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Friday, June 5, 2020
Home Articles What will it take to stop the rot in the property market?

What will it take to stop the rot in the property market?

AS WE approach the end of the year it is apparent that the Island’s property market is in a deep recession with little hope of a recovery in the near future.

Domestic sales have been hit by the uncertainty in the property market, the lack of liquidity plus the high cost of loans, record levels of unemployment and the problems with the Island’s economy.

British buyers have virtually deserted the market as a result of the revelations about Title Deeds and the misdemeanours of property developers, real estate agents and banks featuring in the UK media.

Property sales to overseas buyers in Paphos, once a favourite of the British, are down by nearly 90% on the numbers sold in 2007 and are at half the number sold ten years ago at the start of the property boom.

Like many other countries in the European Union, the UK has problems with its economy. Rising levels of unemployment, the fall in the value of Sterling against the Euro and the general economic situation has reduced the number of Brits buying overseas property.

But there are still many Brits investing. In Spain for example, sales to overseas buyers increased by nearly 25% during the third quarter of 2011 compared to last year, while sales to overseas buyers in Cyprus over the same period fell by 30%.

Prices

SINCE RICS Cyprus started publishing its Property Price Index in the last quarter of 2009, apartment and house prices have been falling steadily.

Apartment prices have fallen by an average of 19% and those of houses by 12%. But these falls have not been consistent across the Island. Prices of apartments in the Paralimni/Famagusta area have fallen by 28% and house prices in Larnaca are down 18%.

The commercial centres of Nicosia and Limassol seemed to be weathering the storm quite well. But the latest report from RICS shows that both seem to have succumbed to the problems of falling prices experienced in the other urban areas of the Island.

Derived from the RICS Cyprus Property Price Index Q4 2009 - Q3 2011

Derived from the RICS Cyprus Property Price Index Q4 2009 - Q3 2011

Government action and incentives

DURING the year, the Government introduced new legislation in its endeavours to instil confidence in the market and increase the flow of revenue into state coffers.

The ‘Town Planning Amnesty’ laws were approved in March. These were designed to enable the legalisation of various building irregularities that were preventing the issue of some of the 130,000 Title Deeds that were pending. Initially set to last for six months, the Amnesty was subsequently extended for a further six months. But it had an unpleasant sting in the tail which meant that properties suffering from severe planning infringements could not be sold or mortgaged.

The Sale of ‘Immovable Property (Specific Performance) Law’ came into force earlier this year replacing the old ‘Sale of Land (Specific Performance) Law’. This new law provided additional protection for those buying property, but caused outrage amongst existing purchasers when they learnt that its provisions were not retrospective.

The government also reduced the VAT on property for first-time buyers and abolished/suspended Property Transfer Fees for a period of six months in efforts to kick the Island’s beleaguered property market back into life. Depending on circumstances, these incentives could reduce the cost of owning a €250,000 house or apartment by around €38,000.

What next?

PROPERTY valuer Polys Kourousides believes that property prices will be reduced further and his views are echoed by Pavlos Loizou in the latest RICS Cyprus Property Price Index where he says “that there is still room for re-pricing of capital values to take place”.

It is unlikely that the government can afford to give the property industry any further incentives, but it can still do much to improve the protection afforded to those buying property. It needs to undertake a wholesale review and reform of the laws relating to the purchase of property – and then provide the authorities with the necessary powers to implement those reforms and to ensure their proper enforcement.

Top of the government’s list of priorities: full legal protection for purchasers and Title Deeds on delivery of a property.

11 COMMENTS

  1. Hi I agree with all of you.

    What may have started of as just a little bit of Mediterranean money helping the situation along has now become deeply ingrained within the Cypriot Government and all its hangers on and supporters. To coin a phrase “They all have the proverbial finger in the pie some deeper than others” what stared as above has now become the normal way of large business on the Island.

