Company Profile

Antonis Loizou & Associates is a professional firm of Chartered Surveyors offering valuation, agency and project management services. The firm was set up in 1980 and is the largest and most comprehensive professional firm of Chartered Surveyors in Cyprus and the Eastern Mediterranean over the last 31 years. The firm employs 55 members of staff across 7 offices in Cyprus and Romania, and is one of the leading real estate advisors for corporations, finance houses, as well as the local government and individual members of the public.       About us

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Issue 27,
July 2011

Cyprus Economy

• Euro area annual inflation remained unchained in June at 2.7% the same as in May 2011, down from 2.8% in April. For Cyprus the annual inflation rate for June 2011 was at 4.5% compared to a 4.1% in May 2011.
• Euro area unemployment rate was at 9.9% in May 2011, compared to a 10.2% in May 2010.
• According to the Statistics Department, tourist arrivals reached 300.817 in June 2011 compared to 275.280 in June 2010, recording an increase of 9,3%. An increase of 53,4% was recorded in tourist arrivals from Russia (from 36.770 in June 2010 to 56.407 in June 2011), 0,8% increase from Sweden (from 15.249 to 15.375) and 3,4% increase from Greece (from 12.831 to 13.273 this year). For the period January – June 2011 arrivals of tourists totalled 973.768 compared to 877.958 in the corresponding period of 2010, recording an increase of 10,9%.
• According to estimates by Credit Suisse (CS) the cost of the explosion at Mari Naval Base is expected to reach €2,4 billion, which corresponds to 13,8% of GDP.
In a report on the situation on Cyprus, CS have admitted that it is very difficult to estimates the full consequences of this tragedy, as there are bound to be many negative consequences in the local economy.
• The Cyprus Government and the parliamentary parties have agreed on austerity measures to deal with the economic crisis, following the blast in Mari on July 11, 2011. The austerity measures seek to avoid a bail-out but also for Cyprus to ‘meet the fiscal obligations of the Cyprus republic and to solve the long term economic problems of the republic’ said Government Spokesman Stefanos Stefanou. Government spending will be cut and the stock exchange privatised. The target is to restrict deficit to 4% in 2011 and to 2% in 2012. Full details as to the package have not, as of yet been made available.

Cyprus Property Market

• Real estate prices across the island continued to fall during the first quarter of 2011 according to the sixth issue of the RICS Cyprus Property Price Index Q1 2011 , with house and apartment prices dropping by an average of 1.6% and 0.9% respectively over the quarter. Compared to the first quarter of 2010, prices have fallen across the board; apartments (- 8.3%), houses (-7.0%), retail (-6.5%), offices (-7.4%) and warehouses (-2.0%).
• In the next two year works are expected to commence for the construction of the new Limassol – Troodos Motorway, which will stop at Saitas. The road will have four lanes and the cost is expected to reach €150 million. It is anticipated that the motorway will shorten the journey by fifteen minutes.
• According to reports in the media, a large solar park is awaiting planning approval. The park will occupy an area of 3000 donums (4.014.000 sq.m.), in the village of Mitsero. The land owned by the Archbishopric of Cyprus will be let to a foreign private investor on a long term lease.
• According to the president of (FIABCI) Cyprus, mr. Dinos Michaelides, following the World Congress held in Paphos, during the month of May, there has been interest from foreign investors. The high calibre legal and accounting services offered in Cyprus and the taxation agreements between Russia and Cyprus, have caught the eye of many Russian investors. Mr. Michaelides said ‘Many foreigners and mainly Russians stayed for a week or longer in Paphos, conducting market research and looking for investment opporunties in Paphos as well as in the other towns of Cyprus’.

