CYPRUS: We should not be paying for mismanagement of public funds

6 mins read


Notwithstanding our 39 years of operation in the real estate market in this country, we are still learning by the wrongdoings and sick mentality that we all seem to share.  

We got a negative reaction by some (and lots of well-done) after that we wrote on this subject in the Greek press that the main cause of the prevailing economic situation is that of our mentality and the brainless politicians that we have. 

Whereas a small country such as ours could have been a jewel and an example to the EU, here we are, in the state that we are in.

Thank God we are not as bad as Greece (no one can understand the Greek Government’s position) and amongst others Hungary and even Italy.  A champion of “who cares” is Iceland (not an EU member) but other countries seem to follow its path.

So, we have huge funds from the local provident funds in Cyprus, mainly from the semi-government Authorities, who manage their own funds and with their own administration and decision-making. 

Suddenly, we found out the con job at the Dromolaxia land project and various other investments in real estate by the Cyta provident fund, exceeding €100 mln and in addition, the Cyprus Electricity Authority fund investing huge amounts in shares went wrong. 

Some fund officers went to prison for these offences, but then, the wrongdoings remain, and we were shockingly informed that these provident fund losses, we, the remaining taxpayers will be called upon to pay for them. 

So, if the funds make a gain on an investment, it is to the benefit of the funds and if not, say a loss, the rest of us have to compensate for their loss!! 

Who on earth in this world could have come up with such an idea of security?  Don’t you think that it is most reasonable that the public has every reason to push for the privatization of those funds/authorities since we will get rid of their unacceptable situation?

So far we (taxpayers) have to foot the bill for the Dromolaxia scam, plus another €50 mln for other real estate investment) and the Electricity Authority provident fund having incurred a loss on their stock market investment, got in exchange for their loss a prime building plot on Spyros Kyprianou Avenue. 

But then, do our politicians dare to raise such matters in public?  Votes dear readers is the main cause and who cares about the economy!! Have you noticed any MP raising such matters?  Considering that the semi-governmental section has around 12,000 employees (and their families in addition) it is one of the reasons why.  Is this not sickening, we ask you.

Well done for the funds that have invested in real estate (provided they were honestly and correctly managed) and there is a great opportunity for the same funds to invest in the real estate market now, especially now that loan packages are coming up for sale, at expected prices of around 50% less than their market value. 

If they can manage their investments correctly in the real estate market, it is all for the best. 

We have even come to know that some funds are “playing” with exchange rates and foreign shares. Not a particularly bad idea under normal circumstances, especially those who bought dollars and now converted them to euros, but, having said that, is this the goal of provident funds which are supposed to be grade A secured?

There are all sorts of attractive real estate investments in the region of €5-€10 mln regarding commercial building lets to grade A tenants having a return (yield) of around 5% p.a.  Considering that their deposits earn nowadays 1% p.a. (less 30% tax) the above yield is quite attractive. 

In addition, certain locations seem to be on the up, whereas other investments including distribution centres (lets), showroom/garages of top quality are also up for sale with similar returns. 

The banks’ distress sales is a source of increased real estate attractions, whereas, regarding housing, these funds could buy in bulk and sell the units at reduced prices to their members, using their excess liquidity (funding of their members’ purchases for their own projects).

Whatever direction these funds decide to follow, what is unacceptable is the guarantee that we offer them, however.

The situation in the real estate market is still a bit fluid at present but opportunities are gradually emerging, a circumstance which will appear on a more regular basis over the immediate future, whereas private/direct deals with distressed real estate companies are also advisable.