    This will take a few generations to filter out if it is possible to do! So NO quick fix as no one is brave enough in the government to do it. they will sit back like the fools they have become and watch the economy of the once great tourist destination steadily drop, trying to work out how much more money they can squeeze from the investors and tourists alike.

    Just a quick one, over 4 years ago I spoke face to face with my Solicitor, he openly admitted he had a conflict of interest between Me and my developer! Guess who’s side he came down on! Correct, the developer. As he was a more lucrative option for him.
    Great legal System.

    Merry Christmas to all, and especially Nigel Howarth for all the effort,
    Happy New year.
    See you all in Cyprus in 2012.

    Cheers UBoat

  2. The problem would be greatly eased if the lawyers did their job properly. How many have been disbarred for not properly representing their clients? The Cyprus Bar Association appears to want to defend the status quo.

  3. As previous comments suggest – the answer is very simple to identify, if government cannot then it should really ask itself what right has it to govern and if it is fit for purpose.

    I would suggest it has in fact identified what it needs to do but the economy, multitude of existing laws that would need re-writing, massive bankruptcies that would ensue and need for top to bottom overhaul of the judicial system is far too much of a task for one or even a succession of governments to even begin to contemplate.

    Sticking plaster non – remedies are the best they can foresee in the hope that it may help. Obviously it is not, and accepting the suggestions of outside independent bodies and consultants would just wreck what narrow grasp politicians have on power not to mention the economy. It will take a brave government of honesty and integrity to have the foresight to undertake what is necessary for the good of the Country rather than the good of the party and that, my friends, is as likely as rocking horse droppings being used as currency by the central bank.

  4. Time and Space here just to give a huge Vote of Thanks to Nigel Howarth in so pointedly, professionally and productively developing and keeping up to date this oh-so-needed Forum.

    So, huge Thanks, Nigel, keep up the excellent work and you and yours have a lovely Christmas, and – importantly, a happy, healthy – and hopefully prosperous! – New Year.

    KEEP UP THE GOOD WORK, NIGEL

    All Best Wishes, Martyn.

  5. The answer to the question posed by the article is contained in its own final sentence.

    No further comment required.

  6. The rot goes all the way to the top of the tree unfortunately so it will take more than just minor surgery to remove it all.

    If this type of rot has managed to infiltrate the Cypriot DNA, as some of us suspect, then it will only be removed by ensuring the present system is dead and buried, before a new DNA strain can be introduced which is rot resistant.

    Perhaps Vice Pres Reding could call in the tree surgeons to start their long overdue cull.

    Anyone need some mulch or cheap logs for burning?

  7. If the those in charge do not know what to do, they should read these pages. It is also a good idea not to keep reloading when they shoot themselves in the foot.

    Merry Xmas Cyprus!

  8. The problem is, nobody trusts a word the government in Cyprus says about purchasers security.

    The only way the property market in Cyprus will recover, is if the government completely overhauls the system to ensure a valid title deed is given to the purchaser at point of sale.

  9. Polys Kourousides does not know what the government can do to help property industry with further incentives.

    Well here is one – no title deeds no sale. Here is another a lawyer must act in the best interest of the client and must declare in writing any conflict of interest. Charges must be given in writing before any work is started. Enduring power of attorney, the lawyer is not to misuse the trust placed in them. Penalties must be put in place.

    I could go on but I don’t want to upset Happy in Cyprus .

  10. For a start, the Cyprus “government” can ensure that the Title Deeds are issued to the buyers at point of sale, end of story! (also to sort out scum such as the Alpha Bank, who are about to foreclose on buyers who have paid in full for their properties). R.B.

  11. Unless Alpha bank lift their claim on innocent victims and own up to their own culpability, there are going to be a lot more people at the various property exhibitions next year and that will effect all the developers on the island.

    Maybe Cyprus doesn’t understand that as well as being a place to sell or rent property, these exhibitions also allow us to tell stories that will be heard by everyone who attends and we’ll be in a position to give them first hand examples of what goes on here.

    We’re fighting for our homes now so the developers and builders need to prepare for some very bad years.

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