FINDINGS of an investigation conducted by Leaf Research into the property market in Larnaca show that there has been a significant decrease in the number of land transactions over the past few years along with falling prices.
Leaf Research’s survey results are based on an analysis of 23,394 transactions registered at the Land Registry office in Larnaca between 2006 and 2011. These transactions relate to properties whose ownership has been transferred to the name of the buyer, as well as sale and purchase agreements where a contract has been deposited against a given property.
This analysis forms part of a much larger analysis of Land Registry data being undertaken by Leaf Research known as ‘Project RED‘ (Real Estate Dynamics).
Larnaca was chosen for the analysis because of its size and the relatively balanced nature of its property market compared with other parts of Cyprus. Although Larnaca has a significant proportion of overseas buyers, it does not have as high a proportion as Paphos or Famagusta – and it also lacks any ‘special factors’ that could affect prices; for example the lack of overseas demand in Nicosia and the high density of Russian speaking buyers in Limassol.
The main conclusions resulting from the analysis show that there has been:
- a much higher reduction in land transactions (building sites and fields) than other types of property. Between 2007 and 2011 the number of land transactions fell by 80% compared with a 71% fall in the overall number of property transactions;
- a higher reduction in apartment transactions than those involving other types of residential property. Since 2007 the number of apartment transactions has fallen 86%, while the number of transactions involving other types of residential property has fallen by approximately 60%;
- a significant drop in property prices. Although all types of property have been affected by the fall in prices, the price of fields has declined the most.
Property prices
The price table below shows the median price of various classifications of property declared to the Land Registry.
Since prices peaked in 2008, the median declared prices for fields has fallen 67%; those for building plots are down 31%, while those of apartments and houses are down 20% and 11% respectively. It is also clear that prices of fields started to decline much earlier.
Millions lost to government coffers
LEAF Research has also calculated the loss of revenue to the government resulting from its inability to transfer title (ownership) of a property to its purchaser at the time of delivery.
This loss in revenue amounts to the taxes paid by purchasers (Property Transfer Fees) and sellers (Capital Gains Tax) on the legal completion of a sales transaction.
Over the period analysed by Leaf Research, the delayed payments amount to €30,171,000 from Property Transfer Fees and €90,745,000 from Capital Gains Tax.
That amounts to approximately €121,000,000 to be received by government only when (and if) the Title Deeds are issued and when (and if) both the purchaser and seller agree to carry out the transfer.
Stuart Johns – Stick in there!
Nigel – Good link and advice!
@Stuart – The Larnaca Golf Property Action Group is holding an emergency meeting in London on 28th April – I suggest you go along.
More details on the LGPAG home page.
Hi everyone, I purchased a off plan Apartment, from Livadhiotis and Sons in Larnaca. This took place in 2006, I paid approximately €49,500 for this one bedroom based in Tersafanou. I was introduced to the above developer by a man named Andy, who in turn turned me over to a Salesman named Chris Pertru, he is employed at Livadhiotis and Sons in Larnaca.
Chris Petru stood very charismatic and a smooth talker, he told me that a Golf course would be built in Tersafanou and my €49,500 would double in less than 3 years.
Well, you got it! I went ahead and signed a contract through one of their preferred lawyers and the nightmare began.
2008 my Apartment was completed and I had paid the developer in full.
It was at this time that Chris Petru approached me and drove me to another investment sight for a 2 Bedroom Apartment off plan close to the the airport.
Later that evening, I received a phone call from Chris to meet him and his boss Panikos Lavidhiotis. I was presented with a contract and it was suggested I move the funds from my original apartment and invest in the 2 bedroom. I refused and told both Chris and Panikos that I would not reinvest, purely based on the notion that I had no idea if I could make a profit. Chris at that immediate point in front of Panikos, that he could sell me my 1 bedroom in one week. Liar, Liar!
This never happened and since 2008 I have been billed every year for €600 for maintenance fees. I have lost my employment and am struggling like millions due to unscrupulous financiers. To this date I owe them €3000 in back fees and feel I was deceived in every way.
No golf course has been constructed. I have never used my apartment, never swam in the pool, never rode in the elevator, never use any of the services suggested. And to top it all off Chris Petru has lied to hundreds of UK investors, this was bought to my attention on my trip to Cyprus by Realtors and local investors.
I am livid at the whole situation. Be warned out there!
@Peter II – I have seen a sample of the raw data used to compile this analysis. The prices are the declared prices – i.e. those entered on the contract of sale or transfer document.
The best way of looking at the numbers is how much people are willing to pay for property in each of the four classifications.
The median price for fields in 2011 was €14,000 – and it should therefore come as no surprise that their sales have fallen by 80%.
Unfortunately, the raw data does not give the sizes of the properties.
(BTW I changed your name to prevent confusion with the other Peter)
I don’t accept the prices shown, even at medians. They are not a reflection of what is happening. I mean come on, 219k for a house in Larnaca. Maybe you can get such a property, but if this is a median, it would suggest that you could get them at much lower prices (which you can’t) to counter the much more expensive ones. Also, what is a field, how big for the prices shown. try buying a field in Larnaca for 14k, yeah, ok, where are they??
I take such data with a pinch of salt.
@Peter 8.02am.
I admire your stoical approach. We still have all this to go through, the scams awaiting us on all sides.
Two years ago the developer wrote to us and his other buyers. He demanded (retrospectively) IPT for several years, calculated on his understanding of the “law”. Any demands unpaid would be charged at 9%.
He also, amusingly, added that it was not to be taken as “an April Fool’s joke”!! (thinly veiled threat- extortion??)
