo Chorio
8. Kellia
9. Kivisili
10. Klavdia
11. Koshi
12. Layia
13. Mari
14. Melini
15. Mennoyia
16. Odou
17. Ora
18. Tersefanou
19. Troulli
IV . PAPHOS DISTRICT
1. Ayios Georgios Kelokedaron
2. Ayios Ioannis
3. Ayios Isidoros
4. Axylou
5. Vretsia
6. Galataria
7. Eledio
8. Evretou
9. Kidasi
10. Kilinia
11. Kourtakas
12. Lapithiou
13. Mamountali
14. Meladia
15. Milia
16. Mousere
17. Pelathousa
18. Pentalia
19. Simou
20. Stavrokonou
21. Steni
22. Trachipedoula
23. Finikas
24. Choletria
V. FAMAGUSTA DISTRICT
1. Achna
2. Avgorou
3. Acheritou
4. Derynia
5. Frenaros

Cyprus Property: Getting Right-of-Way

Nigel Howarth
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I have a plot which does not have direct access to the public highway; can you advise me how to about getting access to my property officially?

I understand that if it is within 300′ from a road then you can get it, but I’m not sure of the procedure.

It’s quite possible you have already answered this question in the past, sorry, if you could just direct me i would be so grateful.

Many thanks

Answer

It requires you to seek right of way over the land between you and the road on payment of reasonable compensation to their owners. Your lawyer is probably the best person to progress this matter on your behalf.

If there’s a track joining your land to the public highway, then it’s a case of getting this converted into a municipal road.

In some areas, the distance is 300′; in others it’s 600′.

You’ll find the details at CITIZEN’S CHARTER – Land and Surveys – Applications – Easements and rights

Half way down the page you’ll find the following:

3. Acquisition of right-of-way

Law, Cap. 224, Article 11A and Regulations 255/67

Where a property is surrounded completely by other properties and is thus deprived of the necessary access to a public road or where the existing access is insufficient to make full use of the property, the owner may claim to obtain a right-of-way from adjoining properties upon payment of reasonable compensation.

Procedure – Application

The acquiring party (i.e. the registered owner claiming access) shall serve a notice upon the servient tenant (owner of the property through which access is claimed) on Form N283 properly completed and signed and accompanied by a survey plan. Such form must contain the particulars of the dominant tenement (the property for which access is claimed) and of the servient tenement (the tenement from which access is claimed)

This notice is served upon the servient tenant to inform him of the acquiring party’s intention to acquire access and the reason for which such access is necessary.

Note:

1. It is the applicant’s (owner’s) responsibility to ascertain the name and the exact address of the owners of the adjoining properties so that the notice may be served upon them. All interested persons may obtain particulars of the adjoining properties on a certificate (see here) including ownership upon filing of an application and payment of the prescribed fees (see Fees and Charges).

2. Such notices may be served by double registered post or handed personally in the presence of at least one witness (the presence of the witness is not necessary if the notice is served upon a public authority).

3. The service of the notices and of the copies of the plans is confirmed by means of an affidavit stating the persons upon whom the notice was served, the time and place of the service with the attachment of the postal advice of the double registered letter and copies of the notices (Form N.283) and of the plans.

The acquiring party must within sixty (60) days from the service of the notice as mentioned above, file an application made on Form N. 284 for the acquisition of the right-of-way.

Documents attached to the application

i. Affidavit made by the owner of the dominant tenement with all documents accompanying it.

ii. Certificate of registration (title) of the property in favour of which the right-of-way is requested.

iii. Search certificate stating the owners of the properties from which the right-of- way is requested.

ATTENTION: After the lapse of the sixty-day (60) period the application shall not be accepted and the service of new notices is required.

Local enquiry

All interested parties are given at least seven days notice for purposes of local enquiry. The visit to the premises takes place whether or not in the presence of the owners of the properties through which the right-of-way is requested. Interested parties are, in addition to the owners of the properties, any such persons in whose favour a charge is registered in the books kept with the Department of Lands & Surveys.

The Land Officer considers the application carefully, hears all views, remarks and objections of any interested person. With regard to the conditions on site and legal identity of the properties, the land officer makes an effort to reach a compromise so that the parties may come to an amicable agreement for the grant of the necessary right-of-way. Where the land officer fails in his effort for an amicable agreement, the position of the right-of-way, its extent with respect to the use of the property and the compensation to be paid are determined by the Director of the Department of Lands Office bearing in mind that the right-of-way to be created must only cause the slightest possible damage, noise or disturbance to the interested parties. The Director’s decision is documented on Form N. 286 which should also include the right-of-way and describe its area of extent and the compensation payable. The position and direction of right-of-way is shown on the drawing/plan attached on Form N286. The decision is notified to all interested parties and calls upon the acquiring party to deposit the estimated compensation with the Department of Lands and Surveys within a period of not less than thirty and not more than sixty days.

