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Price Index of Construction Materials, December 2006

Nigel Howarth
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Figures released by the Cyprus Statistical Service show that the Price Index of Construction Materials for December 2006 reached 133.72 units (base year 2000=100.00) recording a marginal increase of 0.03% over the previous month.

For the period January – December 2006, the index recorded an increase of 4.98% over the corresponding period of the previous year.

This rise of the index over the last year is mainly due to the price increase of the following materials:

  • Copper pipes: 41.1%
  • Electric wire: 39.8%
  • Bituminous mixtures (Bitumen Asphalt): 19.9%
  • Premix: 13,4%
  • Round bars of iron: origin E.U.: 9.0%
  • Aluminium metallurgy products: 7.5%
  • Iron metallurgy products: 7.0%
  • Bricks: 6.4%
  • Crushed sand: 5.5%

A decrease in the price index has been recorded in a number of materials such as:

  • Plastic tubes: 4.3%
  • Cement products: 1.1%

Property Prices Fall for Fourth Successive Month

Nigel Howarth
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The Cyprus property price index is published monthly by BuySell Cyprus Real Estate, a real estate advertiser.

The company started to produce its property price index in 2004. It shows the movement of prices at which residential properties in Cyprus are sold and is based on an average of around 400 to 500 home sales/month.

When the index started in January 2004, the average residential property price was CYP 77,910. By the end of December 2006, it had reached CYP 90,881 – an increase of 16.65% over the 36 months since its introduction. This equates to an approximate annual growth of 5.55%.

Since the start of 2006, property prices have increased by 6.87%

Title Deeds & Share Transfers – Beware

Antonis Loizou FRICS
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Due to the delays that are met in securing the various building permits and the consequential delays in getting the titles and the much sought after transfer of title, the market has come up with a new way to by-pass the system.

The time that it takes for a property to have its title secured from the date of delivery of a project, is nowadays not earlier than seven to 10 years (five years ago it used to be three to four years) and this provided the development has no serious problems. This time gap depends also on the district that the property is situated. There are local authorities that are efficient and others which “take their time”.

Transferring shares It also depends on the volume of work involved. Paphos for example has 30% more applications for building permits than in Limassol. So if you are “unlucky” enough to choose Paphos, you will have to put up with the delays. What is worrying here, is that the developers are now transferring shares in a project, as opposed to the proper titles. For example if you buy a house in a project of 10 units, you get an immediate transfer of 1/10th of the shareholding of the land, on which the project is built on. On the one hand this is better than no title at all (other than a sales contract deposited at the Lands Office). This 1/10th share title can be sold to third parties, mortgaged (be it not at its full value) pass it on in your will to your children etc. etc. It is an asset, but what you will find happens is the problem as to who will undertake the subsequent procedure for the title issue. In addition all 10 shareholders must sign any application and all 10 of them must coordinate (impossible, believe us). If you receive the developers assurances that he will do it, we will say that 99.9% he will not. So if you accept to settle, instead of a proper title, with a share transfer, you must know the minus as well (do not do it unless there is no hope at all to get a proper title).

A “share” title is not recognised by the Lands Office as referring to a particular property, even if all the shareholders have documents agreeing whose property is what. So in the event of, say, a “forced sale” (auction) the Court may sell your own house which is free from any impediments and not the neighbour’s, who is in default.

Whatever you decide to do, as for example a small change in your building, you will need all the other 9 shareholders’ signed approval. If one refuses either because he is being difficult or even for good reason (such as one of the shareholders has died), you are stuck for life.

A property’s value for financing purposes in terms of a share is usually assessed at around 20% less than a property with a proper title, whereas some financial institutions will refuse to accept such shareholdings for security purposes. Such shareholding properties must have a good administration/management for the common use areas. For example the roads will not be public, neither the street lighting and other public services, requiring your constant contribution in the upkeep. Bearing in mind the problem that there is in collecting common expenses, this can develop into something very serious.

Regrettably this new form of “substitute titles” is increasing in popularity, despite the described problems and this state of affairs is widespread in the Paralimni/Ayia Napa/Sotira region (eastern Cyprus) where unscrupulous developers (and more serious unscrupulous lawyers) encourage this state of affairs.

The new Minister of the Interior (Neoklis Sylikiotis) to whose attention we have brought the whole problem of the permit/title issue, has taken action by promising the creation of a committee, comprising of public officers and the Technical Chamber, whose scope of work is to come up with firm suggestions on how the problem of delays can be solved. This is a positive start and provided this committee can produce their suggestions within no more than six months, there is hope for a better future, because surely we do not want to have a situation like Marbella, where a large percentage of buildings were found at the end of the day to be illegal and the unaware buyers faced with a demolition order (the other problems in Spain apart such as the confiscation of property with no compensation payment etc etc). We criticise the previous Ministers of the Interior who have left this situation come to a most difficult stage and we blame them for their inability to grasp the seriousness of the situation. We have the feeling that with this new Minister, we have hope. We will see and we will keep you informed of developments.