We declined his suggestion.
Since when were developers legally allowed to act as tax collectors/administrators? I would have thought that this was the job of the Inland Revenue.
@Peter – you should not have paid the 9% interest. This is a penalty imposed on the developer by the Inland Revenue Department.
This is developer’s responsibility – it’s his fault, not yours.
@ Nigel,
Yes got a receipt off the developer, and just have to accept the write-off of the 9% interest p.a.
I have gone into Paphos Tax Office and got all the forms to claim the money back (Form IR 31), even downloaded the English version off the web. There is also a Greek version with transactions by you on http://www.cyprus-property-buyers.com/files/cyprus_IPT_recovery_IR_314.pdf
My developers said. “I wish you luck in getting your money back as the Government don’t like to give refunds”. So although I’m entitled he doesn’t think I will get anything back.
Apparently the most you can claim back is 6 years so I will still lose the other 4 years.
@John Swift – I’m afraid that you are confusing ambition with ability. Under what directives can the EU legitimately withhold grants?
@Peter – I very much suspect that you paid the €4,080.62 to the developer who told you that it was for Immovable Property Tax?
I further suspect that the 9% interest was added to the bill by the developer? (This would be the penalty added by the Inland Revenue Department to the developer’s tax bill for delayed payment).
Did the developer provide you with statements and receipts to enable you to reclaim any overpaid Immovable Property Tax from the Inland Revenue Department?
What documentary evidence did the developer provide to you proving that the money he collected from you was paid to the Inland Revenue Department?
The EU should withold any grants until all the outstanding title deed revenue is collected.
LEAF misses the point.
IPT has doubled from .04 to .08% in 2012. The amount outstanding is money in the bank, but there is profit in the delay. Because it took 10 years to transfer my property into my name I ended up paying €4,080.62 in taxes to the Government, money they would not have got if they had acted in a timely manner. €505 was for 2012 alone, plus 9% interest to my developer. I don’t know anyone else who can earn 9% interest in today’s market.
And then I still had to pay €11,083.66. If I had got my title deeds in 2002 it would only have been C6,300.
It’s a win win for the Government. It’s a good investment to keep people waiting.
@Costas Apacket – what do they do after 10:00 am on a Monday?
I have visited the Land Registry in Limassol several times. The offices are always busy and recently the number of emails I receive about Title Deeds being ready for collection has been growing, so things seem to be improving.
As for what they did yesterday, I expect they were waiting for the electricity to be switched following another massive blackout!
Thanks for all the comments in response to my spleen venting ramblings!
Nigel, the point I was trying to make is that the workload of the planning department and land registry is surely affected by the decrease in property sales so what do they do after 10am on Monday?
Andyp and Simon Edwards have again reiterated what’s been said and written for some considerable time.
The amount owed to the government in transfer fees and CGT is relative chicken feed in comparison to the €6+ billion owed by the developers to the banks. The former simply don’t have the money to repay their loans and with property sales down to a trickle, prospects aren’t exactly rosy.
In addition, I suspect that many developers aren’t servicing their loans either so the whole edifice, government, developers and banks, are locked in a dance of death.
Judgement Day is here and it’s a question of WHEN rather than IF this meltdown is going to be officially admitted.
I think they are not doing very much Costas because the real problem lies at the Banks who have been lending all this cash with poor management thereof at best.
The Developers have been allowed to go for years without servicing these loans which I guess are rolled over and not registered as losses. I would also guess that the Developers, God bless them, in reality cannot or will not pay them off.
Catch 22. If the Banks let the deeds go to the rightful owners perhaps the true Bank debt will be revealed and bye bye Banks. Then we might get some progress.
@Costas Apacket – If you follow the section on property sales, you can see how the number transactions have been falling over the past four years. This has nothing to do with the Land Registry – people are just not buying.
To answer your earlier question – only the Interior Ministry can answer. Clearly the system currently used and the long-winded process involved are well passed their sell by date.
And another question.
If Land Registry transactions have fallen by over 80% since 2007, what are they actually doing?
Costas a packet surely collecting this is impossible until the developer mortgages are cleared ? Therein lies the problem.
Costas a packet surely collecting this is impossible until the developer mortgages are cleared ? Therein lies the problem.
So this begs the obvious questions:
What is it within the current property ownership transfer system in Cyprus, that is so important or so difficult for the Cypriot Government, that it should prevent the collection of €121,000,000 in tax revenue at a time when the financial crisis in Cyprus is so dire that a €2.5 Billion loan from Russia is required to keep the country afloat?
Given that, (and I assume), the €121,000,000 of outstanding tax revenue is only for a proportion of the 23,394 property transactions registered at the Land Registry office in Larnaca between 2006 and 2011, what is the true outstanding revenue across the whole island that the Government could collect for all the outstanding Title Deed transfers, if it just took the relatively simple steps of amending the current antiquated and unfit for purpose property laws in Cyprus to allow Title Deeds to be issued at the point of sale as part of a normal property conveyancing process as employed in many other civilised EU countries?
I will ask again; What is it that is so important or so difficult?
Great, at last somthing more specific to Larnaca and detailing plots etc.
I hear theres a new (maybe its not so new ?) scam being tried (they will have a go if they can get away with it) by some in Larnaca. The reverse title deed scam.
Try to buy properties from desperate (with heavily reduced prices) suckers in 3-4 installments with horrible contractual clauses such as the title deeds are signed over after the 2nd installment.
Lets hope a huge influx of Chinese speakers will rescue Larnaca from the abyss.