DESPITE brave and confident statements from the government and some developers there appears to be little or no movement. It is tempting to blame the worldwide recession for this crisis, but the reality is much closer to home.
The market has dried up because the reputation of the property market has been destroyed by appalling controls, a ridiculously lengthy process and corruption.
Potential investors would be mad to trust their money here without effective safeguards. The international crisis has merely provided the catalyst for putting property markets under the spotlight.
In Cyprus this spotlight caused many vulnerable home buyers who thought their purchases were secure to question and protest through such organisations as the Cyprus Property Action Group. This travesty was predicted at least three years ago and much to the annoyance of the government was called the Cyprus Toxic debt!
But who destroyed this reputation? It is tempting to focus on one particular group or another, but the blame must be shared by many.
Unscrupulous developers have raised capital by reselling (mortgaging) property that they had already sold to someone else through a contract lodged with the respective lands office. This is fraud. It must have been committed if, on their mortgage application, the developers signed to say that no one else had a call on this property.
If the developer had sold the property and signed a contract with the purchaser knowing that a bank had first call upon it then this is also fraud. But it takes more than one party to commit these acts of fraud and the banks must also accept their share of culpability.
If the banks had carried out due diligence, they should not have loaned money on property to which someone else had a legal call. Indeed, did they even ask the question of the loan applicant? If not, they are guilty of negligence and should be fired! This is not shutting the stable door after the horse has bolted but merely complying with banking rules.
The lawyers who advised the property buyers must also be held responsible for not conducting thorough searches to discover whether the purchase was sound and whether the developer had borrowed money with the property as security. The Law Society bears a huge responsibility for not enforcing its own rules and disbarring members of its profession who both represent the buyer and the seller, thereby causing a conflict of interest.
The legal and judicial system deserves mention. Had the police investigated acts of fraud and the judiciary found perpetrators guilty and effectively punished them it would have demonstrated a serious resolve to stamp out such crime.
The next category may be uncomfortable to many, but the purchaser must also take some measure of responsibility. Those purchasers who came from the UK are well aware of the stringent safeguards that are in place to protect them when buying property there. Yet when they come to the sun they forgot all common sense and seemed to believe that the nice developer’s solicitor would be fine working for them as well!
They also failed to ask the nice solicitor whether his firm would conduct a thorough search on the property and the financial circumstances surrounding it! How do we know what level of search is conducted unless we ask? We cannot assume that standards are the same as those of our own country.
And what of the purchaser who does not want to pay their transfer tax? There are probably in excess of 130,000 people who are awaiting their Title Deeds. Many have waited for over a decade and may not wish to pay this additional tax, particularly if they are to be fined for any improvements and additions they have made to their property over these intervening years! Transfer tax is an unfair tax in that it cannot be predicted when it is due. It is also open to corruption, both from the purchaser/seller and the state. In addition there is no compunction to accept your Title Deeds.
Would it not be better to increase stamp duty (an incorruptible system because the revenue from the stamp purchase goes directly to the government) a little because a “little of something is better than a lot of nothing”. Stamp duty is also collected at time of purchase not at some indeterminate later date when titles are transferred. Those property purchasers who did not want to pay transfer tax would no longer have any incentive to delay or obstruct.
Finally, the government needs to take its share of the blame. But wait a moment, which government? This problem has been going on for many years, but the advent of the Internet has meant that this dirty washing is now being thoroughly aired world-wide, and the uncertainty of the economy has caused panic amongst those who now know that their properties are at risk. Certainly, to my recollection, there were incidents of developer malpractice dating back at least 12 years.
And how many governments have tried to address this problem and introduce legislation in an attempt to improve the credibility of the property market? Only one: the current AKEL led administration. However their attempts to drive the five complex strands of legislation through Parliament are continuously obstructed by special interest groups leaning on Members of Parliament to support their vested interests. It is not the government who should take all the blame – indeed they have tried to do something about it – but parliamentarians. They have failed to realise that, in their bid for popular support, they have put the future of Cyprus’ property market and indeed the economy at risk.
In the same way that the UK property market is dependent on first time buyers the Cyprus property market is dependent on foreign buyers because its domestic market is not large enough to stimulate a recovery. The foreign market was traditionally dominated by British purchasers who fell in love with this island on frequent holidays. Other nationalities, notably the Russian market, are being touted, but, guess what? The Russians use the Internet as well and are increasingly cautious. We now have a prophecy which has become self fulfilled!
(Name and address withheld)