THE BANK OF CYPRUS has begun auctions of foreclosed immovable property, signalling the first auctions under the new foreclosure legal framework implemented as part of a €10 billion bailout by the EU and the IMF.
The property placed into auction was foreclosed by the bank against non-performing loans that have been terminated after a legal process which began a decade ago. No primary residences will be included in the first wave of auctions.
Auctions began on Thursday in Paphos, placing seven plots for sale. Three plots attracted interest yielding €1.05 million.
Auctions were also carried out in Nicosia on Friday, with four plots placed for sale but no interest was shown.
The Bank of Cyprus will continue auctions in Limassol and Famagusta District whereas other banks, such as the Cooperative Central Bank and Hellenic Bank will follow suit in July.
Under the new legal framework a bank can auction the property at a reserve price of 80% of the current market price. If no interest is attracted, the bank can place the property to a new auction with the same price while in a year’s time from now it can auction the property with a new reserve price amounting to 50% of the current market value.
Source: Cyprus News Agency
@Nigel
I’ve been through the red book where “market value” is defined as “the estimated value to which an asset should be exchanged at the valuation date”
“at the valuation date”…! In my home country, a rule of thumb is that if a property is not sold in three months, it means it’s over evaluated…
Given that most of the houses or flats I’ve seen till now are for sale for more than one year, I think the “market value” should need a (very serious) revaluation…
So having houses sold for auctions at whatever % of a so-called “market value” is just a complete nonsense, especially knowing that banks were recently paying (€80!) “valuators” to artificially increase the value of collaterals…
As for the economic theory of supply and demand determining market value, I don’t how many properties are still for sale in the island (I’ve heard crazy figures like 50,000 of them), but for the road signs one sees everywhere, it seems that the supply largely overflows the demand (although real estate agents try to convince me that Russians, Lebanese and Israelis are buying like crazy…:D)
Ed: In Cyprus supply exceeds demand by a considerable margin – there aren’t thousands of buyers looking for property as there were 10 years ago. Properties are selling (sales for one agent I know at the eastern end of the island have risen 50% this year). Hopefully the banks aren’t trying to rig the market like Barclays, etc with LIBOR.
@andrews, compared to 2008, prices are about 30% lower (cf. BoC property index wich went from 105 in 2008 to 70 today for flats, and 106 to 75 for houses).
But I agree there are still way overpriced, if one compares them to the rental yields one can expect…the supply is way over the demand, and market doesn’t seem to be adjusting…
50% of NPL and still, which means one people out of two is unable to pay back his house, but price stay high for very low building standard properties in very average location (and offering very low yields)…I just can’t understand how is this possible…
How do they determine the “market price”?
If there was something such as “market price”, people would sell their properties with ads like “90% of market price”…they don’t…
Besides, market prices are continuously dropping since 2008…so let’s say “market price” is the average market price/sqf (which anyway, no one knows btw), but based on which year, then?
Ed: Market prices are assessed by qualified property valuers – RICS valuers use the ‘Red Book’, which contains mandatory rules and guidance for assessing property values. Economic theory contends that the market price converges at a point where the forces of supply and demand meet.
Is there a way to watch/track/bid on the auctions online, or do you have to attend in person?
Ed: Not to my knowledge, I suggest you speak to the bank.
As Andrew has pointed out the properties are overpriced, in fact way overpriced. When they are at a reasonable level they will sell. Remove the reserves.
Three plots attracted interest. Can we assume that at this point it means what it says. Only an interest has been shown, no deals or money has changed hands. If any sales do go through what will the legal and auction fee’s come to.
Ed: “Three plots attracted interest yielding €1.05 million.” I understand that an office building in Ayios Theodoros was also sold for €901k.
This simply means the selling price (market value) is too high, as are most of the ‘for sale’ prices in Cyprus. Cyprus property is still way over priced although it is about half the price of the 2007/8 high, BUT IT IS STILL OVER PRICED and this is because market forces are not allowed work. Why? Because the banks are only interested in their own pockets and if they had any idea how a bank should work, we would not be in this mess and the bank hair-cut of 2013 would not have happened. The bank has taken peoples money from their pocket but you can not take the DNA out of the banks, no matter what.
Apologies to any one reading this as I feel very strongly that I am wasting your time and mine writing this.
It is very worrying to see the words “No primary residences will be included in the first wave of auctions”.
Will this mean that home buyers can have their homes auctioned due to a Developers bad debt.
The banks are suddenly asking a lot of new and very personal questions, of their existing customers.
It smells more fishy than a pile of rotting sardines.
Ed: Home buyers unable to get their deeds to their developer’s will (should) have applied for them as described in Applying for Title Deeds.
I believe this lengthy and bureaucratic procedure is just making the correction and return to growth slower for Cyprus, unfortunately. I appreciate that swiftly disposing of the many repossessed properties may set back the property price in the short run. However, everyone -including foreign investors- on who Cyprus is dependent and that everyone is trying so hard to attract, is aware of the many overvalued secondary locations properties that people gave as collaterals to the banks. The correction made in the UK some nine years ago with Royal Bank Of Scotland were bold but practical.