Is a real estate crisis around the corner?

3 mins read

By Antonis Loizou

I have been following the reports and aftermath of the passports issue and the corruption involved that has targeted the Republic of Cyprus Republic in recent months and it seems that there is some sort of race of who will make the noisiest announcements.

I have long wondered where all these people, including politicians and ‘experts’, have been all this time since 2013.

I have studied the criticism, that Cyprus has benefited from 7,000-plus passports, claiming that the Government has earned no more than €48 mln. Is this serious?

If the benefit to the economy has been €7 bln, where did the €48 mln come from?

This figure may be in direct payments of fees, etc. to government coffers, but they also miss out the side benefits to the economy in general.  The €7 bln was not an income earned only by property developers, but it also benefited suppliers, contractors, subcontractors, the labour force, service providers, professionals (lawyers, accountants, financing) and so on.

This unacceptable situation was mainly created by the developers themselves, who were eager to sell property investments in exchange for passports, in some cases even by providing false information. On the other hand, there were politicians and their parties, as well as the Church, who were okay with receiving generous donations. But recently these same guilty parties have been extremely quiet.

When a ship is sinking, the first to escape are the rats. But the Cypriot rats will most likely get off unscathed, causing damage to the rest of us and the Cyprus economy in general.

The passports issue has its side effects, with the Auditor General reporting on all sorts of wrongdoings on the subject (post event).

We now have the AG slowing down matters in order to proceed with his investigations. This has resulted in the cancellation of the Paphos-Polis road, the sewage plant at Limassol, the attempt to close of a slaughterhouse (creating a meat shortage in the market) and so on.

I was also shocked that he had set his sights on Wargaming, as well as the Casino.  Is he serious?


Olivewood still in infancy

On the other hand, it came as no surprise that he was investigating the Olivewood film industry, which is still in its infancy, and home some investors have been misled and have not yet received the Government grants.

How can we attract foreign investors, if their names will be mentioned in such reports 3-5 years from now? I’m not suggesting to cover ups, but serious companies like the ones I mentioned before may simply pack up some day and take their business away.

What is causing harm is what is seen as the Auditor General’s self-promoting aspirations and the fact that he has even reported his opinions to the professional body of auditors. Even if the government is vindicated in the future, who will trust the Government of Cyprus for future investments?

This atmosphere has impacted many investors, such as the imaginative project of the Ayia Napa marina, with the recent cancellation one of the two tower apartment buildings. Other tower blocks in Limassol have also halted construction, the Polis road will not happen, the Eden development will not happen, as well as so many other infrastructure projects.

If and when the Paphos marina is concluded, we will still have the Auditor General finding a way why this should not be concluded. The same could happen to the Ayia Napa-Paralimni golf course and the much-awaited Larnaca port with the Auditor General coming after 1-2 years to report that it should be cancelled.

In this country we seem to be looking only after ourselves, promote personal interest and ignoring the effects on the Cyprus economy.  We should get our act together, but is this the way?

So, who is to blame?

Developers: The primary wrongdoers of the whole situation, notwithstanding that they were warned, by former Interior Minister Hasikos and the press reports dating back to 2018. I suggested in an article in 2018 that a hefty penalty be charged for such wrong doings of €500,000 per case.

Lawyers/Accountants: Part of the problem as they had a role to play in the provision of wrong and misleading information attached to the passport applications.

Estate Agents/Valuers: The least to blame since they are the recipients of so many questions and inquiries, but some of them have gone to extremes to get business.

Press/media: Not to blame as such, but should they not have checked if the misleading adverts were within the legal requirements and should they not have criticised the whole situation beforehand?

Governmental Employees: This is a very serious allegation against those who provide cover ups, not doing their due diligence and reporting false information to their supervisors.

The Government: Yes, of course it is to blame to the extent that did not listen to the warnings of the E.U. and so many others.

Political Parties: Absolutely, especially if a donation is given to the right people, as were the cases of Focus and the Dromolaxia project.

I would not be surprised if the Auditor General issues a report against the Larnaca marina/port deal, a fair warning to the Larnaca Municipality and the town’s business community.

To conclude, a real estate recession might be coming, leaving the developers, borrowers and financiers out in the cold, for whom the Cyprus Investment Scheme did wonders in the past.

This situation could be followed by layoffs, increasing unemployment and so on and as an icing on the cake.

For sure, those first to complain will be those same political parties and others, who are now very happy with the mess that we are in.



[email protected]