In the wake of the latest bailout problems in Cyprus, we ask the view of a leading legal services company, Judicare Group. Here, Neil Heaney, CEO of Judicare Group addresses the main issues.
Cyprus has always been and always will be a place well-known for its beaches, Brit-friendly culture and ever-shining sun. These are the main reasons why nearly 2.3 million people visit Cyprus as tourists every year - almost 2½ times the local population - while thousands of others select it as a place to spend their retirement years.
The above attractions are possibly the only significant issues that remain the same in Cyprus for overseas property hunters since March 2013. This point in time is the most significant in Cyprus's recent history as a lot of things that existed previously have changed dramatically.
The above attractions are possibly the only significant issues that remain the same in Cyprus for overseas property hunters since March 2013. This point in time is the most significant in Cyprus's recent history as a lot of things that existed previously have changed dramatically.
Bad loans
To start with, in previous years, banks in Cyprus gave loans in foreign currencies to purchasers and without any real investigation into the ability of a borrower to repay his loan. At the same time banks never really checked whether the developers - who were building the properties purchased by the bank's clients - could really built and deliver these properties.
The result of this was a steadily increasing number of borrowers who could not repay their loans - due to currency movements working against them - and a large number of purchasers who would never get the properties they bought. What's more, many of those who did obtain possession of these properties never got a title deed in their name. The above painted a most unsatisfactory picture that led a lot of purchasers seeking the protection of their rights in the Cyprus Courts both as plaintiffs or defendants (the latter in court actions against them by the banks). At the same time inevitably Cyprus began to acquire a bad name amongst people who were interested in investing or living there.
Banking crisis
All these led to the financial collapse of March 2013. The Cyprus economy, including its two biggest banks, faced enormous difficulties and the end result was the closing down of one of these banks and the Cyprus Government receiving financial assistance - or bailouts - from the European Union and IMF. Then came the infamous "haircuts" when depositors at the banks had to contribute funds. At the same time the standard of living of most people fell dramatically with the poverty rate rising alarmingly.
As often happens, though, out of a bad thing a good one emerges. The above mentioned inevitably led to the whole system changing for the better. The banks no longer hand out loans without being certain that borrowers have the ability to repay them and at the same time without explaining to them - the borrowers - the effects of their actions. Also banks check very carefully the viability of the building projects they are financing making it sure that no one will buy a property that will eventually not end up his or her own with a legal title deed.
Title deeds
Title deed issues, a huge historical problem for home-owners and investors alike are also slowly being addressed by the relevant authorities in Cyprus. Many owners have been waiting years for the title deeds of their property. Although these new measures will take some time to take effect, given the large numbers of pending applications, it's a much-needed step in the right direction for home-owners and prospective purchasers.
Property price drops
In addition to the above financial collapse - on the back of the global economic downturn - has brought down the value of many properties significantly. As a result people can now buy well-located properties in popular towns at half the price of what they previously had to pay for them - in certain areas. This plus the confidence that is slowly but steadily beginning to come back to investors, has led to increased interest in popular holiday home areas such as Paphos and of course new projects being created such as the marina in Limassol which opened on time last year and is proving to be a great success and a real jewel in Cyprus' crown at present.
Cyprus was once called "the most well kept secret in the sun". It may not be a secret any more but one can for sure say that now, apart from the sun and the sea, it is also becoming a safe place - in every respect - to live and invest.
Neil Heaney (CEO of Judicare Group)
(This article was first published in A Place in the Sun Magazine Spring 2015 issue 121)