Have we reached ‘zero values’ yet?
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.