Cyprus-Forum.com

[Johnson&Johnson]

This is sad - more expats who didn't do their homework :

http://www.dailymail.co.uk/pages/live/a ... _a_source=


I don't like this guys style, but he makes some good points regarding the Cyprus property bubble. I must however contest his statement that the peak was in 2005. Clearly the peak was last year, 2007 - a property buying frenzy of epic proportions.

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Recognizing a Crisis
Financial Mirror
12th May 2008

A crisis may be defined as a period of acute, intense and often dramatic conflict and uncertainty involving loss of control and possible chaos. Frequently a crisis involves acutely unstable conditions leading to unwanted major change. A crisis is therefore more than simply a problem, whether acute or chronic.

How do you recognize a crisis? When you are already in one.

There is, however, often a long lead-up to a crisis, characterised by those in charge being either blissfully unaware of the developing situation or, more often, denying (a) that a crisis is possible ‘on their watch’ or (b) that a crisis is imminent. Perceptual defence and being in denial are the hallmarks of crisis development. Three typical cases in Cyprus are illuminating: water, tourism and property.

-- The Cyprus Drought

Cyprus has always been a dry country. In the 1990s, water cuts in the summer were normal but then better supply technology and desalination were introduced – so, problem solved? Well, the government clearly thought so. Despite just about everybody else over the past five years urging the government to act to head off another water crisis, very little was done. Wise decisions to build more desalination plants were undermined by a failure to recognize the urgency, practical realities and time needed to commission and build such plants.

Cyprus will probably be on half-time water rationing for the rest of 2008. These measures are workable and necessary and the population will survive the inconvenience of it all. However, for some sectors and special needs it is more than inconvenience. Foreign tourists, already an endangered species in Cyprus, will not put up with it and many are staying away. Hotels, restaurants and other businesses will suffer. Some will not survive. Overall verdict? A crisis, but thus far managed. Only time will tell if the overall economic fallout will accelerate.


-- The Vanishing Tourists

The number of foreign tourists to Cyprus has been in decline for the past five years. Obvious, that is, to all but the CTO and the Tourism and Trade Ministry that have been in persistent denial about it. The almost ghost town image of Dhekelia Road/Oroklini tourist area over the past few years tells its own story. It is bereft of tourists. Hoteliers, bar owners and restaurateurs there are in serious trouble. Only the brave, the foolhardy and the occasional foreign speculator continue to invest there these days. Businesses in Paphos and Limassol tell a similar story of the vanishing tourists.

Tourism is a fiercely competitive buyer’s market. Like all lifestyle choices, it depends on some obvious key factors such as accessibility, travel costs, local costs, climate, attractions and a welcoming friendly atmosphere. The real killer for Cyprus is travel costs.

Frankly, who in their right mind would want to take a 4.5 hour flight from the UK (or longer from the North, Scotland and Scandinavia) and have to pay a king’s ransom for the dubious privilege? Add to this the current indignities of flushless toilets and waterless showers and it is a wonder that any tourist comes here. The four star hotels are a travesty and a laughing stock. A true four star hotel should have vast reception areas with polished marble floors and columns, sumptuous rooms and endless personal attention.

The government should stop treating foreign tourists like idiots, expecting them to be masochists. Tourists will not punish themselves just to come here. They do not need Cyprus but Cyprus needs them. Only when Ryan Air’s CEO Michael O’Leary berated the Cyprus government and tourist industry a few months ago to ‘get real’ and scrap the iniquitous Airport Charge (which creates a Triple Whammy when added to the EU Environment Tax and the Security Charges) did we hear for the first time a faint bleating of recognition that a problem existed at all! O’Leary offered an extra 75,000 new tourists in 2008 if the Larnaca airport charge was cut and possibly 750,000 new tourists in five years time. With no such cut, Ryan Air would continue to boycott Cyprus.

So, did we see action? Nah, this is Cyprus mate! It took another few months (15 April 2008) for the House Commerce Committee to admit that ‘it was time drastic measures were taken to reinforce tourism at all levels’ noting that there were 17 different official and semi-official entities all dabbling in tourism instead of an obvious need for a single unified body. So, with such a crisis, have we seen action? Nah, this is Cyprus mate!


-- The Property Bubble

In parallel with the tourist decline, the property boom in Cyprus went into reverse from 2005 onwards. Nevertheless, over that period we have seen countless articles and utterances seeking to deny first that there is a problem at all and, when that position became untenable, to bluster that the problem was minor and temporary. Cyprus has always bucked the trend elsewhere, the argument went. We never had a property crash here like the UK did in the early 1990s so it was ‘obvious’ that conditions here are so different that we never could! And what with such brilliant developers, luxury properties and superb climate and attractions, there was simply no way that the foreign buyers would stop coming. Despite the glaring facts, many continue with this fantasy.

