Have we reached ‘zero val­ues’ yet?

Financial Mirror (Cyprus) - - FRONT PAGE -

By An­to­nis Loizou F.R.I.C.S. - An­to­nis As­so­ci­ates Ltd - Real Es­tate & Project Man­agers

In the present un­usual sit­u­a­tion that we have reached, one won­ders if there is any value left ??for cer­tain prop­er­ties. The word “value” sug­gests that an in­ter­ested per­son will pro­vide an X ??amount for a par­tic­u­lar prop­erty within a rea­son­able time from the date of no­ti­fi­ca­tion of the avail­abil­ity of the prop­erty. There­fore, if some­one of­fers the apart­ment for an X ??value and does not at­tract in­ter­ested and then re-of­fered it with a 30% dis­count and then with a fur­ther 20% dis­count again finds no buyer, it means that the value of the apart­ment or prop­erty is 35% and with­out a po­ten­tial buyer. Hence, what is it’s value?

Cer­tainly, an apart­ment that was “worth” 100,000 in the pre-re­ces­sion era and is now of­fered by the owner at a 50% dis­count, might find a buyer, provided it’s in a lo­ca­tion that may be in­ter­ested to buy­ers. Ar­eas, there­fore are the main de­mand set by for­eign­ers, and thus the price de­crease and the in­crease of the avail­abil­ity pe­riod is very dif­fer­ent from the res­i­den­tial ar­eas. So, where do we go? Of course we do not have the ex­pe­ri­ence of the 50%-plus dis­counts, but is this an un­avoid­able di­rec­tion?

The down­ward trend in val­ues ??is mainly ob­served in ru­ral ar­eas (mainly re­mote) that are un­in­ter­est­ing, es­pe­cially now with the ban on con­struc­tion of in­di­vid­ual houses in ru­ral ar­eas, and old apart­ment build­ings in poor con­di­tion, with no lift op­er­a­tion, im­proper main­te­nance, etc. fall into the same cat­e­gory.

Cyprus may be among the few coun­tries where there is no mar­ket. In Bri­tain all prop­er­ties are sold, al­beit at a re­duced price. Here, even with the 50% dis­count,a buyer still can­not be found. The is­sue gets even more dif­fi­cult when re­fer­ring to large in­vest­ments, such as in­com­plete con­struc­tion projects, high cost of land, share of own­er­ship, etc. What about prop­erty whose value is based on the prof­itabil­ity of the busi­ness? A ho­tel, for ex­am­ple, if it con­tin­ues to show losses on an on­go­ing ba­sis with­out a pos­i­tive out­look and provided that the man­age­ment is not to blame, what is its value? Who will buy / in­vest in it, when ev­ery year you have to sub­sidise its losses? So, then what value has this prop­erty – zero, ie.

Loizou & only the land value? There are even prop­er­ties which have neg­a­tive value, that is they not only have no value, but the seller would have to pay the buyer for com­pen­sa­tion, to en­cour­age him to take it off his hands. In the case of two quar­ries that were sold in re­cent years, the buy­ers re­ceived a gen­er­ous “com­pen­sa­tion” by the sell­ers to to get the deal done.

The whole sit­u­a­tion is ex­pected to worsen with the an­tic­i­pated ex­pro­pri­a­tion and swap deals which are un­der devel­op­ment in sev­eral large scale deals with their lenders in­creas­ing pres­sure on bor­row­ers to sell their land in a short time. On the other, will the in­ter­est rates of 10-13% on ar­rears in­crease the re­duc­tion of dis­posal ac­com­pa­nied by the bid or of­fer by the seller for com­pen­sa­tion?

Although the statis­tics show an in­crease in sales, these are not stated in prob­lem­atic / agri­cul­tural / disad­van­taged prop­er­ties and there­fore should not be car­ried away by the statis­tics that these re­lated mainly to res­i­den­tial and priv­i­leged prop­erty.

As strange it seems, the “resti­tu­tion pay­ment” to the buyer when one con­sid­ers the Real Es­tate / Mu­nic­i­pal taxes, drainage, com­mon ex­penses, etc., sev­eral prop­er­ties have a neg­a­tive value. We have not come across such a devel­op­ment (com­pen­sa­tion pay­ment), but in the sit­u­a­tion that we do, we will not be sur­prise at all.

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