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You would be mad to buy a holiday home in Cyprus

You would have to be certifiably insane or just plain awash with money to even begin thinking about buying a holiday home in Cyprus; governments have really done nothing to resolve the Title Deeds disaster.

holiday homes developmentYOU MIGHT expect that with building permits tanking, construction reeling and prices plunging we were looking at all those factors which should shortly create conditions for a strong market upswing, but that is not going to happen in the holiday homes market in Cyprus any time soon, even with the huge ‘overhang’ of unsold units from the last ‘boom’.

In 1990, if you had wanted to buy something on the Larnaca/Dhekelia road, the price, converted into euros, would have ranged from €17,500 for an apartment to €50,000 for a small house.

Ten years later, a small house in Protaras would have cost you around €120,000 and that same house five years later in 2005, around €220,000.

At this point, the holiday homes market was dead in the water with the average price of a holiday home in Cyprus exceeding the price of a house in Wallsend, near Newcastle.

The boom was on its way out, but many new developers did not realise that until later on and continued to build, borrow, and take deposits as if all was well.

Up until then, the ‘early settlers’ didn’t understand price except by reference to back home, namely “much cheaper than the UK”. They certainly didn’t understand registered.

The thought that Cyprus operated under an English system obscured all.

Beating prices in Wallsend, the advent of social media, the advent of opportunistic developers, the huge publicity given to such as the O’Dwyer case, and the someone knowing someone who didn’t have title deeds or even the remotest chance of them began to take a heavy toll long before the financial crisis and later, the kourema or haircut.

According to the theory we should now have started seeing buyers come back into the market.

Prices have fallen up to 50 per cent. Wallsend is more expensive again. Yet in the first two months of 2013, there were three, yes, three transactions in the Famagusta district, involving foreigners, who, don’t forget, made up 80 per cent of buyers in the holiday homes market in Cyprus.

We are forced to conclude, either that potential buyers believe that prices have still further to fall, and I agree, or that these markets are not at present price sensitive, with which I also agree. So what’s in the way?

You would have to be certifiably insane or just plain awash with money to even begin to think about buying a holiday home in Cyprus at the moment. This government and the last have really done nothing at all to resolve the title deeds disaster.

Christofias’ ‘amnesty’ was a help for solvent, reputable developers, but for the insolvent and those developers who never intended to provide deeds, it did absolutely nothing to advance the case. More seriously, it showed the impotence, or unwillingness, of the government to deal with this at all, and that is the message to the world.

Much of what is available for sale, not only doesn’t have title, but if it does, it is old and needs refitting. Or frankly, it is crap: poorly located or positioned, densely developed and with neglected, overgrown, run down common areas.

Almost nobody wants to buy a holiday home in, say, Frenaros or Dherynia. It would be tough to shift much of this available stock or planned projects at any price.

Meanwhile, taxation has increased: now we have VAT and property tax that actually has to be paid and we know that it is going up progressively.

The scams of super inflated service charges and signing fees are now all well-known too. The solvency of developers is another issue, and, if not, then confiscation or repossession by the banks will be.

There has also been a fall in Russian buyers due to EU sanctions.

And let’s not forget the unavailability of credit and the fear of Cyprus’ banks, not just due to capital inadequacy and non-performing loans (NPLs), but previous scams like the promotion of Swiss franc denominated mortgages.

The poor regulation and doubts about performance standards of lawyers and estate agents and other service providers also comes into play, and the anti-foreigner sentiment.

Now, whether any of this is right or wrong is in a way irrelevant. It is however what potential overseas buyers perceive.

Make no mistake, unless something seismic happens this is where we are headed. Instant sticking plasters like primary residence protection are all well and good, but no substitute for a comprehensive overhaul to make the system work instead of trying to fix a broken outdated system.

If I were a bank I’d be spending a lot of time in the toilet

If I were a bank, I think that I should be spending quite a lot of time in the toilet. You cannot deal with 47.47 per cent NPLs without a market. We don’t have a sufficient market.