Global Property Market

• The UK property market remained in a ‘stalemate’ in June, according to the latest survey by the RICS. Prices continued to fall back while sales rose only marginally. Regionally, London continues to be the only part of the country where surveyors, on balance are reporting, rising house prices.
• According to the latest Halifax House Price Index house prices in 2011 Q2 (April-June) were 0.5% lower than the previous quarter. The average UK house price in June was broadly unchanged from December 2010, on a seasonally adjusted basis. According to the index, low interest rates have helped to improve affordability.
• The European Central Bank (ECB) has raised interest rates for the second time this year, from 1.25% to 1.50%. ECB president Jean-Claude Trichet emphasised that the bank would watch inflation closely: ‘Looking ahead, inflation rates are likely to stay clearly above in the coming months. Upward pressure on inflation, mainly from energy and commodity prices, is also still discernible in the earlier stages of the productions process.We will continue to monitor very closely all developments with respect to upside risks to price stability’ he said.
• The Monetary Policy Committee of the Bank of England once again kept interest rates at the record low of 0.50%. The decision was made as inflation remains at more than twice the bank’s target rate of 2%. Most economists do not expect a change in the UK base rate until the end of the year.
• The price of gold has hit a new record high of $1,615 an ounce as concerns grow about the delay in US Congress agreeing a new debt ceiling. The debt crisis in the eurozone has helped to drive up the gold price in recent weeks. Gold is seen as a safe investment and often rises in times of uncertainty.
• Credit agency Moody's has downgraded Ireland's debt rating to junk status and warned of the growing possibility of a second bailout. Moody's downgraded Ireland's debt rating to the junk status of Ba1, saying that it reduced the rating by one notch because there was a 'growing likelihood' that Ireland will need more bailout aid in late 2013 when the current bailout ends.
• Following weeks of uncertainty and anxiety in financial markets, euro-zone leaders have finally agreed on a new €109 billion bailout program for Greece, as well as measures aimed at preventing the country’s debt crisis from spreading across Europe and doing more damage than it already has. The latest package for Greece means the euro zone (via its bailout fund) and the International Monetary Fund will lend the country roughly €109 billion over the next three years at an interest rate of 3.5 percent. The interest rate on the bailout packages for Portugal and Ireland will also be reduced to 3.5 percent, from around 6 percent previously.The plan will also involve the private sector. French President Nicolas Sarkozy announced that private lenders will contribute a total of €135 billion for Greece by 2019.
• A draft European Union law on tougher bank capital will show the extent to which the bloc's newly centralised system of regulation spells the end of national banking rules. EU Internal Market Commissioner Michel Barnier is due to publish a draft measure to put into European law a global accord on tougher bank capital and liquidity standards known as Basel III, the world's core response to the financial crisis. The moves to limit national wriggle room will be reinforced by the new European Banking Authority which will flesh out binding technical standards to implement Barnier's law.
The EU executive European Commission may also come forward with separate proposals soon on tightening up another channel for supervisory discretion known as Pillar II. The combination of these steps will create what will be known as the EU's single rulebook in banking which national supervisors must follow to the letter.
 

The sale of real estate and its trend is shown on the table below.

Sale contracts by the Land Registry by Local and Foreign buyers:
Year:            2006    2007     2008   2009    2010    6/2011
Local:           6199    9964     8031   6049    6568       2031
Foreigners:  10754   11281     6636    1761    2030       957

It is evident from the sales contracts the crisis that exists in the Cyprus property market which shows a continuous drop in sales of property especially in 2011.

English Articles of the Month

Sovereign Base Areas + Development 26/6/2011 The Cyprus Government has reached an agreement with the British Government regarding development within the Sovereign Base Areas. In a nutshell the two Governments have agreed that S.B.A. which are now under a “preservation order” in the sense that no development is allowed, in future, development will be allowed. The existing regulations of the S.B.A. allow agricultural buildings development, as well as housing provided that applicants for a building permit are local (i.e. live in the village of the S.B.A.) or has strong family connections there, e.g. son/family, and lives permanently in the village (or intends to do so) and have no other real estate/land in the area, intends to use his property as a permanenresidence etc.     Read Article   Α Worrying Reaction 19/6/2011 The establishment of Lidl supermarket in Cyprus has upset people in the trade (and in particular the so called kiosks), since, at least, for the time being, its goods/prices are quite competitive. This is especially so in the tourist areas, where price differences are indeed noticeable. A bottled water is sold at approximately 1/3rd of the price that it is sold in small scale supermarkets (periptera), whereas a packet of cherries costs ½ of what one could buy them in Nicosia. Other goods have similar price differences and this has angered small scale retailers, with the end result, the Paralimni Lidl to be attempted to be burned down.                     Read Article