Note:

1. The period of thirty (30) days gives the opportunity to all interested parties to appeal before the court against the decision of the Director if they do not agree with the position, the direction or the extent of the right-of-way or the amount of compensation.

2. If during the local enquiry it is ascertained that in addition to the proposed servient tenements there are also other suitable properties then the decision is postponed and the applicant is notified to serve Forms N283 upon the owners of the other properties within the prescribed period of sixty (60) days.

Fees

For fees levied upon acceptance of the application, for recording of the right and for registration see Fees and Charges.

Time of completion of the procedure

This procedure takes more than six months and there exist specific periods which need to be complied with (see above). Furthermore, the time of completion varies depending on the case and its particularities and on various other factors such as the number of servient properties, the morphology of the ground, the existence of other suitable properties, for which no such procedure has been initiated, the co-operation of the owners of adjacent properties etc.

Buying Cyprus Property? Beware of Hidden Extras!

Jean Christou
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CYPRUS is placed 14th out of 37 European countries when it comes to transaction costs in purchasing a house, with buyers needing an extra 11 per cent to cover fees and charges when they buy here.

A study by the Global Property Guide shows 23 countries with lower transaction costs than Cyprus, including Malta at just over 9.0 per cent, Ireland at only 6.9 per cent and the UK at 5.03 per cent.

“Residential investments in Europe incur punitively high roundtrip transaction costs in many countries, exceeding 15 per cent in several cases. Purchasers of new properties often incur even higher costs,” the study said.

The study takes into account all transaction costs involved in the property sale-purchase process, including registration and notary fees, legal fees, real estate agents’ commissions, and sales and transfer taxes.

In many countries, including Cyprus, VAT at 15 or 20 per cent is added on the purchase of new homes, hiking the cost up even more. “Buyers of new residential property are in for a shock, because additional taxes are charged on newly constructed or renovated properties,” said the study.

The lowest charges are recorded in Lithuania, where buyers pay only 2.3 per cent on top of the cost of their new homes. Other countries under ten per cent include Turkey, Denmark, Switzerland and Norway.

Buyers in Russia will pay the highest amount in transaction costs at 25 per cent, with Bulgaria at 24.8 per cent and Monaco 19.6 per cent, Belgium, Italy, France and Greece are close to the 15 per cent mark.

While actual registration costs in Cyprus are among the 12 very lowest of the 37 countries, transaction costs rise dramatically when agent’s fees and sales and transfer taxes are added. Legal fees, which also comprise part of the four criteria, are also low in Cyprus.

Copyright © Cyprus Mail 2007

Property Buyers Warning

Nigel Howarth
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There are many retired Britons living in Cyprus who prey on the fears (and wallets) of their fellow countrymen.

Acting illegally as property middlemen, they receive a finders fee or commission from their ‘friends’ in the property business when they introduce would-be purchasers. It makes no difference whether you allow yourself to be conned by a silver-tongued expatriate or an affable Cypriot middleman; the end result will be exactly the same!

Although the Cyprus Government introduced a new law at the end of 2004 designed to stamp out these rogues and cowboys, it has proved ineffective.

Take care

Financing of Real Estate Acquisitions in Cyprus

Antonis Loizou FRICS
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Securing finance for the acquisition of real estate is being developing constantly in Cyprus.

The financial institutions up to the year 2003 did not look upon financing for such purposes, as being an attractive proposition for them and the amount of the loans was around up to 50% of the purchase price and with a repayment period of around 7 years with a maximum period of 10 years. With the Banks being loaded now with cash deposits and with the lack of profitable and secure business ventures, the financial institutions have turned their attention towards the financing of real estate, which, now comprises the majority of their loans. With competition, being what it is now, there are several financial schemes offered, that are very attractive and with some minor differences on the whole.