That is not to do with price and even if it were, prices falling further wouldn’t help the banks. It is to do with structure, and in my opinion, only the government, in consultation with serious industry players can fix that and at present there is no sign of the realisation of the extent of the problem.

The government cannot keep its head in the sand. The sooner we have a modern land law and tenure system, the financially safer we shall be.

For those of you who are still awake, you will by now have realised that although there was a market downturn, buyers long ago got sick of the system, the lack of quality, and greedy prices.

In other words the system is broken. There is a danger that exactly the same is now going to happen to tourism, the nation’s only remaining industry.

It’s of such poor quality and very expensive, and there is no respect for the customer or understanding of their needs. Without tourism, the kindling for the holiday home markets also goes away as well. Kalinikta. It’s margarita time.

About the author

Philip Beardwood, Bsc Est Man FRICS, is a real estate professional.

Readers' comments

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  • Reg says:

    Looks like sales are now starting to rise. We bought in 2007 in Limassol area, have really enjoyed 7 years holidaying in Cyprus (2-3 times each year) without the problems you have mentioned, and hope to continue for some time yet. Tourism is picking up (UK also suffered due to the economy but life here is now on the up). Perhaps a bit more positive attitude would help.

    I am not certifiably insane or awash with money, but look at the positive side of Cyprus.

  • andyp says:

    Cyprus deserves no favours until all who have paid for a property in full are given their deeds with no penalty payments for developer mortgages or rectifying planning and building problems caused by their developer.

    Too many estate agents protest too much yet some were selling property on behalf of developers where the developer did not even own the land.

    Under the present system too many things can easily go wrong and the honest and trustworthy are hard to find. The buyer only finds out how wrong they were when it is all too late.

    I do not know about the author’s numbers but totally agree with the sentiment.

  • Denton Mackrell says:

    In a normal economy with a depressed property sector, it would be tempting for buyers seeking bargains to rush in as Maria Maclaren advocates. However, not only is the property sector here and the behaviour of developers, lawyers and banks anything but normal (as Nigel notes in relation to the scams and frauds) but also the finance sector is still extremely vulnerable.

    Bank of Cyprus may well experience a second crisis (next year?) as a result of its on-going failure to call in all those NPLs, especially from developers. That debt overhang goes beyond the current EU bailout and not surprisingly the Troika may have to get tough if the banks continue to pussyfoot with liquidations.

    And what about the supposedly safe banks such as Hellenic? Behind the scenes, there has been a quiet takeover of Hellenic whereby Wargaming, a subsidiary of Demetra which is controlled by Co-op Banks, has a controlling stake. But hang on, aren’t those Co-op Banks the same ones who themselves have a 57% NPL debt mountain and have been nationalized by the government?? See George Markides’ illuminating article The new owner of Hellenic Bank: The Cypriot government. So, Hellenic has gone from a ‘good’ bank status to a potential high risk owing to who owns it.

    The BoC saga and the Hellenic saga plus the shaky Co-ops do not inspire confidence for holding any money in Cyprus or for any major financial transactions here – that must include property buying/selling. There has already been one haircut.

  • Brian McSkimming says:

    I read with interest the comments on being mad to buy a property in Cyprus. Unfortunately I am one of the 1000’s of people who have been ripped off and I can confirm you would be “mad” to buy a property in the corrupt island. I genuinely feel the lenders, lawyers and government officials have been in cahoots to rip off buyers and put individuals in financial difficulty – people have committed suicide over their buying experiences.
    Stay away from this island, that’s the best advice I could give anyone!!

  • @Akis – The system is relatively safe, but many people have been systematically lied to, cheated, deceived and robbed by nefarious developers who claim to be ‘reputable’ – plus lawyers who claimed to be ‘independent’ yet who were in bed (literally in some cases) with the developer and who totally failed to protect the interests of those buying.