By Antonis Loizou, FRICS

Copyright © 2006 Antonis Loizou & Associates Ltd. All rights reserved.

Cyprus Project Management – Real Estate

Antonis Loizou FRICS
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The job of the Project Manager is well known in most of the developed countries and the need for such an added consultant’s job in the building industry, arose as a result of the increasing complexity of buildings, the cost which reached higher and higher levels and the more sophisticated mode of work by the various contractors/sub-contractors and suppliers. In addition, the lack of time by the owners and/or the non devotion of the needed time by the technical staff involved, the increasing complexity of buildings and the fine timing of development-funding, have also caused the need to have a general coordinator and more of a full time employee for the job.

The Project Manager must be, in our estimation, a charismatic person with respect to building management. As in any management position, a university degree by itself will not secure the successful execution of a project management job. The Cypriot P.M. is primarily a coordinator, who must coordinate, not only the several consultants that are involved in a project, but also administer the Cypriot methodology of construction, making sure that the numerous sub-contractors and suppliers will be timely coordinated and operate in harmony with the main contractor. The erection of a building has a strong labour force and it is estimated that approximately 40% of the cost of a building is labour and 60% materials. As such the human element becomes very important.

The Cypriot Project Manager, in a summary, has the main duties to:

(a) Coordinate all consultants, so that the various drawings and specifications are produced on time and have full details.

(b) To examine such drawings and make sure that these reflect the client’s requirements and budget cost.

(c) To seek tenders, negotiate and suggest to the client the most suitable contractor, suppliers and sub-contractors.

(d) To chair site meetings and keep a constant watch upon the development process, keeping records, minutes etc and in general administer the construction process.

(e) To be responsible for the quality control of work executed and materials, in parallel with the supervising architect.

(f) To liaise with the public authorities for the supply of public services and sort out any problems/delays.

(g) To coordinate with the financiers and vet payment certificates to the Bank in conjunction with the project Quantity Surveyor.

(h) To deliver the project within the time and budget originally set and provide the client with alternatives if there are cost/time overruns.

(j) To secure the final certificate of approval/title deeds by the authorities, including the follow up of the red tape needed for the title issue.

The use of the Project Manager in the Cyprus building industry, refers mainly to large projects, since small scale jobs may be costly to employ this consultant, although he is becoming very popular with high cost private home investors and even with foreign people who are not here to look after the development progress.

The Project Manager has a good future in the local building industry and it is used both by the private market and the Government more and more. The Project Manager is especially appropriate for the offshore/foreign clients, who are not aware (neither have the time) of the local details/ conditions in the building process. The Project Manager should at the end of the day save considerable cost and reduce the owner’s headaches (and everybody’s else). As a rule of thump, from our own experience, the client should save 2-5 times the Project Manager fee, if the Project Manager is reasonably successful.

The average cost of a Project Manager is approximately CYP500-CYP1500 p.m. depending always on the size of the project and the required service. If for example, the client requires the Project Manager to retain a full time site agent and a quality controller, you must appreciate that the costs will increase. For larger projects you can estimate a fee of 1%-2% on the total cost.

By Antonis Loizou, FRICS
Copyright © 2006 Antonis Loizou & Associates Ltd. All rights reserved.

Cyprus Property Market Set to Boom, say Experts

Editorial
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CYPRUS is among the three EU countries – with the UK and France – where property is set to boom in 2007, with price rises of up to 15%, according to property specialists Assetz.

They say the island is among the established property markets, which will be the hotspots for 2007, while emerging destinations such as Bulgaria and Croatia are set to cool.

Local experts see the local property market booming with steady increases for the year, before it stabilises for a while with all types of property in Cyprus, including plots, flats, houses and offices affected.

Estate agent Evripides Lemonaris told The Cyprus Weekly that flats and houses will see increases of 10%-15%.

“Land is set to see even higher increases this year, up to 20%-25% due to the prospect of the introduction of VAT on plots of land in 2008. Expected demand this year is set to put prices up,” Lemonaris said.

He also sees an upward trend for office property, which has been through a decline.

“The demand for office property from large foreign companies, including banks and local organisations, for mainly large buildings, means the office property market is set to reverse its slump of the past few years,” Lemonaris said.

He said the only problem faced in the local property market now is a slump in the rented accommodation market, mainly flats, which is happening for the first time in many years, due again to supply and demand, with too many flats and houses available for rent at present.

