Future prospects in Cyprus?

Everyone is after money, and above all, there are the governments of the world facing budget deficits. Being more demanding in tax collection and adding new tax requirements is understandable during times of good economic activity, but during times when there is high unemployment, property and other tax increases, welfare benefits reduced, etc., it is worse. . At least as far as Cyprus is concerned, what we are going through now is because of our own stupidity, made worse by the confiscation of the deposit in the banks. It is generally accepted that the banking sector is partly to blame for our situation, but the same sector is after its pound of meat in a more aggressive way. Of course, banks must receive what is owed to them, otherwise they may not survive and require more “haircuts” for depositors. There are ways and means to do it and some banks show understanding by trying to help, while other financial institutions have not quite understood what it is. Since all this is not enough, we study several proposals, including that of debts to the Government (for example, property taxes) so that debtors are accused of criminal offenses and sent to prison. We do not know how they can suggest this type of solution when the people who caused the catastrophe are still present and among them are our deputies who, with their rejection of the first proposal of the Troika for a contribution of around 7% of the total deposits led to the closure of one and the near catastrophe of the second bank (a haircut adds up).

How is it possible for all this to happen at the same time and we even detect some competition among the “new” economists who are proposing tougher measures? Some of these proposals should be part of a Greek tragedy scenario. There was an economist (of some sort) suggesting a brilliant proposal (in his own idea) to avoid the debt burden of refugee owners from not selling their properties to the Turkish Committee in the T. Held areas. His solution is for the government to contribute 50 million euros. pa budget to compensate turkish owners. We quickly closed the television and went out for a walk. The kind of stupidity is enough and we say this at a time when there is no money for food and basic necessities.

We also read that UK owners, if they live abroad (as permanent residents) must pay capital gains tax when their property/house is sold back home. This is a serious situation that will affect British homebuyers abroad if the British authority considers their home abroad as their main residence. The strange thing here is that for Cyprus capital gains tax purposes, there is a tax exemption if the owner declares his home in Cyprus as his main residence. Therefore, the local (Cypriot) tax authorities interpret even your holiday home as “your main residence in Cyprus”. On the other hand, if the UK authorities find out, it will mean they will tax your UK home for capital gains.

Having said that, where are the lucky people who have cash? Where does one deposit their cash savings? On the basis of unclear statements from the Eurozone that the Cyprus example can be repeated in all European banks, there is an exodus of funds from most EU countries, while we are informed that the “new” investment in Cyprus is to build through private companies. Because the safe deposit boxes that are now in operation: bank safe deposit boxes are full, while foreign banks do not offer interest on deposits and now we hear that some banks offer a “safe keep” fee. All of this could ultimately help real estate investment (in terms of cash safety) as ½% interest on bank deposits (overseas) plus EU risk, could divert some interest this way. investment. We have reported that Cyprus is increasingly interesting for international investment funds with experience in this type of real estate situation in struggling economies. Real estate returns in Grade A buildings and subject to Grade A tenants with long-term leases require 6½% per annum (plus escalation every 3 years). For locals, 6-7% return with the possibility of sale and leaseback is an option, but a newer Portuguese-American company is asking for 10-12% return. Hedge funds are in the region of 15% per year returns – these returns are more than double what we’re used to, but then with interest charges on late payment, they go up to 13% per year and one wonders if 6%-7% per year return is not “reasonable”. It is difficult to say how the situation will develop, since much will depend on economic progress, the retention or not of local deposits, the collection or not of bad debts and, moreover, the world economic situation. If one examines the hitherto booming Turkish economy, interest rates on loans have risen on average from 7% to 12% overnight, which means new opportunities for investment in Turkey by international funds as well such as competition from deposit rates (the depreciation of the Turkish lira, as well as making real estate even cheaper, including holiday competition).

So what is the future? Who’s to say? Is it a solution for the Qataris to come to Cyprus for a second investment attempt? Will the gas discovery happen before 2020, giving us some kind of investment confidence? Will the casino arrive on time, will the Egyptian investors for the Larnaca marina progress? What is going on with the Ayia Napa golf course and marina development (we hear that not one but 3 groups are interested).

Because this is a country of big talk, little politics, and prevailing stupidity, we don’t expect our immediate bright future in real estate to come to pass. The signs are there, the interest however limited in property investment is there, as is the vibrant private sector and the will of this new Government to improve things. Crossing our fingers and to some extent depending on the political situation with the Turkish Cypriots, we could do it in the next 1½ to 2 years. We need confidence and straight thinking to take charge of our future. With the improving economy/confidence spilling over into real estate, it will have a better chance of a restart in, say, 2016. Don’t expect prices to start rising then, though. The oversupply must be absorbed, the relevant legal issues, including that of title issues, plus the restoration of Cyprus’ solvency are issues, among others, to attend to. At this point we must keep our fingers crossed.

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