The successes and failures of this government
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.
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.