    The only fools are those developers and lawyers who destroyed the island’s property market through their own greed, dishonesty and stupidity.

  • Akis says:

    The ‘system’ can be safe for those who buy property while sober, preferably before baking in the sun.

    A buyer can request due diligence for the property he/she intends to buy (both technical&legal), can ask for a bank waiver upon signing to guard against rogue developers and mortgages and can ask for a bank guarantee to guard against late completion and issue of titles. Ah! Buying from reputable developers is always a good idea!

    The tools are there and only fools do not use them. So now you know!

  • Maria Mclaren says:

    Well these comments are doing Cyprus no favours. Cyprus is a wonderful island and now IS the time to buy. there are many properties with title deeds if this worries the clients or bank guarantees from the developers. Has any other country in Europe got such growth as Cyprus with its Oil and Gas reserves. You can bag a bargain as they say. A bungalow 5 mins from Coral Bay for €170,000

    2 bed apts on beautiful projects with titles 105K or a towhouse in Pafos for 105K and all with title deeds. the prices will not be going down any further as the NON Europeans are buying many properties and developers have prices now higher than last year. yes re sales are much cheaper but they wont be staying cheap. Cyprus is a small Island with the Oil will be very rich in the years to come. Any property bought should be a good investment.And you wont go wrong buying in Cyprus with honest help and advise.

  • Robert Bate says:

    What a pity we came to Cyprus 3 years ago and decided we would like to retire there, and there was a little warning even then that something was brewing

    Its my dream to leave south Africa and live the rest of my short days in Cyprus but it doesn’t look like a reality with the SA Rand and Government greed going mega corruption, and your beautiful island has lost its direction and good leadership;

    But still hopeful.

  • @Zak – everyone is entitled to their opinion, whether you agree with what they say or not.

    You can find the sales statistics on the Department of Lands and Surveys website – and I publish them each month in the Property Sales section. If you check the recent article you will see that just 3 contracts to purchase property in the Famagusta district were deposited during January and February of 2013.

  • NIKOS FILIPOU says:

    Property prices in Cyprus have long been out of reach of the majority of the population. That’s why there was a growing real estate loans market set up by the banks….if you were lucky to be approved for a loan then you were tied for life to that loan at a high interest rate.

    Of interest is the the real estate price vs net salary index…Cyprus has the highest margin of any country in Europe….property prices are out of reach for the average wage earner. People have turned to Eastern European countries and …funnily enough…Greece to buy their properties. You can find cheaper and better deals there.

    And yes, property prices in Cyprus will plummet…..the market is in a slow downwards spiral and those left after the event will not necessary be the those that deserve to be around.

  • Zak says:

    I am surprised and shocked with this man comments. Why is he allowed to write this rubbish and without giving the correct picture. 3 sales in famagusta area? Did you check the other areas? did you get your figures from the land registry office?. I will highly recommend that before you print something you get your facts right!.

    Is an absolute disgrace to allow this kind of journalism if I can call it that. Obviously the gentleman purchased a S…t property in Larnaca area somewhere! and how is a Real Estate professional is he operating with a register license?? or is it another Brit that set up a website selling property for a quick buck??

  • Costas Apacket says:

    The Cypriot Government repeatedly says that:

    1) It wants to attract more inward investment into Cyprus to help restart the economy.

    and

    2) One of the biggest challenges to the Cypriot economy is the growing number and amount of NPL’s.

    So cleaning up the property market will achieve at least two things to help with the above.

    1) It will encourage good publicity which will attract new inward investment.

    2) Property Developers, who collectively owe a vey large percentage of NPL’s, would start to receive increased incomes from property sales which they could use to begin the repayment of their NPL’s.

    Is it only me who can see the obvious benefits of a property market clean up?

    Are the vested interest groups so strong that they even prevent common sense prevailing?

