The suc­cesses and fail­ures of this govern­ment

Financial Mirror (Cyprus) - - FRONT PAGE -

I would like to re­fer both to the suc­cesses and fail­ures of the govern­ment in mat­ters re­lated to the real es­tate sec­tor. The past year (2015) was one of many changes. Some of th­ese were the re­sult of pres­sure from the Troika (thank­fully), while oth­ers came from a dif­fer­ent phi­los­o­phy from the for­mer “left” men­tal­ity, ver­sus a new “cap­i­tal­ist”, which has a com­pletely dif­fer­ent ap­proach.

It would also be a mis­take not to recog­nise the pres­sure from both lo­cal and for­eign groups with the aim of im­prov­ing mat­ters.

The mar­ket is still numb with a lim­ited num­ber of trans­ac­tions (8,170 in 2009 vs 4,952 in 2015). The de­mand is mainly in the high qual­ity per­ma­nent / hol­i­day homes and in­vest­ment prop­er­ties with a yield of 5% -6%, while de­mand for or­di­nary and agri­cul­tural land re­mains lim­ited. At the same time, de­vel­op­ment land near or on the beach has been show­ing in­creased in­ter­est and th­ese plots seem to have a pos­i­tive fu­ture.

On the plus side:

• The main pos­i­tive point is the mea­sure for visas and pass­ports and the con­tri­bu­tion of our of­fice was up 50% since 2011, as the in­cen­tive ex­isted since 2007 but the pre­vi­ous govern­ment failed to adopt it.

• The vague in­ter­pre­ta­tion for res­i­dency to for­eign­ers, that un­til re­cently was in­ter­preted as the pur­chaser hav­ing to live at his home in Cyprus more than 183 days, has changed and the per­ma­nent res­i­dency is now in­ter­preted as when a for­eigner is in Cyprus for an un­de­ter­mined time.

• Clos­ing the ‘cat­a­strophic’ Cyprus Air­ways opened new hori­zons for the tourism and avi­a­tion sec­tors with new des­ti­na­tions, where (mainly) young tourists are a pre­cur­sor for in­ter­est in the prop­erty mar­ket.

• The in­cen­tives given to large in­fra­struc­ture projects in ru­ral ar­eas, in­creas­ing the build­ing co­ef­fi­cient for golf cour­ses, mari­nas, etc., in­creased the prof­itabil­ity and at­trac­tive­ness of such in­vest­ments.

• Re­plac­ing the plan­ning amnesty by in­creas­ing the build­ing co­ef­fi­cient by 20% (up to 60sq.m.) has con­trib­uted greatly to by­pass the bu­reau­cracy that ex­isted with the ur­ban plan­ning amnesty.

• The new as­sess­ment of prop­erty val­ues based on 1.1.2013 in­stead of 1.1.1980, de­spite its faults (the six month ad­just­ment pe­riod was enough for ob­jec­tions).

• The new tax reg­u­la­tions for repa­tri­ated Cypri­ots and for­eign­ers, adding to the at­trac­tive­ness of the Cyprus tax sys­tem, in ad­di­tion to the new tax regime for ship­ping.

• The more lib­eral in­ter­pre­ta­tion on re­lax­ations un­like the older sys­tem of ex­emp­tions that takes years to con­clude and has higher costs.

• The new pro­vi­sions for the 50% dis­count on trans­fer fees, avoid­ance un­der cer­tain con­di­tions of the cap­i­tal gains tax, eva­sion of the mort­gages, the charge of prop­erty tax on the pur­chasers, etc., were all pos­i­tive re­sults.

It would be wrong not to men­tion the breath of fresh air in­tro­duced by the Min­is­ter of In­te­rior in the prop­erty sec­tor, re­sult­ing in a feel­ing of “pro­tec­tion” of the in­dus­try against the “per­se­cu­tion” from other stake­hold­ers.

On the neg­a­tive side:

• Re­build­ing con­fi­dence in the econ­omy fol­low­ing the events of March 2013 is not eas­ily for­got­ten. For­tu­nately, to some ex­tent we were helped by the mis­for­tunes of our com­peti­tor des­ti­na­tions, but again this is not the way to base the fu­ture de­vel­op­ment of the econ­omy de­pend­ing solely on the trou­bled sit­u­a­tion in other coun­tries.

• Some lenders in Cyprus have not fully un­der­stood the prob­lems of the hous­ing mar­ket, while oth­ers as­pire to a quick exit rather than a long-term in­vest­ment.

• The Cen­tral Bank has not lived up to ex­pec­ta­tions and does not in­spire con­fi­dence that it can play the role that Cyprus needs.

• For­eign in­vestors do not add great value to the ef­forts of the govern­ment, de­spite the ef­forts of the Pres­i­dent and some other politi­cians. There is strat­egy to utilise for­eign in­ter­est, such as the pro­mo­tion of sports tourism and other ac­tiv­i­ties in an ef­fort to at­tract in­ter­est from for­eign mar­kets, even in co­or­di­na­tion with var­i­ous mu­nic­i­pal­i­ties and lo­cal au­thor­i­ties.

• The ar­chaic sys­tem of li­cens­ing pro­ce­dures, and is­su­ing ti­tle deeds, in­stead of be­ing re­placed from scratch, is con­stantly be­ing sub­jected to mi­nor “corrections” that alone can not meet the chal­lenges ahead.

• There is some sense among both lo­cals and for­eign­ers that govern­ment of­fi­cials ex­ploit their sta­tus, pro­mot­ing their own in­ter­ests.

What­ever the is­sue, the past year will go down in the his­tory of the Cyprus prop­erty mar­ket, as at least a year of some ef­fort to bet­ter things. If the econ­omy is freed from the chains of trade unions and al­lowed to cor­rect it­self, then we will have a pos­i­tive fu­ture for 2016 in the prop­erty sec­tor.

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