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