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50,000 housing units in Cyprus unsold

Up to 50,000 housing units in Cyprus have remained unsold for a considerable time based on the difference between the number of building permits authorised and contracts of sale deposited at Land Registry offices.

unsold housing units in CyprusTHERE COULD be as many as 50,000 unsold housing units in Cyprus according to the European Commission’s Country Report Cyprus 2016.

This figure of 50,000 is assessed on the difference between the number of authorised building permits and the number of contracts of sale deposited at Land Registry offices.

However, if the number of unsold housing units is estimated on the number of contracts of sale deposited at Land Registry offices minus the number of Title Deeds remaining to be issued, the number of unsold units is at least 18,000, which is still a significant number.

But if we assume that investment in houses each year is determined by the number of units sold in that year and that new houses take two years to go on the market for sale, over-investment can be estimated as sales minus sales two years previously. Adding this gap, between 2018 and 2015, gives about 28,000 unsold properties. (However, this calculation underestimates the stock of unsold houses if there were also houses left unsold before 2018.)

Over the five year period 2011 to 2015 an average of 5,300 contracts of sale have been deposited at Land Registry offices each year. So whichever way you calculate the number of unsold housing units, it will take some years to clear the housing stock overhang.

The report also notes that approximately one third of the housing units built and sold since 2000 are still legally owned by the vendor and, with over 40,000 such cases, this is a major problem.

Typically, the home buyer has paid the developer most of the sales price, or even its entirety, and has become a de facto owner. However, legally, the seller (usually a developer) still owns the property, as the transfer of the title deed has not taken place.

In some cases developers have failed to repay the mortgage loan for building the property, despite having received the proceeds of the sale. As a consequence home buyers who have not received their title deeds may have an incentive to default on their home loans, since the bank that granted the mortgage (or other creditors) cannot foreclose on their property. Instead, it is the bank of a non-performing developer who has the right to seek foreclosure on the property. However, that would lead to evicting the home buyer, who would be left with only a junior claim to the foreclosure proceeds.

Foreclosing on such de facto sold, but not transferred, property, though legal, would seriously undermine the attractiveness of Cyprus property market to foreign investors and would be politically and socially unacceptable.

The report highlights the significant problems with the issuance of title deeds, stemming from slow administrative processes and notes that although progress has been made on speeding up title deed issuance, the procedures are still lengthy and uncertain.

Since 2013, roughly half of the backlog in title deed issuance has been cleared. However, the still complex title deeds issuance procedures are not supporting a swift cleaning of the backlog, which still remains substantial, despite significant administrative efforts undertaken.

The Commission considers that the difficulties in issuing and transferring title deeds hamper competitiveness and deter international investors. The Cypriot property market has been very dependent on foreign investors, particularly as regards the most distressed assets (middle-class coastal holiday homes).

Foreign investment in the property market has dwindled with the crisis, and given the title deeds situation, has not returned to Cyprus. A return of foreign investment would support the recovery of the housing market, and thus would help improve banks’ balance sheets.

Further reading

European Commission ‘Country Report Cyprus 2016’ (pages 32 – 35)

Readers' comments

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  • sky says:

    Problem is people tend to forget real estate market, as every market, may as well sky-rocket as plummet…People who got used to the prices artificially created (thanks to way too easy lending) during the 2004-2008 property bubble, think that they can sell today their house at those ridiculously inflated price (clearly “I’ve got conned, now I’m trying to con you”).

    Problem is that buyers are today aware of the con, of the conditions that created the bubble, that real estate market is very low, and that people know that the building standards are very low (and so houses never deserved the price they were sold).

    So we now have cautious buyers, and sellers who have made an initial bad investment and just don’t want to admit it (or rather, admit they are going to loose a bunch of money…).

    So properties stock is increasing, thus reducing even more (law of supply and demand), the value of properties in Cyprus…

    So now we’ve got a real estate bubble inflated by unsold properties, slowly deflating but waiting to burst…

  • embabaphos says:

    An understatement if there was ever one:

    The Commission considers that the difficulties in issuing and transferring title deeds hamper competitiveness and deter international investors. The Cypriot property market has been very dependent on foreign investors, particularly as regards the most distressed assets (middle-class coastal holiday homes).

    If the state does not streamline the whole process of sale-transfer to work along the lines of no deed no sale then its just a matter of time before we are at square one again.

  • robert stambouli says:

    I believe most of the statistics give a wrong impression of the market. One clear example 5 flats were purchased in 2006 but not registered with the land registry those 5 flats in agreement with the bank were first registered in the name of the buyer who got a title deed (as the developer had it already).

    A week later they were transferred to the bank and the land registry registered officially 5 sales again.

    These are 10 sales registered in a month that are in fact a result of sales in 2007.

    How do you factor those sales?

    (Editor’s comment: I don’t factor the sales. If you read the article the EC used a number of different methodologies to calculate the number of unsold properties. As far as I am aware, the granularity required in the figures to get an accurate picture isn’t available.)

  • Andrew says:

    Instead, it is the bank of a non-performing developer who has the right to seek foreclosure on the property. However, that would lead to evicting the home buyer, who would be left with only a junior claim to the foreclosure proceeds.

    Foreclosing on such de facto sold, but not transferred, property, though legal, would seriously undermine the attractiveness of Cyprus property market to foreign investors and would be politically and socially unacceptable.

    If the above is correct, then what good is the new “hidden mortgage law” The mind boggles.

    (Editor’s comment: I suggest that you read the article I published last Thursday ‘Applying for Title Deeds‘.

    As the European Commission has reported such a move would be “would be politically and socially unacceptable.”)

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