Urban areas

Property expert and project manager Antonis Loizou, said that the property scene on the island is set to see a boom with an expected increase of up to 10% at least for most properties.

According to Loizou, land and development projects in urban areas will see an increase of around 12% while areas near towns will go up 15%.

Nicosia office property, Loizou said, would see an increase of at least 20%, as a result of demand, and this goes for old and new buildings.

Beach land is also set to see an increase of 20% and land near the sea front will go up, at least 15%, Loizou said.

The free Famagusta area, including Paralimni and Sotira villages, will increase by 20% and property in Larnaca 10% as result of over-supply.

Warehouses and establishments that are not so pricey will go up 15%, while expensive property, especially homes, will go up 5% and the not-so-expensive ones 10%, Loizou said.

Holiday homes in tourist areas across the island which are not near the sea front will go up 15% and land outside tourist zones will increase between 15%-20%, he told this newspaper.

Loizou agreed with Lemonaris that plots of land would go up by at least 20% as a result of the changes in local planning provisions and the prospect of the introduction of VAT next year.

The main reasons for the overall increase in the local property market his year was supply and demand, due to low interest rates (only 4%) in deposit accounts, foreign demand for property on the island and the change in the mentality of locals, who now prefer to buy property than live in rented accommodation.

Loan facilities

“The facilities given by banks, with up to 30 years for paying back, has made Cypriots to want to buy a home and sell it at a later stage for an even better one, rather than live in rented accommodation, “ Loizou said.

Loizou and Lemonaris thought emerging markets like Bulgaria, because of its EU accession, would see a bigger increase in their property market prices, around 30%-40%.

International property market analysts say property in Spain will level off this year, with no increases, Germany will be stable and the UK will see increases of up to 10% in London and 5% elsewhere.

Copyright © Cyprus Weekly 2007

Property Conveyancing in Cyprus

Nigel Howarth
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When buying property in Cyprus, lawyers representing the vendor and the buyer carry out the legal work required, which is known as conveyancing. The conveyancing process is fairly complicated and involves unravelling the legal jargon found in the Title Deeds, checking the background of the property, and various title searches.

The process culminates in completion (readers in Scotland will know this as settlement); the transfer of ownership of the property from the vendor to the buyer. In Cyprus, completion occurs when the Title Deed to the property is issued in the name of the buyer.

The property conveyancing process

The conveyancing process starts after an offer has been made and accepted for a property and lawyers’ details have been exchanged. Both parties must be legally able to sell or transfer the property before the property conveyancing process begins. The vendor’s lawyer will draw up a contract of sale. As a buyer, your lawyer will review the contract of sale and make various enquiries on your behalf to protect your interests.

Title search

One of the first things your lawyer needs to do is carry out a Title Search at the District Land’s Office. The point of this search is to establish whether the property you are thinking of buying is owned by the person trying to sell it and that there is not a mortgage or any other claims lodged against it. It’s quite common for a property developer in Cyprus to mortgage the land on which he’s building to raise the money to start a development. So it’s essential that your lawyer checks this out.

If your lawyer finds that the property is mortgaged, he should ask the vendor to provide a “release” from the financing company or bank stating that the property you are buying is released from the mortgage. If the vendor is unwilling or unable to obtain a “release”, your lawyer should advise you not to proceed with the purchase. The potential consequences of buying a property that is burdened by a mortgage in Cyprus, or anywhere else for that matter, are disastrous; you risk losing everything.

Plan search

You may also ask your lawyer to arrange for a surveyor carry out a Plan Search at the District Administration Office. This establishes whether there are any developments in the pipeline near the area in which you’re buying. Please don’t make the mistake of taking the developer at his word when he says he has no intention of building next door to you – get your lawyer to check it out as part of the conveyancing process.

Geological survey of the building plot

You may also wish the surveyor to assess the suitability of the land for building.

Planning permission & building permit

Ask your lawyer to check with the authorities that Planning Permission & Building Permits have been issued for the property you’re thinking of buying. Your lawyer will probably arrange for a surveyor to carry out this task. Building without the required Permissions & Permits is illegal in Cyprus – so get them checked as part of the conveyancing process.

Contract

Your lawyer will review and possibly amend the contract of sale provided by the vendor’s lawyer to ensure your interests are safeguarded.

Once your lawyer is completed their work on your contract, you should be given the opportunity to review it & discuss it with him/her. If there is anything you don’t understand, now is the time to ask.

Some of the ‘standard’ contracts used by Cyprus property developers are very biased in their favour leaving the buyer with very little protection. If the lawyer carrying out your conveyancing is presented with one of these, they’ll have a fair bit of negotiating to do on your behalf to achieve a proper balance!