  • Costas Apacket says:

    Despite the many significant changes being carried or being planned by the current Cypriot Government there has not even been the suggestion of a potential change in the property conveyancing or land law system in Cyprus.

    In the current climate of plummeting property prices and the ongoing total mistrust of the Cypriot property market doesn’t this just tell its own sorry story?

    Clearly it’s either not a priority for the Cypriot Government or the benefits of change are outweighed by the vested interests of the usual suspects?

    I think I know which it is.

  • Gavin Jones says:

    The horror stories of thousands of people will confirm that there’s not a lot wrong with what’s been written in this piece.

    More worrying still is the fact that absolutely nothing’s being done to change tack and address the criminality of what’s going on. Shameful and yet so predictable.

  • JaneW says:

    I could not agree with Caroline B more. Surely all member states of the E U should have the same rules when it comes to buying and selling property. Cyprus seems to be a very corrupt country which makes it own rules up as it goes along. I feel the same as Caroline regarding visiting the island again. We have two apartments which we bought there and I would love to sell them at a loss but unfortunately one of them is so badly built we feel we will never be able to sell it. I too feel that I never want to set foot in Cyprus ever again. It’s is a shame because we bought our properties there for ourselves and our family to use. The stress this whole business has caused so may families is a scandal.

  • AndyM says:

    “Ten years later, a small house in Protaras would have cost you around €120,000 and that same house five years later in 2005, around €220,000”

    Yeh and how much is that house now? I don’t know where all these cheap houses. All the websites I view from the UK selling houses in Cyprus still seem expensive to me.

    Furthermore the advert should add you’ll be mad to buy a holiday home…….without title deeds !

    Or are those houses with Deeds still extortionately expensive?

    There are two different prices – those at which properties are being advertised and those at which properties are being sold. There’s an article by Pavlos Loizou on the subject at Why aren’t prices falling as much as they should? – Ed

  • Caroline B says:

    I’m in the process of selling 2 properties, touch wood I’ve sold all be it at a loss and am working to get the deeds sorted on the other one to make it a bit more saleable. But what a shambles and if I’d known in 2004 what I know now I would’ve run screaming from the country. It’s really about time the EU stepped in and sorted out the inconsistency that runs throughout the whole of the EU. If we want to be one union then we should at least have the same rules and principles.

    It is a shame because Cyprus is such a beautiful country but after my visit in May I won’t be returning again.

  • MartynG says:

    Leaving aside the Query regarding his ‘credentials’ the Author, whatever his full name/title and possible past track-record in Cyprus, has described very well the complete Mess that is the RoC property markets today. Not just the Holiday Home markets either, his comments apply also to the whole of the RoC residential property scene.

    Decades of lax regulation, weak government and lack of adhesion to even the rudiments of ‘prudential Banking’ mean, even with a remarkable overhaul of the fundamentals in this country and the apparent strict Oversight by the Troika (of which personally I have seen little if any real ‘evidence’) we are still looking here at the long-term ramifications of a catastrophic collision of incompetences and overall lack of regulatory and professional ‘standards’.

    With little done so far to do anything but begin to ‘scratch the surfaces’ of the inter-connected fault lines in the overall broken RoC property/construction/legal/banking ‘system’ I sense the national foci will quickly turn now to trying to tap/convince new markets that somehow the Cyprus property scene has been, is being ‘Mended’. Or else just leave the mess to fester and switch national attention/efforts to ‘Med-gas’ and see whether that can become the next ‘Big White Hope’?

  • Sue says:

    This is such depressing news and does not do we the sellers any good, my property has been for sale for four years, due to the fact my partner died, how cosy to sit in another country and shout your mouth off.

  • Peter Howard says:

    Interesting comments from a ‘real estate professional’ whose main company was dissolved a few years ago !!!

  • Chris Ellinas says:

    Totally agree with everything said.

    I have Investment over there myself and can’t really see a return for many years to come.
    It really needs to get its house in order, corruption is and always has been a major issue over there.

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