Is this the last year for buy­ers’ bar­gains?

Financial Mirror (Cyprus) - - FRONT PAGE -

I don’t share this view, with­out first ques­tion­ing the sta­tis­tics is­sued by the Lands Sur­veys Dept. By re­duc­ing VAT to 5% and trans­fer fees by 50% or even zero, it is true that there was an in­creased in­ter­est. This in­ter­est is ex­pected to in­crease fur­ther with the ap­proval of the bill for trans­fers prior to 31.12.2016, the re­lease of the mort­gaged prop­er­ties, as well as mar­kets that will be ex­empt of the cap­i­tal gains tax.

These mea­sures, to­gether with the leg­is­la­tion on pass­ports and visas, per­ma­nent res­i­dence for for­eign­ers (whose ap­pli­ca­tions are see­ing a growth rate) sug­gest a pos­i­tive di­rec­tion for the fu­ture, es­pe­cially in view of the lim­ited num­ber of new con­struc­tion projects avail­able.

Real es­tate prices in­di­cate, even to a small ex­tent, a de­scend­ing path. It should be stressed that the de­mand for land and agri­cul­tural land is not ex­pected to re­cover any time soon be­cause of the large sup­ply and the large stock of land planned to be di­vided into plots (which are now on hold). There is in­creased de­mand, which is en­cour­ag­ing, for apart­ments in se­lec­tive lo­ca­tions and high cost homes in the EUR 800,000 - 1.1 mln range for coastal units.

In the cat­e­gory of hol­i­day homes, Pro­taras re­mains as the pri­mary tar­get for Ni­cosians while Li­mas­sol is in great de­mand for high net worth for­eign buy­ers, fol­lowed by Paphos pri­mar­ily for Bri­tish buy­ers (the strength­en­ing of the ster­ling against the euro helps) and the in­ter­est from the Arab world is fo­cused in Lar­naca, where two spe­cial­ist of­fices re­cently opened. Stay­ing in Lar­naca, with the new state of af­fairs in Iran, as well as the in­crease in di­rect flights from other Arab coun­tries, the in­ter­est for the city of Ki­tion is bound to in­crease.

Cer­tainly, the lack of fund­ing is the main rea­son that still holds back or re­stricts the de­mand in the mar­ket and most buy­ers ei­ther have trou­ble find­ing fund­ing (even in the case of loans for 30% of the value, while the 100% pay­ment in cash may even cause cer­tain tax is­sues, as re­gards dec­la­ra­tion an trans­parency.

That which we ex­pect to re­ceive the big­gest in­crease is the sec­tor of hol­i­day homes with se­cured ti­tle deeds. A re­mark­able ef­fort is be­ing un­der­taken by the Land Reg­istry to in­crease the pace of is­su­ing ti­tles, but for the process to reach their of­fice a great deal of bu­reau­cracy still needs to be over­come that has not changed as re­gards the is­su­ing of plan­ning per­mis­sion or build­ing per­mit, se­cur­ing fi­nal ap­proval cer­tifi­cate, etc.

It is also as­sumed that the “op­por­tu­ni­ties” di­min­ish as time passes. True, the best bar­gains were in 2012 due mainly to jit­tery Bri­tons who were selling their hol­i­day or re­tire­ment their homes al­most in a panic, but now the qual­ity in the de­mand for such these hol­i­day homes has de­clined, per­haps push­ing prices lower.

I be­lieve, there­fore, that maybe 2015 is the last year for a cer­tain type of qual­ity op­por­tu­ni­ties. The mar­ket is ex­pect­ing the course from the fore­clo­sures by banks but I do not think that this will cre­ate par­tic­u­lar op­por­tu­ni­ties, par­tic­u­larly in units with ti­tle deeds. The new buyer will have to pay the trans­fer fees, to se­cure the ti­tle, to un­der­take re­pairs, etc. and fi­nally add his profit. Per­haps fore­clo­sures will cre­ate op­por­tu­ni­ties for com­mer­cial or in­dus­trial prop­er­ties - and to a lesser de­gree for va­cant plots or good qual­ity residential es­tates, while in v e s tm en t op­por­tu­ni­ties (eg mod­ern of­fices for rent es­pe­cially in Li­mas­sol) are still not pro­duc­ing a high yield, de­spite the fact that rents are at about EUR 20 / sq.m. I must add that I have yet to see com­mer­cial of­fices for sale that fall in the cat­e­gory of dis­tress sales or forced sales.

Cer­tainly, the sit­u­a­tion as it is to­day is grad­u­ally im­prov­ing, but our mar­ket re­mains so frag­ile and con­tin­u­ous changes that it is dif­fi­cult to draw fi­nal con­clu­sions even for the medium term, while the var­i­ous an­nounce­ments by de­vel­op­ers or real es­tate agents and oth­ers re­fer­ring to a rapid re­cov­ery are rather driven by their own in­ter­ests.

Re­cently, we have seen a widen­ing in the gap be­tween the ask­ing price and the fi­nal agreed price.

There is so spe­cific per­cent­age to sug­gest this be­cause the seller de­ter­mines the fi­nal price and it still de­pends on the pres­sure and the need for the seller. But gen­er­ally a vari­a­tion of 5% - 10% depend­ing on the qual­ity of the sale is a good in­di­ca­tion.

On a fi­nal note, we are all wait­ing to see what the fu­ture holds, in­clud­ing any prospects of a Cyprus set­tle­ment.

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