Akamas Still in Trouble	12/6/2011
The battle for Akamas and the Natura areas will not go away. Notwithstanding the fact that after 4 Governments have tried to solve the problem, the for and against the Natura classification of large areas of land rages on. For all of us who do not have property in the affected areas, the easiest thing to say is that the “more natura the better”, but, then, it comes with a huge cost. Under the Cyprus constitution any measures taken by the Government which result in a reduction in a property’s value, the state must compensate the owner for the loss. Such provisions do not exist in other European constitutions and as such it is difficult for Europeans to understand Cyprus’ situation and dilemma.                                                            Read Article

Downgrading the Cyprus Economy	5/6/2011
Over the recent months and as early as last week, the Cyprus economy was downgraded by the international evaluators by 3 points. The main reason being the exposure of the Cyprus Banks to Greece (for the Greek Government bonds which is debatable if they can be repaid on time and in full) and the inaction of the Cyprus Government regarding its carefree spending, with special reference to also unsolved issues, such as the retirement age, the pensions funding and the constant handouts to the needy. The Government (“communist”, according to our President, but mainly old socialist in terms of economy management) has not been able to grasp the global situation and how serious the downgrading is.                                                       Read Article

Greek Articles of the Month

Τόκοι και Αποδόσεις	26/6/2011
Ο δανειστικός και καταθετικός τόκος πάντοτε συγκρινόταν και συσχετιζόταν με τις αποδόσεις από επενδύσεις στην αγορά ακινήτων. Οι επενδυτές ακινήτων είναι διατεθειμένοι να αποδεχθούν μια απόδοση χαμηλότερη από τους καταθετικούς/ δανειστικούς τόκους, λόγω της ανατίμησης (αύξησης) των τιμών των ακινήτων. Όσο πιο γρήγορα αυξάνονται οι τιμές των ακινήτων, τόσο πιο χαμηλή ήταν και η αποδεκτή απόδοση στα ακίνητα. ΄Ετσι στις «καλές» εποχές των ετών 2003-2008 μια μέση απόδοση σε ενοίκιο της τάξης του 4%-5% ήταν πολύ ικανοποιητική, μια και που οι τιμές αυξάνονται κατά 10%-15%/έτος.                                                                        ... Read Article

H Αφυπηρέτηση της Παρέας	19/6/2011
Δεν είναι η πρώτη φορά που οι ξένοι μας δείχνουν τον δρόμο της εξέλιξης στην επένδυση ακινήτων. Από την ανάπτυξη σε γεωργικές περιοχές με μεμονωμένες κατοικίες και την αναπαλαίωση των κατοικιών σε χωριά, μέχρι και αγορά ξενοδοχείων για αφυπηρέτηση σε συνιδιοκτησιακή χρήση. Πρόσφατα ξεκίνησε κάποιο ενδιαφέρον από «παρέες»/συνδέσμους ξένων, για αγορά ξενοδοχείων προς αφυπηρέτηση των ίδιων των αγοραστών. Μια ομάδα πχ. δημιουργεί μια εταιρεία η οποία με την σειρά της αγοράζει ένα ξενοδοχείο με τις μετοχές του ξενοδοχείου να αντιπροσωπεύουν συγκεκριμένα διαμερίσματα και περίοδο ιδιοκτησίας.               ... Read Article

