Cyprus Property File: Inmates Running the Asylum?

The Minister of the Interior recently announced that he was considering giving the green light to a new self-checking, express procedure for issuing planning permits. In turn, the Developers’ Association  said that this was a big step towards solving the huge problems confronting the building industry – but will it help the purchasers who fund the industry ?

 

— Failing Planning System

 

The Minister was quoted as saying that at the start of this year about 10,000 permit applications were pending approval. His plan is to reduce this backlog by 50% by the end of this year by abdicating to the applicants themselves much of their responsibility for checking the legality, etc., of the permit applications. Properties covered include single houses, blocks of up to 8 conjoined dwellings and apartment blocks of up to 10 dwellings.

 

— Foxes in the Hen House?

 

The new procedure has been designed in conjunction with ETEK, the Cyprus Scientific and Technical Chamber. Clearly most of these industry professionals may be honest, law abiding individuals. However, in catering for the inevitable risk of ‘bad apples’ the Ministry with ETEK are considering penalties such as fines and loss of licence for false statements.

 

— Consumer Protection?

 

Possible sanctions on errant professionals, who may be under intense pressure from their employers, the developers, will do little to comfort victims of any misdemeanours. More worrying is the potential for legally distancing the Government from the aftermath of any illegal permits that are issued under the new regime, including compensation, mentioned under Article 32 of the Constitution covering property rights.

Remember that anyone in Cyprus can become a ‘property developer’. There is no qualification or competence-based licencing system, no necessity to carry indemnity insurance or have any form of financial standing. This lack of regulation merely exacerbates the risk to buyers.

CPAG is aware that many developers have mortgaged themselves up to the hilt on the back of clients’ properties and for years they’ve preyed on buyers in the Title Deed trap.

And now it appears that they are going to be allowed even more leeway by Government?

 

— Stormy Outlook

 

Anyone who visits the islands’ ‘property hot-spots’ will see many unfinished or empty apartments. If they read the UK press they will see that the holiday home market is fast unravelling with the previously fast growing market in Bulgaria shuddering to a halt. In Spain leading developer Llanera has just gone bust as victim of the credit crunch after failing to meet payments on EUR 748 mln of debt. With a recent 4% hike in the UK cost of personal loans, which currently stand at GBP 66 bln, and the lowest disposable incomes for 10 years, the potential knock-on for the property market here is obvious.

 

— Earnest Suggestion

 

As the property market recedes wouldn’t it make sense to concentrate efforts on building a more sustainable quality product during this recession by concentrating on fixing the many potential pitfalls for buyers and cleaning up the current mess? Rather than ‘speeding up the conveyor belt’ of empty properties on the back of other purchasers Title Deeds?

In other countries, for example, purchasers are protected with a mandatory 10 year, industry backed guarantee against defects, whereas here the norm is one year, possibly two, and by the individual developer – who may have gone bust during this time! We don’t need less regulation in this industry – we need more!

History tells us that in any competitive market the brand that survives and prospers is the one that builds a quality product by listening to the feedback of its customers.

 

Any comments  on property matters may be submitted to [email protected] or The Editor, Financial Mirror.