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.
Institutionalised Extortion?
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.
Conclusion
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.
As a British investor in the Cypriot property market and someone who did extensive research prior to purchasing property it was only by chance that I bought from an honest and credible developer. That to one side, our Cypriot solicitor then tried to sell me a different property stating that I was overpaying for the first, a statement I disputed parting company with that solicitor.
To give you my thoughts on the situation we have in the Cyprus property market:
We in the UK have only recently heard of the term “Toxic Debt” Cypriot banks are full of it, in the form of secondary mortgages to developers, to rid the banks of this debt it would fall upon the Cypriot Government to “bail out” the banks as the UK government has done for the UK banking system.
The only difference between the two Countries relating to this debt is that UK banks invested heavily in the US property market, a market that crumbled whereas Cypriot banks have invested in a faltering and abused domestic market and until the banks are rid of this debt then the property market in Cyprus will always be susceptible to unscrupulous practices.
As a British investor in the Cypriot property market and someone who did extensive research prior to purchasing property it was only by chance that I bought from an honest and credible developer. That to one side, our Cypriot solicitor then tried to sell me a different property stating that I was overpaying for the first, a statement I disputed parting company with that solicitor.
To give you my thoughts on the situation we have in the Cyprus property market:
We in the UK have only recently heard of the term “Toxic Debt” Cypriot banks are full of it, in the form of secondary mortgages to developers, to rid the banks of this debt it would fall upon the Cypriot Government to “bail out” the banks as the UK government has done for the UK banking system.
The only difference between the two Countries in this debt is UK banks invested heavily in the US property market, a market that crumbled whereas Cypriot banks have invested in a faltering and abused domestic market and until the banks are rid of this debt then the property market in Cyprus will always be susceptible to unscrupulous practices.
“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?”
EU Law has already ruled on this issue and found it unfair. In the case an employer dismissed a worker, the worker appealed as allowed under it grievance procedure, and the person who heard the appeal was the boss who sacked him.
How fair do you think that is, as the boss put his other hat on to decide if he had made a mistake? I can only think of one Country where they would say.. “Well what is the problem”?
Even the Cypriot Mafia will eventually realise that protecting the Cypriot crooks will damage the whole island and everyone will eventually suffer in the long run.
Cyprus is way too small for locals to profit healthily without overseas investment and tourists.
Cyprus – You’ve had a good run over the past 20yrs. Many Cypriots are very rich. Their children & grandchildren are financially secure for many years to come.
But, like all Empires…Nothing lasts Forever !