It is a good effort by the Housing Development Body (HDB) which is state-owned, to supply additional housing units to let, to check ever-increasing rentals, especially for housing.
The HDB and others, such as the Limassol Municipality, have taken on the job to supply 200-300 affordable housing units.
- Notwithstanding the worthy effort, such added supply will not appear in the market before 2-3 years, while the numbers supplied will not cause a noticeable impact on the rental levels.
- HDB will undertake the leasing of properties from the owners and sublet them, including taking care of the common expenses. Undertaking common expenses is a particularly promising idea by the HDB since the troublesome collection, misbehaviour by tenants and the various illegalities that they undertake, is a huge problem to landlords. If this is successful it will help the private sector to encourage individual owners to let out their units (which now they refuse to let due to the non-payment of rents/common expenses, delays in eviction).
- The development of housing projects for this purpose in certain areas (which implies somewhat large-scale developments) might lead to the creation of council estates which, based on our experience on the refugee housing, creates problems in downgrading the neighbourhood and the encouragement of ghettos.
- The private sector can certainly help towards this, by the HDB acquiring private properties to sublease to third parties, such units will be dispersed (leasing) in small numbers where there is a shortage of units to let. Since the original let will have a guaranteed rental payment by the HDB and doing without the common expenses’ problems, private property for let will come into the market at increasing numbers.
- Private market units could have a rental income based on its market value (one reference is the 1.1.2018 Land Registry Value) using a formula of 2%-3% of the market value. Such rental levels could be published per area, so that prospective landlords will know the income beforehand.
- Those who buy units to let under this scheme (letting to HDB), should be exempted from the 19% VAT and 5% VAT should be applied.
- The VAT level is a major issue since, for an apartment of say €100,000, the VAT difference of 14% amounts to €14,000 with the investors having to charge an added rental for it, something which defeats the purpose. In this example, the difference in the rental level could amount to ±€100 p.m.
- Those who opt to use this approach should keep their property to let for 8-10 years and if they decide to sell earlier than this, must pay back the discount.
- Let’s of such a nature by the private sector should not be less than 3 years with the landlord responsible for insurance, repairs, and improvements with the tenant (or HDB) for the ordinary maintenance and upkeep.
- To encourage the private supply of units, those who invest in this have the right to extend their property by 20% (max 50 sqm) of the permitted town planning zones.
- The HDB has a key role to play in achieving the goal of affordable rentals. Care is needed for the applications to be correctly processed independently of any influence by political parties and others (should be based on the personal/financial criteria of the applicants only).
These and other ideas come about from our own practical experience of the market and not on a theoretical approach.
It is not based on the somewhat political corrupt system of governance that we have.
Considering this and other matters about real estate we conclude that to get the market on the right path, a Deputy Minister is needed most urgently.
The Transport and Energy ministers are examples of younger people with limited political ties who have shown how the job is done correctly and efficiently.
You might have noticed dear readers, for over 40 years we have expressed our views on the real estate market difficulties, and we think that the Ministry of Interior at times understands little and even worse they do less.