Financing through Banks/Co-Ops etc are as follows:

  • Buyer’s Contribution 20%-25% depending on the circumstances. For special, long standing clients with a good record, this could be reduced to only 15% own contribution (despite the Central Bank’s directions that the borrower should contribute around 30%).
  • The repayment period is around 15 years but with a life insurance related loan, this could be extended to 35 years(+). It is a matter of age so that the repayment of the loan, will coincide the retirement age (+-63 years old) or the termination of one’s employment (whichever is the earlier).
  • Some Banks are prepared to hold back the loan repayment for periods of up to 7-10 years with the borrower paying only the interest. The capital to follow. This is extremely helpful if one expects to have income increases in the future.
  • The interest top-up is around 1.5%-2% on LIBOR (London Interbank Offered Rate), depending always on which currency you choose to borrow. If Cyprus pounds this will be 6%-6½% and if Euro 5.67%-6.17%.
  • Some financiers have a penalty clause if the borrower pays the loan earlier than the stipulated date. You can discuss this with them however, since a number of Banks will forgo such a penalty if you insist.
  • In addition to the interest, you must bear in mind other related costs which goes hand in hand with the loan such as:
    • Life Insurance – You will need to cover the doctor’s check up say £100.
    • Initial administration cost – This Bank charge could very from £500-£1500 depending on the loan amount.
    • Legal documents – Some Banks could charge around £500 for documents.

The above applies to Cypriots and all E.U. members. In case of other nationalities the financiers are free to charge different rates (usually higher).

Other related to the acquisition/financing costs are:

Stamp duty for the sales contract and deposit the same with the Lands Office (if no title available).

This is based on the sales price recorded on the contract and which must be stamped within one month from the date of signing. If later you will be called upon to pay a penalty (the maximum period for depositing the contract is 60 days).

Stamp Duties:

  • 1.5% on purchases up to CY100,000
  • 2% on purchases over C£100,000

The penalty is set at £20 + 10% on the difference. E.g.: For £100.000:

  • The payable duty is £150
  • The penalty is £20
  • Plus 10% of the difference (150-20)/10 £13

Total penalty payment £33

Transfer fees are charged on the date of the transfer and depend on the market value on the date of purchase (no interest addition).

If the contract is not deposited at the Lands Office, the Lands Office may adopt the market value on the date of the transfer. The transfer fees are scaled as follows:

  • 3% on purchases up to £50,000
  • 5% on purchases between £50,001 & £100,000
  • 8% on purchases over £100,001

Mortgage Fees

Mortgage fees are set at 1% on the amount of mortgage.

So if you are securing a loan of £100.000 on a property purchase of £150.000, as a rough guide you will have the following costs:

  • Life insurance £100
  • Once and for all initial Bank payment (+/-) £500
  • Stamp duties £250
  • Transfer fees £4000
  • Mortgage fees £1000

In case that you have no title to mortgage (e.g. under construction/no title even if it is completed) try to get a loan from the financing bank of the developer. If not you will then require a Bank guarantee by the registered owner (who will charge you at least 1.5% p.a. based on the guaranteed amount i.e. at least the amount of the loan). In case of the above example of the £100.000 loan, it will mean £1500 p.a. If you are using the developer’s financier (or not), seek a mortgage release from the developer from his own bank, stating that the bank will free from mortgage your own property, once the titles are issued. If the seller cannot provide such a bank release, we do suggest not to go ahead with the deal.

Independently of the above and notwithstanding the amount of available loan, do not depend on the possible income that the property will bring in, in order for you to repay the loan since returns are low (approximately 4%-6%) and vacant periods large, implying high maintenance cost. Holiday homes will bring no income to speak about (unless there are 3-4 bed villas in Paphos with pool etc let to holiday makers during the summer period which might bring a gross income of around £12.000 p.a.). It does not take much for one to have his financial planning upset either due to the business upset, health etc. So do not stretch your finances to the maximum since you run into financial problems, selling your property is not as easy as borrowing/buying. There is a theoretical, be it market price, on one hand and the time needed to sell which could reach 1-2 years. If you have financial problems you will soon note that the bank will cancel the mortgage after 3-5 instalment delays, it will seek repayment of the loan from the developer (who usually is a guarantor if no title) who will in turn cancel your contract. On this point we strongly recommend that your sales contract contains a proviso (in the event of no title) that you have the right to cancel the contract and re-sell to third parties, with the developer being obliged to enter into a new contract with the new buyer. If you do not have such a right and the developer refuses to release you from the contract, you will not be able to resell your property, even if you find a buyer – Bear in mind that in this case you must settle any capital gains tax and secure a tax release, so that the developer bears no additional costs – Cancellation fees should also be agreed with the developer beforehand and a reasonable fee is around £1500, plus your own tax costs. The use of a solicitor in such transactions is recommended, but, again, care is needed (refer to our articles on crooked and indifferent lawyers).

P.S. Do not forget the legal fees should you wish to use a lawyer. This should cost anything from £500-£1000 maximum, depending on the size and complexity of the contract. We are aware of multiple to the above charges hence our last paragraph above.

I am grateful to Antonis Loizou FRICS of Antonis Loizou & Associates Limited for allowing me to publish his articles on this website.

You can view the original article at: Financing of Real Estate Acquisitions

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