Consider the following:

Many large developers and agents will admit privately that they have not sold a property in 2008 and, in some cases, for over 12 months.

The buyer famine began long before the recent credit crunch hit the UK, as awareness of property fraud risks and the Land Registry delays in obtaining title deeds became widespread. The financial woes of UK buyers and the Euro/sterling exchange rates have merely sealed their continued absence.

A report by the Cyprus Property Action Group described as ‘absolute dynamite’ has been sitting on the desks of the
Ministers who commissioned it. The new Finance Minister has apparently been advised that without government action UK buyers should be regarded for the foreseeable future as a dead market for Cyprus.

Recently, executives in one bank in Cyprus were summoned to a ‘crisis meeting’ (sic) to discuss plans to deal with a possible wave of loan defaults by developers.

In desperation, at least half a dozen of the larger developers took the initiative in 2006-7 to seek new buyers in three countries: Iran, Russia and UAE. They sought to create property sales pipelines into Cyprus. For example, advertising hoardings in Persian can be seen in such places as Oroklini, Pyla and the departure check-in at Larnaca International. Special visitor visas were issued to buyers so that they could come and go to enjoy their properties. For 18 months all went well and new buyers were coming in from the Middle East and Russia. Sounds too good to be true?

Now, the Immigration Department added another deterrent to foreign tourists and property buyers. Any poor soul ‘unlucky’ enough to require a visa for Cyprus, unless travelling via a tour operator and pre-booking hotel accommodation, now requires a resident sponsor in Cyprus who has to cough up an 854.30-euro bank guarantee – each and every time they wish to come here. Yes, this includes all those property buyers from the Middle East and Russia! So, suddenly, they have vanished.

Was this the result of a coordinated governmental policy? Were all the consequences clearly not considered beforehand? While the CTO and developers search desperately for new ‘warm bodies’ from Russia, the Middle East and Asia, the Immigration Department or whoever is busily undermining their respective missions. Is the Finance Minister aware of the impact on government coffers and the economy? Was he consulted? Do we have joined-up government?
Crisis? In Cyprus? What crisis?

[purdey]

Good post..

[Johnson&Johnson]

oh dear...

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Property sales down in 2008
Cyprus Mail
14/05/2008

THERE was a 30 per cent reduction in property sales during the first four months of 2008 compared to previous years, the House Commerce Committee was told yesterday.

The statement was made by the deputy head of the Town Planning Department, Christodoulos Ktorides, who added that £370 million were received in transfer taxes in 2007. Ktorides said the possibility was being examined of reducing the percentage of transfer taxes, which are currently on a scale of three to eight per cent.

Committee Chairman Lefteris Christoforou of DISY called for specific measures in order to reduce the price of houses as well as the taxes imposed. He added that his committee had decided to invite the Interior and Finance Ministers to their next meeting to explain the government’s policy on the issue.

“Most countries’ constitutions say that the state must ensure its citizens are provided with homes, as a social benefit, in the easiest possible way,” said Christoforou, adding that his committee had tired of repeating its concerns over issues, such as high VAT and transfer tax rates.

Finance Ministry Spokesman Stavros Michail explained that the government’s main priority was to prepare a concise housing policy, before examining the various taxes that are imposed.

He added that the 15 per cent VAT imposed for property purchases was part of Cyprus’ commitments to the EU.

The committee will continue examining the issue in two weeks’ time.

Copyright © Cyprus Mail 2008

[Johnson&Johnson]

and it looks like the developers are hoping one of their own will get the top job with the biggest bank in Cyprus - that way they can ensure the flow of cheap and easy credit propping up the overvalued property market is not turned off :

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Close race predicted for BoC’s top position
By Jean Christou
Cyprus Mail
14/05/2008

Former Finance Minister Michalis Sarris and chairman of Aristo Developers Theodoros Aristodemou are the two main contenders for the chairmanship of Bank of Cyprus (BoC) when shareholders meet later today.

World Bank-affiliated Sarris was the Finance Minister in the Tassos Papadopoulos government, and the man responsible for bringing the island’s economy up to scratch for entry to the eurozone in January this year.

Aristodemou, who is already a member of the BoC board, heads Aristo Developers Limited, Artha Developers Limited and Artha Estates Limited. In the past he served as Chairman of the local Chamber of Commerce and Industry of Paphos, as Chairman of other organisations and as a member of the Board of Directors of the Cyprus Telecommunications Authority and of Cyprus Airways. He is also the Vice-Chairman of the Cyprus Chamber of Commerce and Industry.

Until recently, Sarris was the only contender for the post, but then Aristodemou entered the arena, upping the ante of today’s Annual General Meeting.

According to reports in Politis yesterday, shareholders are split as to who they will vote for.

“Certain members of the board who initially had favoured supporting Sarris have now changed their minds,” Politis said, quoting sources within the bank.

