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Talk by George StrovolidesTalk by George StrovolidesHilton HotelHilton HotelNicosiaNicosia, , 7 October 20117 October 2011

THE PROPERTY MARKET IN THE PROPERTY MARKET IN CYPRUS – FACTS & CYPRUS – FACTS &

FICTIONFICTION

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TOPICSTOPICS

The property market in Cyprus in the light of The property market in Cyprus in the light of the local and world economic crisisthe local and world economic crisis

Data on government revenues and number of Data on government revenues and number of salessales

Latest developmentsLatest developments The futureThe future Question timeQuestion time

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THE PROPERTY MARKET & THE THE PROPERTY MARKET & THE CRISISCRISIS

The property market was at the epicentre of The property market was at the epicentre of the current crisis.the current crisis.

The The sub-prime loan crisis in the US in sub-prime loan crisis in the US in 2007 2007 was was directly related to the property marketdirectly related to the property market..

The correction was inevitable after the The correction was inevitable after the worldwide property boom which followed the worldwide property boom which followed the stock exchange crash of stock exchange crash of 2000. 2000.

Real estate properties are less volatile than Real estate properties are less volatile than shares but not a safe haven like goldshares but not a safe haven like gold..

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THE CYPRUS REALITYTHE CYPRUS REALITY

It was unrealistic to expect Cyprus to remain It was unrealistic to expect Cyprus to remain unaffected (de-coupled) from the crisisunaffected (de-coupled) from the crisis..

In 2008 both the U.K. and Russia were affected In 2008 both the U.K. and Russia were affected by the crisis with their currencies loosing a lot by the crisis with their currencies loosing a lot vis-à-vis the Euro.vis-à-vis the Euro.

The market for holiday houses/flats came to be The market for holiday houses/flats came to be over dependent on these two marketsover dependent on these two markets. .

The fall in property prices was not uniform The fall in property prices was not uniform ((NicosiaNicosia vs. vs. costal townscostal towns, , flatsflats vs. vs. houseshouses).).

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DATADATA – – Government revenues from real estateGovernment revenues from real estate ((from ownersfrom owners – – excl. VATexcl. VAT))

0

100

200

300

400

500

600

700

800

900

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20102011*

CGTIPTTrf feesTotal

Source: Ministry of Finance – Amounts in millions of Euros *2011 Jan-Aug.

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DATADATA – – voluntary sales in no and voluntary sales in no and value (2006 – 2011)value (2006 – 2011)

0

5000

10000

15000

20000

25000

2006 2007 2008 2009 2010 2011*

No of docsValue of sales

Source: Lands Registry Dept. Value of sales: in thousands of Euros *2011 Jan-Sept.

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LATEST DEVELOPMENTSLATEST DEVELOPMENTS

The town planning “amnesty”The town planning “amnesty”.. The new town plans.The new town plans. The need for tax reformThe need for tax reform.. Bill before Parliament for reduction of transfer Bill before Parliament for reduction of transfer

feesfees..

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DEVELOPMENTSDEVELOPMENTS – – “Amnesty’’“Amnesty’’ An attempt to solve the problem of 100.000 or An attempt to solve the problem of 100.000 or

so pending title deedsso pending title deeds.. KSIA’s role was vital.KSIA’s role was vital. Recent legislation passed by ParliamentRecent legislation passed by Parliament.. Deadline for provisional declaration 7 October Deadline for provisional declaration 7 October

2011, to be extended by six months.2011, to be extended by six months. ““Irregularities” legalized by paying a fee.Irregularities” legalized by paying a fee. Could be a significant boost to government Could be a significant boost to government

revenues.revenues.

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DEVELOPMENTSDEVELOPMENTS – – New town plansNew town plans Various town plans revised in 2011.Various town plans revised in 2011. Public presentations/discussions are held.Public presentations/discussions are held. Four months from time of publication allowed Four months from time of publication allowed

to lodge objection.to lodge objection.

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DEVELOPMENTSDEVELOPMENTS – – the need for tax the need for tax reformreform

Current system is overly complicated with large Current system is overly complicated with large number of taxes/levies.number of taxes/levies.

Cyprus is among the most heavily taxed Cyprus is among the most heavily taxed countries in Europe in property taxation.countries in Europe in property taxation.

KSIA’s proposal is for a single tax/levy on KSIA’s proposal is for a single tax/levy on acquisition, another on holding and a third on acquisition, another on holding and a third on disposal of propertydisposal of property..

Both tax base and bands need to be updated.Both tax base and bands need to be updated. Tax incentives could be useful.Tax incentives could be useful.

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THE FUTURETHE FUTURE

The property market in Cyprus and abroad is likely The property market in Cyprus and abroad is likely to remain volatile for some time, certainly while the to remain volatile for some time, certainly while the recession lasts.recession lasts.

Future events in Cyprus that could have a Future events in Cyprus that could have a significant impact on property prices.significant impact on property prices.Scarcity and cost of finance.Scarcity and cost of finance.The political crisis.The political crisis.The Greek economic crisis.The Greek economic crisis.Natural gas.Natural gas.The Cyprus problem.The Cyprus problem.

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QUESTION TIMEQUESTION TIME The floor is openThe floor is open!!