We, as Cypriots traditionally invested in the U.K. property market with the center of interest being Central London. With the close ties that we have with the U.K. and with 40% of the university graduates in Cyprus studying in the U.K., this is not a surprise. Originally demand started with parents buying apartments in the London and close to the U.K. universities, for the use of their studying children, since it made sense to buy “something” and seek a mortgage vis-à-vis pay rent. With property prices in the U.K. with the last years (prior to the crisis) going up and up and with easy finance, this was a sound move for those who had the financial capacity to cope. Usually buyers kept the apartments for a period of time and subsequently they would sell them for a profit or keep renting them to other parties. Then other markets with “opportunities” appeared, including apartments in Greece (mainly in Athens) as well as Cyprus and in ex-eastern block countries and interest for the U.K. declined. Of course the top financial Cypriot people, directed their interest in the “named” areas of London and with respect to Greece, to the Kolonaki area (Athens). Based on this demand, a number of local developers undertook several conversion jobs in the U.K. and Greece, by buying old apartments and making them up in a modern style and selling them at relatively high prices. Demand for them was forthcoming mainly from business people, accountants and solicitors, who over the last 10 years have made a lot of money in Cyprus, due to the property and business boom that was with us until recently.

The recent economy/property crisis, coupled wit the dramatic fall of sterling with relation to Euro (in total a reduction of prices around 15%-25% in the U.K. and with the exchange difference of another 15%) made U.K. prices appear to be very attractive, especially when yields reached around 7%-9%. This is particularly so for commercial property, which, up to recently was not a favorite choice by locals (Cypriots).

Investing in U.K. real estate market however is far more serious business than in Cyprus. Good properties have a minimum value of at least €1.0 mil. and with the shortage of finance, equity contribution requirement reached around 30%-40%. Notwithstanding this, especially central London, which is an “international address”, with demand forthcoming from all over the world and more recently from upcoming economies such as India and China, central London properties in “named” locations (residential) have not shown particularly signs of a serious decrease (according to reports around 10%-15%). The favorable system that the U.K. has, with practically no capital gains (be it slightly illegal according to what one’s declares) and low transfer fees, encourages property deals and this as opposed to our 7% (on average) transfer fees and the 20% capital gains in Cyprus.

At the same time and riding on this (bearing in mind the present state of affairs), several Cypriot developers have come up with the idea of property exchange. That is, if a British wants to buy a property here, but he cannot, because his property is difficult to be sold and at the same time a local developer/property owner, who has a similar problem in Cyprus but wishes to acquire real estate in the U.K., an exchange could take place with both, meeting their wishes. However, based on our experience (which we have tried on behalf of our clients) this is not an easy exercise, because both parties wishes must be met, both, in terms of price, plus the location and type of property. This sort of exchange solution could work when one has hundreds of properties for exchange. The problem of course remains the exchange difference and management of the U.K. properties. In addition to having high municipal (annual) taxes, the management and maintenance cost can reach around 20% of the annual rental income, whereas the under declaration of income (quite usual in Cyprus) is rarely done in the U.K.

As we have reported in our previous article, now Cash is King (more now than before) but cash is not around, plentifully. So it appears that we will have to suffer and sustain this situation of depression and heartache, the annulment of plans and children’s education etc, for which most of all of us worked hard for tens of years.

Similarly Greek properties are not in a better shape, whereas the market in Romania and Bulgaria is completely dead in terms of property transactions.

In an international report by Cushman & Wakefield, this international real estate consulting firm, expects signs of property recovery will start mid 2010 and recovery by the mid/end 2011. The question is can we afford to wait for so long, especially when local (Cyprus) Banks, have such high mortgage interest rates (around 7%-8%) and if delays occur they can reach 12%!!

What a mess indeed and bad times for especially young people who lose their jobs and have their career interrupted. With respect to Cyprus and referring to the technical professions, such as civil engineers, architects etc, who want to have a career in the building industry this is especially bad.

We wish to write the articles in this column always with a positive and not a depressing mood. For this reason we will continue, from time to time, to write about something else more joyful and not get our readers down (to the extent that local circumstances permit us). In a recent visit at a women’s monastery at Trikouchia (Prodromos village) the six nuns told us that they never had so many people praying for a better future, whereas on the other side, reports indicate that gambling has increased in hope of a gain!! What can we say?

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