Once you are satisfied with the contract you need to sign it. Be aware that once you have signed a contract that’s it – there’s no contract cooling off period in Cyprus as there is in the UK.

Once all parties have signed the contact, four copies are made and stamped at the District Lands’ Office. One of these copies is stamped ‘original’ and will usually be kept by your lawyer. The remaining copies are stamped, with a CYP 1.00 Revenue Stamp and certified as being true copies of the original.

Stamp Duty

The lawyer carrying out your conveyancing will ask you to pay an amount of Stamp Duty. This is payable by you when you sign the contract – the rates are as follows (in Cyprus Pounds):

1.50 per thousand for purchase prices up to 100,000 and
2.00 per thousand for the part of the purchase price exceeding 100,000

So for a property costing 150,000 the Stamp Duty payable by you is 250.00.

Deposit contract of sale

Your lawyer should then deposit one copy of the contract of sale at the District Lands’ Office for what is known as ‘Specific Performance’. This is a vital stage in the property conveyancing process that I shall discuss in a separate article.

Taking possession of the property

Once the obligations of the seller and buyer, as stated in the contract of sale, have been fulfilled, you may take possession of the property.

Completion

Completion is defined as “When the sale and purchase of the property are finalised, and you become the legal owner of the house or flat”.

In the UK, the solicitors acting for the vendor and buyer agree a completion date & advise their clients accordingly. Usually it’s within a couple of weeks of exchanging contracts.

Unfortunately, completion in Cyprus can take years or even decades. I personally know several people who have been waiting more than 20 years to complete on their purchase and the average wait seems to be around 5 years.

Completion cannot take place until the Title Deed for your new home is available. And to put it bluntly, the time it takes the Land Registry to issue Title Deeds is totally unacceptable. Issuing Title Deeds requires the undivided attention of half the islands’ Civil Servants, each carrying a fistful of quill pens.

The administrative problems of issuing Title Deeds are compounded by the fact that there are no ‘incentives’ for developers (and others) to progress matters. Indeed, it’s often in their financial interests to delay things for as long as possible!

You can, if you choose, pursue the Land Registry through the Ombudswoman and the property developer though the courts.

During my CyBC radio discussion with MP Rikkos Erotokritou, he said “the House of Representatives are worrying a lot about the situation”. (Click here to listen to the podcast). I hope that means the Government be doing something about it!

To give you some idea of the scope of the problem, it’s been estimated that 1,000s of people are waiting for their Title Deeds and other estimates put the loss revenue to Government at some 40,000,000 Cyprus Pounds!

That’s enough of my ranting – here’s how completion happens.

Completion, the final stage of the property conveyancing process, is carried out by staff at the District Lands’ Office. They need the following information to accomplish the transfer of ownership:

  • A completed Form N270 – ‘Declaration of Transfer of Immovable Property’.
  • The relevant Title Deed being transferred.
  • A completed Form N313.
  • A certified copy of the Council of Ministers’ permission to acquire the property or a
  • Certificate of Permanent Residence issued by the District Administration Office (where appropriate).
  • Receipts confirming that the following have been paid:

Immovable Property Tax Town Tax.
Capital gains tax.
Estate Duty Tax.
Sewerage Board Tax.
Town rate & Communal rate.

People usually give their conveyancing lawyer power of attorney to attend the District Lands’ Office and facilitate completion on their behalf.

Property Transfer Fees

At completion, you are required to pay Transfer Fees and in return, the Land Registry Office issues a Title Deed bearing your name as the legal, registered owner of the property. At the time of writing, the fees are as follows:

3% – on the first 50,000
5% – on the next 50,000
8% – on the remainder

So for a home costing 100,000, the Transfer Fees would be 4,000; for a home costing 200,000, the Transfer Fees would be 12,000.

If your Contract of Sale is in joint names (e.g. a husband and wife), the lower rates are granted to both parties, i.e.:

3% – on the first 100,000
5% – on the next 100,000
8% – on the remainder

As a result, the Property Transfer Fees for a home costing 200,000 in joint names would be 8,000.

The Land Registry Office normally uses the price you paid for the property (its declared sale price) to calculate the Property Transfer Fee. But if the Director of the Department of Lands & Surveys considers that the price you paid was below the property’s market value at the date of the agreement, he will determine the market value on which the fees are payable. Once you have paid the transfer fees, you may apply to the Supreme Court to contest the Director’s decision.

In the words of Professor Dr. Andonis Vassiliades, Professor of Law, Criminology & Penal Justice and a Legal Consultant: “the end result is sure and satisfying. You leave the Land Registry Office knowing full well that the property is now yours. You own that property!”

Open that bottle of champagne – time to celebrate!

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