It is not unusual that before major elections, especially parliamentary elections, for politicians to excel in vote hunting. This time around they utilised their full arsenal of available weapons to get votes, hurting the real estate sector.
It is a certainty that the real estate sector is a very important part of the Cyprus economy, on several respects. Real estate services and construction companies employ a substantial number of the local work force. The sector attracts the largest portion of foreign investment capital to Cyprus from abroad. My basic knowledge of economics, suggests that Foreign Direct Investment is critical for our economic activity. It is even more important that cash inflows from the tourism sector as it has an ongoing and repetitive benefit. The property sector is also a great benefactor for state tax coffers and municipal funds as 10 different taxes and levies are paid for holding, buying and selling real estate.
Since the sector is so important for the Cypriot economy, why is the state penalising it endangering its health and driving it to bankruptcy?
Why are there many, complex and high taxes for real estate?
Why is it so difficult for someone to secure a licence to build anything?
Why is it so difficult to secure the final approval and title deed for a new building, something which takes several years after the project is completed?
Why have we allowed the tenants to have the upper hand in violation of the owners’ rights, by hindering the courts to deliver fair, timely and enforceable rulings in owner-tenant disputes.
Why do we still have an antiquated tenancy law which causes many conflicts and distortions in the rental market without any visible benefits?
Why have a law on common charges which is unable to address basic issues with commonly -owned buildings?
As if the above problems were not enough for the real estate sector, a few weeks before the parliamentary elections the government and the Parliament managed to strike more blows to the sector.
It has just been announced that for the next 2 years (i.e. until April 2023) the rental units falling under the tenancy law will get a zero-rental increase. This is the fifth consecutive 2-year period that the government imposes a zero increase. Other units (not under the tenancy law) doubled their rent during the last 10 years.
A few weeks earlier the Parliament, unanimously passed the following law: All sales of properties will bear a tax of 0.4 percent for the benefit of the Refugee fund (from the 1974 Turkish invasion). After 47 years, the law makers decided that it would be a good idea for the property owners to bear the cost of the ever-increasing number of refugees. What if the seller is also a refugee at the same time? What if the seller is financially distressed and trying to sell his property in order to settle his debts? Is this a fair approach by the political parties? Does the real estate sector, which is overburdened with multiple complicated and excessive taxes, need another tax?
The icing on the cake came last week, when Parliament decided that only lawyers can prepare contracts for rentals and sales of properties.
This decision is wrong from many angles. We never had any problems with contracts that were not prepared by lawyers so far, therefore nobody can claim that the law is needed to protect the buyers or the tenants. This will add a significant additional cost to every transaction. Above all it will cause unnecessary delays. Let’s face it; this new law is merely a means to generate incomes for lawyers and the bill will be picked up by property owners.
What else should the property owners expect before the elections? It seems that the state (political parties and government) are in a spree of vote fishing. As a property owner, I am puzzled as to who should I vote for in the upcoming elections. Can I trust any of the serving MPs that voted the above laws? Probably not.
Written by: George Mouskides
Director FOX Smart Estate Agency
Chairman Cyprus Property Owners Association (ΚΣΙΑ)
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