Everyone is after money and, above all, there are the governments of the world that are facing deficits in their budgets. Being tougher on tax collection and adding new tax requirements is somewhat understandable during times of good economic activity, but during times when there is high unemployment, increases property and other taxes, reduces welfare benefits, etc., it is worse. At least as far as Cyprus is concerned, what we are going through now is because of our own stupidity, which is 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 going after its pound of meat more aggressively. Of course, the banks must get what they are owed, otherwise they may not survive and require more “haircuts” for depositors. There are ways and ways to do it and some banks show understanding trying to help, while other financial institutions have not understood what it is. As all this is not enough, we studied several proposals, including that of debts to the Government (for example, property taxes) so that debtors are charged with criminal offenses and lead 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 Members who, with their rejection of the Troika’s first proposal for a contribution of around 7% of the total deposits, led to the closure of one and the near catastrophe of the second bank (the haircut adds up).

How is it possible that all this is happening 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 sorts) suggesting a brilliant proposal (in his own mind) to avoid the debt burden of refugee homeowners 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 it at a time when there is no money for food and basic needs.

We also read that UK owners, if living abroad (as permanent residents) are required to pay capital gains tax when their property/home is sold back home. This is a serious situation that will affect British home buyers abroad if the British authority considers their home abroad as their primary 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 primary residence. Therefore, even your holiday home is interpreted by the local (Cypriot) tax authorities as “your main residence in Cyprus”. On the other hand, if the British authorities find out, it will mean that they will tax your British home for the capital gains.

Having said that, where are the lucky people who have cash? Where does one deposit their cash savings? Based on the vague statements from the Eurozone that the example of Cyprus 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 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 deposit” fee. All of this could in the end help real estate investment (cash safety wise) as the ½% interest on bank deposits (overseas) plus EU risk, could divert some interest towards this form investment. We have reported that Cyprus is becoming increasingly interesting for international investment funds with experience in this type of real estate situation in struggling economies. Real estate returns on grade A buildings and subject to grade A tenants with long-term leases require 6½% per annum (plus escalation every 3 years). For premises, a 6-7% return with the possibility of sale and leaseback is an option, but a newer Portuguese-American company asks for a 10-12% return. Hedge funds are in the region of 15% per annum returns – these returns are more than double what we’re used to, but then with the interest charges on late payment they add up to 13% per annum and one wonders if the 6%-7% annual return is not “reasonable”. It is difficult to say how the situation will develop, as 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 so far 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 deposit rate competition (the depreciation of the Turkish lira, as well as making real estate even cheaper, including vacation competition).

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

Because this is a country of big talk, petty politics, and prevailing stupidity, we don’t expect our immediate positive future in real estate to come to pass. The signs are there, the interest, however limited, in real estate investment is there, as is the vibrant private sector and the will of this new government to make things better. Fingers crossed 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 trust and straight thinking to take charge of our future. With the improving economy/confidence spreading across real estate, it will have a better chance of restarting in, say, 2016. However, don’t expect prices to start rising at that time. The excess supply must be absorbed, the relevant legal issues, including that of title problems, plus the restoration of the solvency of Cyprus are problems, among others, to attend to. At this time we must keep our fingers crossed.