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‘The end is nigh’ property firm spreads bank fears

Like thousands of others, I received an email from BuySell’s sales director advising me that that keeping cash in the bank is too risky and offering to find me a property bargain.

The end is nighEXPATS across the island were perplexed yesterday to learn that their bank deposits were worthless, Cypriot banks were on the brink of collapse and a further drop in property prices could lead to an imminent crisis.

They received the stark assessment via an email from BuySell sales director Chris Hajikyriacou, encouraging some 15,000 recipients to withdraw their savings and invest in gold… or property.

Hajikyriacou’s email said: “Your valuable cash or bank deposits are just a piece of paper or a worthless number on your bank statement… if you have deposits you should be psychologically ready to lose your money, unless you protect your wealth with some smart moves.”

He warned further that: “Cash in the bank is very vulnerable. If your bank collapses, your valuable lifetime deposits will disappear.”

The email was posted in one busy Cypriot internet chat forum, and while some readers quickly dismissed it as an attempt to boost property sales, the Cyprus Mail heard from one property expert that the message had caused quite a stir among the local expat community: “selling through fear, uncertainty and doubt is something that was practiced in the 1980s,” he said.

Association of Cyprus Banks boss Michael Kammas was quick to dismiss the email.

Kammas said: “I have seen the email and it is really not worth paying attention to. I am going to check with the external lawyers regarding the content.”

Asked about the email, the author, Hajikyriacou told the Cyprus Mail yesterday: “The end of the road is coming… now might be the best time to invest savings because the property market is devalued.”

This market devaluation, he says, is problematic because it has created a situation where residents are servicing mortgages for properties that were overvalued when purchased between 2003 and 2005. Hajikyriacou claims many of these people are simply leaving their properties and mortgages unpaid – and in the meantime banks are spending large sums trying to track them down.

“Imagine you paid €120,000 for an apartment that is valued at €60,000. If you have only put down €10,000 then you will want to pull out.”

With banks unable to recoup the money lost to property developers and buyers who took out the mortgages, a run on the banks, he said, would be “catastrophic”.

Hajikyriacou was unable to give any figures about the number of people who might have large sums of cash in the bank to invest, or the amount saved.

Asked about the factual basis for the claims in his email, Hajikyriacou said: “Unfortunately I don’t have the figures but many people are telling us that they are unable to pay their mortgage, and if the number is high enough then it could be catastrophic for the banks.”

However, he did give two anecdotes that he thinks are indicative of banking sector instability.

The first relates to an acquaintance whose bank would not let him withdraw €200,000 of his own money, the second when one bank allegedly refused to allow the sale of four properties for €10,000 less than the value of the mortgage.

This is in spite of an alleged 25 per cent to 35 per cent drop in property prices. Hadjikyriakou said that in the coming weeks he planned to reveal more information about the troubled state of the property and banking sectors.

Readers' comments

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  • donna says:

    He made a few mistakes and did not reply to my email with my points below.

    1.Deposits in banks are guaranteed by the government up to 100k per person per account

    2. It’s high time the properties reduced in Cyprus. Russian prices are not allowing us to join the property market…

    3.Is it not the estate agents that pushed the prices up in the first place and made lots of profit too?

    4. I agree property is a safe haven but if you get a mortgage the banks rates could go sky high and cripple you and you could end up loosing your home.

    5. Cash is king.. it allows us to be free to rent anywhere in the world and not tied to a red tape country where the mayor takes back hander’s to build lots of blocks and spend doing up Limassol for tourists i.e molo and castle area and not areas or roads that the tax payer uses.

    6.Have you ever invested in forex?

  • dimitri says:

    @hector, cash reserves of Cypriots banks being what they are, not seen the balance sheets but it is what I hear from those that do have some access to information, having said that it may all be a bunch of lies….who knows? the auditors who come in?

  • Odd_Job_Bob says:

    With regards to depositors’ protection, Cyprus is a member nation of the European Forum of Deposit Insurers and the Central Bank of Cyprus operates its Deposit Protection Scheme in accordance with EDFI guidelines.

