2009 was a disastrous year for the Island’s property market and 2010 was not much better. After a promising start to last year with sales improving on 2009 figures, sales declined for six consecutive months between July and December.
The market in 2011 has not got off to an auspicious start with property issues once again making headlines in the English language press. This bad publicity will do nothing to encourage overseas buyers, and in particular British buyers, to return to the market.
Title Deed legislation?
Readers may recall that in June 2008, Interior Minister Neoclis Sylikiotis assured property buyers that legislation to resolve problems in the sector could be implemented by the end of the year.
Last week, more than two years after the deadline Mr Sylikiotis set himself, Chairman of the House Legal Affairs Committee proudly announced that the Island’s Deputies (MPs) had agreed a solution to one of the many problems that Mr Sylikiotis was looking to resolve – developers’ mortgages.
This solution graciously allows those buying property to repay part of the developer’s mortgage to get the Title Deeds to their home.
Of course, this solution is merely a way of ensuring the present system continues virtually unhindered and does nothing to protect buyers from the crooks and conmen that plague the Island’s property industry.
Details of the other legislative changes being proposed have yet to emerge. But if they are as ridiculous as last week’s ‘solution’, no-one will be delighted; apart from perhaps the Banks and property developers.
Also last week we received news that District Lands Offices (DLO) are continuing to overvalue property when assessing the Property Transfer Fees. These fees are effectively a sales tax payable at the legal completion of a sale and are equivalent to the Stamp Duty Land Tax or SDLT, charged on property transactions in the UK.
In some reported cases DLO valuations are more than double the property’s purchase price.
Let us take an example of a recent case of overvaluing by the Paphos DLO of a property bought in joint names (husband & wife) to see the impact of this practice:
Property Transfer Fees based on the €130,000 paid to the developer – €3,900
Property Transfer Fees based on the Land Registry’s market valuation of €280,000 – €10,582.80
This overvaluation by the Land Registry cost the buyer an additional €6,682.80 in Property Transfer Fees.
If the property had been purchased in a single name, the additional Property Transfer Fees would have amounted to a cool €10,774.19.
Although the buyer has the right to challenge the Land Registry valuation, it would be Land Registry staff who would undertake the on-site revaluation of the property. How objective and impartial would their valuation be?
Impartial legal system?
The impartiality of the Cypriot legal system was brought into question last week following the unexpected verdict in the celebrated Conor O’Dwyer saga that has been dragging on for the last five years.
Mr O’Dwyer lost his private criminal prosecution against property developer Christoforos Karayiannas & Son Ltd concerning the sale of his house for a second time. The prosecution case against the woman who bought the house, Michelle McDonald, also failed.
Despite damning evidence to the contrary, the judge ruled that Christoforos Karayiannas had not committed fraud by selling Mr O’Dwyer’s home for a second time to someone else, and to add insult to injury, she ordered O’Dwyer to pay the defendants costs.
Speaking to the Cyprus Mail after the judgement Mr O’Dwyer said “My worst fears have come true. What this means is that a developer can keep your money and never deliver your house, then if they want they can re-sell it. Our contract is in the Land Registry and someone else is in our house, it’s that simple.”
There has been much discussion on Internet forums about the judge’s decision. Some believe she was bribed, some say she was leaned on by the local mafia, others say that she deliberately interpreted the law incorrectly to favour the Cypriot defendants.
Mr O’Dwyer’s lawyer, Yiannos Georgiades will file an appeal with the Supreme Court in the next few days, provided that the Attorney General gives his consent. “It’s a mistake on the judge’s part”, he said.
It is difficult to see how the Island’s property market will not be damaged further by these events. It is also difficult to see how Cyprus can recover from the damage without its government taking immediate and effective action to resolve the many problems and restore overseas investor confidence.