Property surveyors even more bullish
Research to test the viability of UN plan’s property restitution regime show that it would be economically viable in three out of four cases, according to the preliminary findings of research conducted by the independent research company S. Platis Economic Research and sponsored by the PRIO Cyprus Research Centre.
The research, carried out by S. Platis Economic Research Director, Dr Stelios Platis, Stelios Orphanides and Fiona Mullen, tested the viability of the Property Board under four different scenarios of property price-growth in the north, where most of the property to be restituted would be located.
The Property Board was body which, under the UN Plan, was charged with restitution, compensation and sale of remaining titles.
As part of their test, the authors assumed that the de facto increase in supply to the Greek Cypriot market would depress prices at the beginning in some areas in the southern part of the island.
They assumed that property prices in the north would rise much less quickly than they have done in the past two years. They found that land prices in the north had risen 172% in two years and house prices 36%, compared with just 14% and 10% respectively in the south.
Land prices in the north are currently at around 22% of prices in the south, according to their findings, while house prices are 46%.
They also assumed that “current values” would significantly exceed market values. Under the UN plan, dispossessed owners who did not receive all of their property back (meaning around half of Greek Cypriots) would be compensated at “current values”. This is an artificial value which assumed that the events of 1963-64 and 1974–and their consequent upward and downward impact on prices–had never occurred.
They found that only in the case of extremely low price growth in the north for three decades–of less than 9%–would the property board eventually become insolvent after 25 years.
In all three other cases the Property Board would make profits running into billions to be able to distribute dividends to holders of “property appreciation certificates”.
Under the final version of the UN plan, dispossessed owners who did not get all of their property back would be restituted for one-third of their property and compensated for the remaining two-thirds in the form of interest-paying bonds and property appreciation certificates. Dividends of property appreciation certificates would be linked to the profits of the Property Board.
Property surveyors even more bullish
The preliminary findings S. Platis Economic Research were presented at the PRIO conference on Saturday entitled “Peacebuilding in Divided Societies”.
During the discussion, two professionals involved in the property business from each side of the island commented that even the most optimistic scenario–of property prices converging with the south within just 10 years–was still cautious.
They pointed to the fact that much of the land in the north is large in size and undeveloped and that this is exactly the kind of property which developers pay a premium for today, because it is highly profitable to turn it into multiple units.
They also agreed with the authors that the ‘Turkish Cypriot State’ as defined in the UN Plan would probably not fully exercise its right to restrict investment by non-residents.
In the UN Plan, if the Turkish Cypriot State restricted investment by non-resident Greek Cypriots, it would have to restrict investment by all non-residents, including non-resident Turkish Cypriots, Turks and holiday home buyers.