    From the website http://www.efdi.net/, the most interesting line is: “EFDI does not have the power to make binding pronouncements….on behalf of its members….. The performance by EFDI….on any particular issue, is without prejudice to the sovereignty of its members”.

    To my mind, this means EDFI won’t do anything in the event of any bank default – it’s up to the individual member to take action. Fair enough.

    From the CBC’s website: http://www.centralbank.gov.cy/nqcontent.cfm?a_id=2794&lang=en, “The maximum level of compensation, per depositor and per bank, under the DPS is €100.000” which is great.

    It also states, “the amounts of deposits will be set-off against any loans or other credit facilities granted by the depositor’s bank as well as ANY OTHER COUNTERCLAIM (my capitals) that the bank concerned may have against the depositor in respect of which a right of set-off exists”. This appears to be not so great.

    Maybe it’s just my suspicious mind, but the MOST telling part of the website is the end bit in red:

    “This unofficial English text is for information only and neither the Central Bank of Cyprus nor the Management Committee of the DPF shall be responsible for its content. The official legally binding copy is the Greek text”.

    So, if we have money on a Cyprus bank account, we may have a mortgage on our property, the developer DOES have a mortgage on our property, the European governing body says they’re not going to do anything, the Cyprus protection scheme says it’ll deduct any money owing by us from our deposits, including ANY OTHER COUNTERCLAIM, before it pays us anything back AND that there is no official translation of its rules as they are all in Greek and will remain that way, how many of us are confident that our deposits will be protected in the (increasingly more likely given the Greece situation) event that our bank defaults?

    SQP. Do it now. Do it quickly. Hy Brasil IS sinking…

  • peter says:

    There is no protection for deposits in Cypriot banks, there are some empty promises. Maybe if the worst happens some Cypriots will be reimbursed at some point, foreigners will be fobbed off and even with the best will in the world the government doesn’t have the cash.

  • Gavin Jones says:

    Following on from CAB and Martyn’s comments, it would be worth having a peek at yesterday’s article and comments in the finance section of the Daily Telegraph entitled ‘Europe meets to discuss Greece debt restructuring’.

    Many have euphemistically commented that the Greeks have been rather less than truthful over the years in matters financial and have well and truly suckered the wider international community.

    Similar ‘economy with the truth’ charges are also currently being levelled at the Finance Minister of a certain Mediterranean island mostly populated by those with so-called Hellenic ancestry but I couldn’t possibly comment.

  • CAB says:

    Perhaps given that there are also rumours that Greece is going to default on it’s debts and even leave the Euro and re-adopt the drachma then it gives a little more credence to this e-mail.

    If Cypriot banks are going to have to wait longer to get their loans re-paid from Greece and then to get worthless drachma’s instead of Euros would you leave your money on deposit with a Cypriot bank???

    Would you like your withdrawal with or without a pool?

  • Martyn says:

    Well said Nigel, BuySell hardly have the Image of a responsible ‘estate agent’, all the man offers so far is a couple of anecdotes to kinda support his Proposition. We’ve heard of many people who have had Bad experiences in the bright bullish days of Cyprus properties and now this looks like blatant scaremongering to try flog a few more properties to boost his firms coffers.

    Beware a bit tho’ folks, many of us believe there are many problems in the Cyprus property/professional/banking sectors yet to be fully exposed and Yes there is ‘protection’ up to €100k per person – but if the crunch ever comes how long might it be before the Cyp authorities reimburse affected Depositors??

  • @PAUL LAMBERT – yes, the Cypriot banks do have a protection scheme – €100,000 for each account.

    Don’t read too much into the article, it seems to me as a desperate way to try and get you to buy property!

  • PAUL LAMBERT says:

    Is this going to be the start of a run on Cypriot Banks ? We’ve seen the images in the UK of queues of people desperate to get their cash out with banks panicking because they don’t have the cash in their vaults. Its happened in the UK where the system , despite its problems, is a helluva lots more stable than Cyprus.

