ANTONIS LOIZOU

Financial Mirror (Cyprus) - - FRONT PAGE - Μy Antonis Loizou

Suc­cesses and fail­ures of this gov­ern­ment

I would like to enu­mer­ate some of the achieve­ments of this (re-elected) gov­ern­ment and some of its fail­ures re­gard­ing the real es­tate mar­ket. The past year (2017) one must ad­mit was one which was met with many changes. Some of these changes came about af­ter the Troika’s pres­sure (just as well) and some due to the change of gov­ern­ment from a “com­mu­nist/so­cial­ist” way of ap­proach­ing mat­ters, to a cap­i­tal­ist one, with a com­pletely new per­spec­tive. It will not be a miss to credit the for­eign/lo­cal pres­sure groups re­gard­ing ti­tle deed is­sues, etc. which helped to­wards the changes.

The gen­eral mar­ket is still in a rather slug­gish state, with lim­ited trans­ac­tions (be it much bet­ter than be­fore) and de­mand that there is, is di­rected to­wards good qual­ity apart­ments and houses (up­mar­ket) in­vest­ment prop­er­ties (i.e. in­come pro­duc­ing ones with re­turns of 5%-6% p.a.) whereas sales re­gard­ing agri­cul­tural land and build­ing plots (res­i­den­tial in the main but as well oth­ers) are at the low end. Land on the beach and near it has shown pos­i­tive signs of in­ter­est and it is ev­i­dent in our opin­ion that for such plots the fu­ture is pos­i­tive.

The pos­i­tive achieve­ments

The main one is the mea­sure for visas and pass­ports (and with­out blow­ing our own horn, 50% of this mea­sure is the re­sult of our own of­fice ef­forts since the year 2011, notwith­stand­ing that this mea­sure ex­isted since 2007, but was not taken on by the pre­vi­ous gov­ern­ment. This mea­sure went over­board how­ever and our warn­ings re­gard­ing the E.U. re­ac­tion were met with hos­til­ity by de­vel­op­ers and oth­ers. Now the new reg­u­la­tions es­pe­cially the re­quire­ment of a 6 month wait, is not the best.

The re­laxed in­ter­pre­ta­tion re­gard­ing what is a “per­ma­nent/main” home by for­eign­ers, is all the best. In the pre­vi­ous years the per­ma­nent house meant that the house where a for­eigner lives more than half of the 365 days a year. Now it refers to the main house while in Cyprus with no lim­i­ta­tion on liv­ing pe­riod.

The quick ac­tion to re­place the cat­a­strophic Cyprus Air­ways with new airlines op­er­at­ing in many other Euro­pean coun­tries has opened new hori­zons for tourism which is the fore­run­ner of the for­eign real es­tate de­mand.

The in­cen­tives given for large scale projects be it pro­posed in agri­cul­tural ar­eas, for the new golf cour­ses, mari­nas, the casino, etc. have added to the prof­itabil­ity of such projects in­creas­ing their chances to at­tract for­eign in­vestors.

The re­place­ment of the build­ing amnesty by al­low­ing a 20% in­crease in build­ing den­sity to ex­ist­ing build­ings (or up to 60 sq.m.) is an easy way to by-pass the red tape pro­ce­dures which ex­isted for the build­ing amnesty.

The mea­sure for prop­erty tax to re­place the 1.1.80 val­ues to 1.1.2013 done within 6 months (be it with a lot of mis­takes but with a 6-month pe­riod to cor­rect – with ob­jec­tions) is an­other way for­ward. On the same line the abo­li­tion of the an­nual prop­erty tax has en­cour­aged the mar­ket and in­vest­ments to a good ex­tent.

The up­dat­ing of the tax­a­tion sys­tem re­gard­ing for­eign high earn­ers is an­other point to note in at­tract­ing the for­eign mar­ket as is the new ship­ping reg­u­la­tions.

Build­ing re­lax­ations, more of a rou­tine na­ture nowa­days rather than go­ing through the re­lax­ation Board is a point in hand. In ad­di­tion is the 50% trans­fer fee re­duc­tion and the abo­li­tion of cap­i­tal gains tax in cer­tain cases.

On the pos­i­tive side, it will be a miss not to men­tion the breath of fresh air that the pre­vi­ous Min­is­ter of In­te­rior (Socrates Hasikos) brought into the mar­ket with no reser­va­tions to re­lax­ations with the aim of at­tract­ing for­eign/lo­cal in­vest­ments to re­vive the mar­ket.

The neg­a­tive as­pects

What­ever mea­sures that this/any gov­ern­ment takes, one is the com­mon de­nom­i­na­tor, that of the con­fi­dence in the econ­omy. We live in a world that most coun­tries are tar­get­ing for­eign in­vestors and our re­cent his­tory (3/2013) is not eas­ily for­got­ten, whereas the re­cent de­vel­op­ments on the Co-Op Bank re­mind us of the scary cir­cum­stances of the 2013 Bail-In. Just as well that our com­peti­tors have prob­lems of their own so that we are not alone in dis­ap­point­ing the mar­ket. As I have re­ported in the past, the ill for­tunes of oth­ers seem to ben­e­fit Cyprus, but this is not the way to build a new eco­nomic ba­sis. Some of our lo­cal fi­nanciers, I be­lieve, are be­hind in han­dling the real es­tate prob­lems in­clud­ing NPLs and I am afraid that their share­hold­ers based on a non-long-term stay, but short-term cap­i­tal gains, is a cause for con­cern. This is wor­ry­ing un­less I am mis­taken.

The Cen­tral Bank is also well be­hind in what it is called upon to do. It seems that the Cen­tral Bank has not placed its hand on the prob­lems and/or is tak­ing its time with a lack of lead­er­ship at var­i­ous lev­els.

The op­por­tu­ni­ties that came about caused by other coun­tries prob­lems, do not seem to be pushed for­ward by the gov­ern­ment, by pro­duc­ing some sort of a list of sug­gested ideas, await­ing the pri­vate sec­tor to do it and then the gtovern­ment to ac­com­mo­date their re­quire­ments. Why has Ayia Napa got 17 foot­ball train­ing pitches and other ar­eas none? Why is the gov­ern­ment not co­or­di­nat­ing mu­nic­i­pal­i­ties and lo­cal au­thor­i­ties/hote­liers for the pur­pose of win­ter sports? Why aren’t other sports - such as rugby, cricket, shoot­ing clubs - ear­marked for gov­ern­men­tal owned land with sub­si­dies to go? (di­rect or in­di­rect). Why keep the old colo­nial sys­tem in se­cur­ing per­mits and not adopt­ing a fresh, com­pletely new ap­proach on pro­ce­dures? Why is red tape not be­ing ad­dressed re­gard­ing all sorts of mat­ters from reg­is­tra­tion of a com­pany, to per­ma­nent/work­ing visas time is­sue? The “feel­ing” that the pub­lic and for­eign­ers have, is that the gov­ern­ment is look­ing af­ter its own mem­bers with fam­ily busi­ness which is an em­bar­rass­ment to the coun­try em­a­nat­ing al­most from the top to bot­tom of the hi­er­ar­chy.

End­ing the “curse” of the Com­mon Ex­penses Law has not been ad­dressed at all, caus­ing se­ri­ous prob­lems for the im­me­di­ate fu­ture.

Let’s hope that my new 2018 re­port on such mat­ters will be more pos­i­tive.

Antonis Loizou F.R.I.C.S. is the Di­rec­tor of Antonis Loizou & As­so­ciates Ltd., Real Es­tate & Projects Devel­op­ment Man­agers

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