Ένα Ενθαρρυντικό Σεμινάριο - Αμνηστία

5/6/2011

Την 1/6/2011 διοργανώθηκε ένα σεμινάριο ενημέρωσης, παρουσία του Υπουργού Εσωτερικών για τις λεπτομέρειες της Πολεοδομικής Αμνηστίας. Επειδή σε προηγούμενο μας άρθρο αναφερθήκαμε για την πολιτική βούληση και την εφαρμογή της (για το δεύτερο είχαμε επιφυλάξεις) ως δύο ξέχωρα θέματα, πως δηλαδή θα ερμηνεύονται οι διάφορες πρόνοιες, φύγαμε από το πιο πάνω σεμινάριο ολίγον καθησυχασμένοι και τούτο διότι:                      ... Read Article

Our News

• Our Office was singled out to attend a UN specialized meeting between foreign and local experts, Cypriot (T.C. + G.C.) business people and politicians to discuss the property issue. The two day meeting in London (11+12/7/2011) was, if anything, a start to exchange ideas how to get out of the deadlock that the politicians created.

• The Office acted as the local advisor for an investigating team from BBC regarding the various con-jobs that happened in Cyprus relating to inspection flights organized by British estate and financial agents. Various matters have emerged during the interviews (18.7.2011) which included on spot visits, which are quite shocking.

• On the 22/7/2011 the office explained in detail to a group of lawyers, the provisions of the Building Amnesty procedure.

• On the 25/7/2011 the Office gave a lecture to approximately 100 members of staff to Alpha Bank regarding the Building Amnesty in plain language for everybody to understand.

• The office has participated in lodging a complain towards the Minister of Interior regarding the new Armenian Institute property at Nicosia (Melkonian) a multi million worth of property for causing damage to its value based on to the new town planning plan proposals.

• A published article by us on the Building Amnesty regarding “misinformation” by several agents and others, on the issue of the Building Amnesty and the fees required of €4500/applicant, was well read especially by the foreign residents based on the letters and the invitations that we have received.

• The destruction of the Vasilico power station is estimated to cost the Cyprus economy €2.410 bil., as estimated by Credit Suisse. There are now fears that should the Government seek E.U. financial assistance and if this happens, the E.U. might ask for several measures to be undertaken by the Government, such as the increase of VAT etc.

• The power cuts are causing our Office productivity to fall. For this reason and in order to minimize the loss, staff is working in shifts according to electricity availability starting from 6.0 am. We seek the understanding of our clients.

The Central Bank bases its index from information received for the years 2006-2009, in retrospect, from a number of Banks and for the year 2010 from the Banks and finance Institutions in the form of actual valuations, in electronic form. As a result small deviations are expected due to the “marriage” of the period 2006-2009 with 2010. Also the General index will tend to differ again slightly due to the weighted average of the Houses and apartments.

However in order to make it simpler to understand we changed the base of 100 from 2010 to 2006 and recalculated the index to show progressively in increases year by year from 2006-2010. As a result, slight difference will be found, but the general trend is evident, which is the purpose of the exercise.

Source:Central Bank
Due to the weighted average and change of the base from 2010=100 to 2006=100 there is a difference in the percentages produced.

As it can be deduced from the index below, the increases at the end of each year [4th quarter] for each year, is as follows:

Year              Houses     Apartments  Gen. Index
2007 vs. 2006     +19.4%    +12.7%          +17.5%
2008 vs. 2007     +7.5%      +6.6%           +7%
2009 vs. 2008      -0.7%      -2.4%           -.9%
2010 vs. 2009     -3.8%       -3.9%           -4.5%

If you now compare, costs of construction from 2006 to 2009, there are the following increases in construction costs:

Year   House    Apartment
2006    €764         €694
2007    €803         €727
2008    €844         €767
2009    €896         €783
2010    €900*       €800*
*estimated

Increase 2006-2010: 17.80%   15.27%

Therefore the increase in value of the properties shown above for 2006-2010 by the Central Bank index compare to the construction costs increase:

Houses +41% against 17.80%
Apartments +27% against 15.27%
Average +34% against 16.54%

Can only be attributed to two factors:

1. 1. Cost of land mainly, and
2. 2. Increase in the profit margin of the developers.

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