Others however, think Sarris is the right choice and would not only bring his calm demeanour to the board but also his prestige as a former World Bank official.

There is not expected to be any battle for the post of vice-chairman. The favourite and only contender is incumbent Andreas Artemis.

Artemis is Chairman of Commercial General Insurance and member of the Board of Directors of a number of other companies. He is also a member of the Board of Directors of the Cyprus Employers and Industrialists Federation (OEV) and of the Council of the Cyprus Red Cross Society.

He also served for a number of years on the Board of Directors of the CyTA, and since 1996 he has been the Honorary Consul General of South Africa in Cyprus.

Artemis has also been a member of the BoC board since March 2000 and was elected Vice-Chairman in 2005.

According to Citigroup forecasts, BoC profits for 2008 are expected to be in the region of €570 million, for 2009 some €700 million and for 2010 around €840 million.

The BoC AGM bonanza will be followed by Marfin Popular’s shareholder’s meeting tomorrow.

The non-Executive chairman of the Marfin Popular Group, Soud Ba’Alawy will be in town for the meeting, reports said yesterday. Immediately following the AGM, the bank will hold an Extraordinary General Meeting (EGM), related to euro conversion, Marfin Popular said.

The charismatic Ba’Alawy, is the CEO of the Dubai Investment Group (DIG), and took the Cypriot business community by storm when he visited the island early last year.

In the bank’s last annual report Ba’Alawy spoke of “a geographic expansion, the goal of which is the consolidation of our position as one of the largest and most profitable banks in the region.”

Citigrup’s forecast for Marfin Popular are €587 million for 2008, and €737 million in 2009 while it estimates that in 2010 profits will reach €878 million.

Both banks are due to release their first quarter results at the end of this month.

Copyright © Cyprus Mail 2008

[Johnson&Johnson]

one more, just to rub it in:

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Cyprus property sales dive 17% in 1Q08
14/05/2008
Financial Mirror

Cyprus property sales registered a 17% Year-on-Year reduction in the first quarter of 2008 according to data from the Cyprus Land Registry. The value of property deals transacted in the first quarter of 2008 reached EUR 794 mln compared to EUR 956 mln in the same period in 2007 for a 17% decline. A similar decline was registered in the number of successful deals, which in 1Q08 tumbled 21% YoY to 4143 from 5202 in 1Q07.

The data confirm the widely held belief that the booming property sector, which had become the driving force supporting the Cyprus economy has entered a period of slowdown. The Chairman of the Cyprus Property Developers Association, Lakis Tofarides during a briefing at the House had warned that property sales had in fact declined by 30% with Larnaca and Ayia Napa areas the worst affected, while Nicosia was faring better, as its mostly supported by locals. The influx of Russian buyers had in part cushioned the impact in Limassol, while results in Paphos were mixed.

A slowdown in the property sector is certain to have a dire impact on state finances, which in recent years on the back of a booming property sector have shown an incredible improvement, moving from constant deficits into a surplus.

The fiscal surplus of Cyprus in 2007 stood at EUR 250.6 mln (CYP 146.7m) vs. a fiscal deficit of EUR 212.7 mln (CYP 124.5m) in 2006, according to data compiled by the Financial Mirror.

The reversal in deficit was the result of higher direct (EUR 2.23bln: +42% YoY) and indirect taxes (EUR 2.92bln: +19.5% YoY). Total revenues in 2007 reached EUR 6.88 bln (CYP 4.03bn) recording an increase of 10% YoY, whilst total expenditures were up by just 3% YoY to EUR 6.62bn (CYP 3.88bn).

In the first quarter of 2008, the capital gains revenue declined by 5% to EUR 90.9 mln from EUR 96 mln in 1Q07.

[purdey]

Further to that, the Head of The Bank of England, has just said "the nice decade is over" More doom and gloom on the way.

[Johnson&Johnson]

you mark my words, purdey me old mate

a short, savage period of rising inflation, followed by a decade of japanese-style relentless deflation

england is a 'hollowed-out' economy and will suffer the most, more than the US

[purdey]

I will sleep well tonight my old mate, thank god I invested in Cyprus, (wisely ? )

[Johnson&Johnson]

gold still looks like it might have some way to go. silver too.

commodities is a bubble, it will burst but not now (oil included)

i think, that green energy is going to be the next paradigm shift. we are on the cusp of big changes in the way we produce, store and consume energy, and these changes will be so powerful and prolific that they will eclipse the internet/tech boom of the late 90's.

those that get in on this early will be the next bill gates's

forget property for now, all the yield has been wrung out of it and it is a dead dog.

[purdey]

I am still investing in old English Shotguns. Property in Cyprus, I stopped a five years ago. Green energy, is still slow on the uptake in the UK and expensive!!
My brother has just gone into recycling cardboard, seems to be doing well..