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BY GEORGE MOUSKIDES
We have already analysed the ‘rent to buy’ financing method for properties in the past, but in times like the ones we are experiencing now, it is good to think about alternative solutions for problems that we face or about issues that we want to address.
One issue that is certainly difficult to promote at present is the acquisition of a home. With the prevalent buyer doubts and difficulties in securing a housing loan, it is something that is quite difficult to achieve.
However, as property prices have dropped significantly, there are opportunities. But funds are lacking, job security is shaky and of course there are obstacles with the banks with the high interest rates that are constantly rising.
Given all the adversities, we cannot remain inactive and limited to the Cypriot way of doing things. We take information and examples of what happens abroad and working within the framework of local legislation, we try to shape the events in Cyprus.
It is with these thoughts that we have promoted the ‘rent to buy’ financing scheme in Cyprus that is already established abroad. The scheme provides the following:
– The buyer makes a small deposit of about 10% of the value of the property;
– After he moves into the apartment, the buyer pays rent for a period up to five years;
– During the five-year period, the buyer has the right to pay a predetermined purchase amount and register the property in his name;
– The buyer has the right, if he so chooses, not to buy the property and instead sell it to a third party or just walk away, losing only the money he has paid until that time.
The buyer has the advantage at least for five years not to need a bank housing loan.
Through the initial down payment and the monthly rental payments, the buyer has created a significant contribution. Thus the balance to be paid for the purchase has decreased and it has become easier to obtain a loan from the bank.
The buyer has the opportunity to live in the property he will purchase and may identify potential problems and ask the seller to fix before the purchase.
Logically, after five years, property prices will be higher, thus the buyer also gets an investment benefit. Also, because of today’s economic crisis, he may acquire a property at a more reasonable price.
We need to point out that ‘rent to buy’ is also advantageous for the seller, because apart from the down-payment he gets a higher monthly rent which helps him towards his obligations at the bank and covers interest and loan instalments.
In a crisis like the one we are presently experiencing, this scheme helps the property sector overall. With these facts in mind, it is taken for granted that the state should sponsor the scheme, thus helping both buyers and sellers of properties.
George Mouskides is Chairman of the Association for the Promotion of Property Development and Manager, FOX Smart Estate Agency.
