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  Cyprus needs urgent action says research boss 18-01-2011

An urgent call has been made for the Cyprus government to take “decisive steps to eliminate delays related to the issuing of title deeds,” to focus hard on reviving the Island’s overseas property sector, and to avoid increasing local property taxes.

Speaking to OPP, Harris Samaras, the chairman and chief executive of local research company Pytheas, said “a major factor in turning the amazing potential that the island has into achievement in the overseas property market is the ability of the Cyprus Government to develop, introduce and enforce effective legislation to deal with the many problems in the country’s real estate, banking and legal sectors.”

Samaras the island’s politicians to be much more pro-active and for “Cyprus to act forcefully, with a greater sense of urgency to reverse its high fiscal deficits, to safeguard public financing and to increase the scope for private sector growth.”

He argues that even though the Cypriot banking sector is basically sound, “the real estate market is a significant component of the banks’ loan books and represents the majority of loan collaterals (more than 40%).” The situation worries him and “the low overall profitability contribution to Cypriot banks from Greece and the elevated loan provisions that subsequently need to be undertaken will affect the funding ability of banks to real estate related clients for at least the next 12 months.”

The lending community on the Island needs to be much more competitive says Samaras. “Where some other countries have lowered their mortgage interest rates and property taxes to encourage overseas investors, mortgage interest rates in Cyprus are amongst the highest in Europe and the government is talking about increasing property taxes it charges large land owners; a charge that will no doubt be passed on to those buying property. This approach is a recipe for disaster, especially when competition (governments in other countries) has taken steps to reduce the costs associated with property ownership to encourage investment.”

Samaras is worried about longer term trends too. “Cyprus enjoyed a more than ten-year housing boom until 2008” he says, “and then the market began to fall in certain areas, mainly because of:

  • The fall in the value of Sterling against the Euro over the past two years means that British buyers, who accounted for more than 50% of foreign buyers, have less equity at their disposal. At the beginning of 2007 a pound Sterling would buy €1.47; today it will buy around €1.20, making investments in the Eurozone that much more expensive;
  • Worldwide economic turmoil that has changed the characteristics of the “typical” overseas property buyer. Investors are now being much more cautious about their investment decisions;
  • Property-related laws in Cyprus that need to become more transparent, although the government seems to be making concrete attempts to rectify the situation;
  • Mortgage interest rates in Cyprus which are amongst the highest in Europe.”

Residential property prices in Paphos have fallen by 20% to 30% in the past three years. There has also been a 2% rise in unemployment, a 16.9% drop in the number of building permits issued, and a 1.7% drop in GDP according to figures from the Cyprus Statistical Service (CYSTAT.) Also, the number of building permits authorized by the Municipal Authorities and the District Administration Offices in the first half of 2010 reveal some large year-on-year declines:

“According to figures released by the Department of Land and Surveys,” says Pytheas,   “a total of 180 contracts of sale in favour of overseas buyers were deposited at Land Registries throughout Cyprus in September 2010 compared to the 173 deposited in September 2009 … a marginal increase.

“And although the market is showing signs of a weak recovery, the number of properties sold to foreign buyers during the first nine months of this year (1,402) is still down by more than 75% on the number sold during the same period in 2008 (5,622).

“So far this year, Nicosia has performed particularly well with sales up by 50.5% followed by Famagusta, where sales have gone up by 7.4% – and finally Limassol, where sales have increased by 3.2%. However, sales in Paphos and Larnaca are down by 6.8% and 12.4% respectively compared to last year.

Investment does continue however, and some significant overseas property projects in Cyprus include:

Venus Rock: This will be Europe’s largest residential beachfront development on 1,000 hectares of land with 850 meters of beachfront in the district of Paphos. It will include two 18-hole golf courses designed by Tony Jacklin, extensive beachfront entertainment, more than 3,000 residences, a 5-star hotel with spa and branded villas, a yachting marina and other sport facilities; at an estimated cost of €1 billion.

Larnaca Marina: A €1 billion private/state consortium has undertaken the expansion of the existing seaport and the building of a 1,000 berth yachting marina, hotels and luxury villas in Larnaca. The first phase to develop the existing port is expected to take three years to complete with the rest on target to be finished within six years. The sea port will now be able to provide facilities for the large third generation cruise ships which cannot currently dock on the Larnaca seaport.

Eléa Resort: A premium development comprising 350 luxury villas and apartments (to be released in the first half of 2011), and a luxury boutique hotel (opening 2012) supported by a range of dining options, spa facilities, and commercial centre. The building cost is estimated in excess of €300 million.

Alakati Village: Mew waterside residential community in Nicosia, consisting of 455 new buildings of which 420 are houses and apartments. Construction costs are estimated at €500 million.

Limassol Marina Project: This includes berthing and dry docks for 1,000 vessels, ranging from 30ft sailing boats to a handful of super yachts and it will be ready in the autumn of 2012. The commercial and residential units, include 280 dock-side villas, apartments, cafés and shops, which will be delivered in early 2013. The project cost will be in excess of €360 million.

Source: www.opp.org.uk