  • PAUL LAMBERT says:

    Do Cypriot banks have the same protection schemes as those of the UK , where you are protected against a bank going bankrupt ? I would hate to be in a position where I could not get title deeds for a Cypriot property AND also loose money if my bank went under. What sort of country is this ? Its to be falling apart at the seams. You can guarantee that the dodgy developers and real estate agents are making alternative a safer arrangements for THEIR money ! Can’t imagine the banks in Cyprus will bother to tell any Brits if they’re going under, but will look after their fellow countrymen first !!

  • hector says:

    dimitri

    I hope you are right. How do you know that ‘I do know that most Cypriot banks have good cash reserves though..’?
    How long before the banks do start turfing innocent people out of their homes as is happening in North Cyprus?

  • dimitri says:

    We will all just have to wait and see what the reality is in terms of toxic debts….been a lag of about 3 years for the crisis to start being felt here…be interesting to see how the economy copes, at the moment all the talk is of the huge reserves of natural gas that has been found, as if this will cure all the problems of the island, I think not.

  • Gavin Jones says:

    Whatever spin any of us want to put on this, the situation IS extremely grave and the fact of the matter is that confidence is at an all-time low. The banks’ exposure to Greece AND their huge property loan book to developers and the public at large is great cause for concern.

    In addition, the pronouncements exiting from the Finance Minister, Stavrakis, hardly give cause for hope let alone enlightenment.

    Whatever Hadjikyriacou’s motives are as expressed in his email, I suspect they mirror what the majority of people already believe to be the reality of the current situation and it’s all too easy to shoot the messenger (him) in order to deflect attention away from his words.

  • dimitri says:

    @hector, sorry to hijack the posts, the banks aren’t servicing all loans for sure and live in hope that the grace periods they give to clients to pay back loans do not go on forever, re-possessions are happening, but like I have mentioned before it is not the cool thing to do, banks try to show a human face to the public, bad for business to be seen turfing people out of their homes ..I do know that most Cypriot banks have good cash reserves though…

  • dimitri says:

    @hector the banks borrowed money from the govt. at a low interest rate and with favourable terms, and the aim was that the banks themselves would lend out this money to us mere humans and businesses at rates that were more in line with Europe…all in an attempt to kick start the economy, guess what, banks are fleecing people though with their rates.

  • hector says:

    Is anyone really surprised at this? I’m amazed the banks have managed to keep afloat this long. Surely, even to my very low knowledge of banking, banks that have lent huge sums of money on property that is worth far less now, hasn’t been completed; and where the loan is not being repaid, must be in trouble. The banks have borrowed money to lend it, how are they servicing their loans? How much of the assets shown on their books are worthless? Is this the elephant in the room?

    Please, someone reassure me that I have it all wrong.

  • James JH Lockhart says:

    At the end off day the day the Greek Cypriots will blame outsiders, at the same time the ruling elite ie lawyers, smart developers etc will have all there corrupt and crooked gains in offshore countries.

    The crooked will incite normal Greek Cypriots that it is foreigners to blame etc etc

  • andyp says:

    I think someone is trying to sell a property or two.

    You can’t withdraw much cash in the UK either unless by prior arrangement.

    Having said that I did take most of my cash out as a protest against their involvement in the Cyp Prop Prob.

  • dimitri says:

    Dear Mr.Hajikyriacou so let me get this straight, what you are saying is that our deposits etc are worthless? at risk etc?, well if they are then why do you want people to purchase property? so they can give you their worthless cash so you can horde under the mattress instead of the unsafe banks? come on!

  • dimitri says:

    @Mr.Hajikyriakou, what next? have a read of what a UK website says about one major cypriot bank….

    http://www.thisismoney.co.uk/savings-and-banking/article.html?in_article_id=529636&in_page_id=7

    my banking sources say a bank cannot stop you withdrawing YOUR funds even if these are tied up in bonds etc, you pay the penalty and withdraw your money…maybe if Mr.H comes back with names and bank names then we can investigate further

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