Chinese and other buyers

Part of the interest among foreign buyers of real estate in Cyprus comes from China – a huge country that one cannot pin-point the particular locality that demand comes from.

The Chinese are mainly interested for the residency visa programme (not so much for the passport) at the lower-end budget. They are after the minimum EUR 300,000 residential units, directing their interest towards Paphos and to a lesser extent to other areas.

However, there are Chinese companies that showed interest in large scale investments and developments. In Larnaca, two hotels are under development by a joint venture with Chinese, whereas another 5-star hotel is also underway in Sotira village with Chinese involvement. These are encouraging for the construction industry, but long term though, the introduction of the Chinese market should promote Cyprus to China to attract tourists.

“Clean air” is one of the major reasons for the Chinese to look for property market investments (save the days we have dust and regrettably they are increasing), security and hospitality play an important role. Regrettably there are no clear indications on the number of units bought by Chinese over the recent years (estimated to be around 500 units with a value of EUR 1.5 bln) but we expect that market demand will increase as the small Chinese community becomes more involved in local activity becoming themselves promoters for our real estate and tourism. To this end the much awaited direct flights between Cyprus and China by Cobalt and others will help.

Why on earth the Chinese with such a diversity in their own country wish to visit and even reside in Cyprus is often difficult to understand. A Chinese client of ours informed us that “we feel at home, people welcome us as part of the family, the limited crime and no racism, as well as the established community at Paphos, are some of the attractions”.

What one must be careful with is the Chinese visa agencies which have been developed as estate agents, supported (regrettably) by various local advocates riding on the golden band wagon of high commissions. The average commission required by these agents is 20% on the sales price, a large amount, but it seems that so far they are getting away with it. Such high commissions are not illegal, but then is it fair?

For an apartment which is for sale for EUR 250,000, the price is inflated, say, to EUR 300,000 and sold as such. The visa/Chinese agents provide a commission/advertising/ introduction bill to the seller for the EUR 50,000. So in this case the seller is not liable to pay tax on this extra EUR 50,000 (if accepted by the Income Tax) but the Chinese buyer in addition to the extra EUR 50,000 has to pay added transfer fees on the EUR 50,000 difference. We had recently an enquiry from a Chinese investor (through a local advocate) for the amount of EUR 4.5 mln with the required 20% addition. As in other occasion we refused outright to cooperate for such a scam. On another occasion, a Chinese bought an apartment in Larnaca for EUR 300,000 with ordinary 5% commission included while a next door neighbour bought a similar apartment for EUR 230,000. They got together and the scam was realised and I hear that the case will go to court.

I wrote to the Chinese ambassador three years ago and published several times of this situation, but it seems that not only does no one want to listen, but we “collect” a lot of enemies on the way.

It reminds me of the early years of the British demand with such scams (be it at a much lower scale) and which led to the creation of the Property Action Group with all sorts of bad publicity. I hope that this experience will not be repeated in the future, but it is doubtful and inevitable. Increasing greed is a sickness in all countries but it seems Cyprus is a champion with all sorts of back-handed procedures, leaving no chance to the buyer. We would have expected that the advocates who are supposed to advise the Chinese buyers accordingly and carry out a due diligence, would have advised the buyer, but, alas. No wonder in a recent property exhibition in China, some buyers appeared with placards objecting to Cyprus etc. Following are the comments of a typical Chinese buyer: - We were approached by a visa agent to buy a real estate in Cyprus during an exhibition.

- There were in addition to Cyprus, other countries also offering free inspection trips for three days. We opted for Cyprus, where we had to pay for the trip, but not the accommodation.

- Collected from the airport by the developer and bussed to the developers’ related hotel booked for the purpose.

- For the 3-day visit our programme was full including lunches/dinners with no chance to look around the wider area.

- We ended up on the third day to sign a sales contract at an advocate’s office taken by the developer.

- After three months when we stayed at the apartment we bought, we were told by locals/neighbours about the nonissue of title deeds, the 20% commission, etc. “Too late by then”. Does this not remind you the goings on with the British market 15 years ago with the various British and local cowboy agents who when the going became difficult they left, closing their companies, leaving their clients alone in the cold?