The Cyprus government has instructed the Cyprus Land Development Corporation (CLDC) to study the mortgage-to-rent scheme employed in Ireland to help those having trouble maintaining their mortgage repayments.

THE Cyprus Land Development Corporation (CLDC) has been instructed by the government to study the Irish mortgage-to-rent scheme, the House Finance committee was told on Tuesday.The committee convened to discuss the budgets of semi-government organisations, including the Cyprus Broadcasting Corporation (CyBC), the Cyprus Theatre Organisation (THOC) and the State Fairs Authority. DIKO MP and acting committee chairman Angelos Votsis explained the extraordinary session was called to discuss budgets submitted to the House late.

With regard to the CLDC’s budget, Votsis pointed out that out of 240 available properties (flats or houses) all but 70 had been sold, and stressed the fact that defaulting debtors who bought CLDC properties add up to only six to seven per cent of a total of 1,700 properties sold. “The corporation is trying to find solutions for debtors who are facing problems with their loan repayments,” he said. “It seems that the issue is heading in the right direction.”

According to Votsis, the CLDC has been instructed by the government to study the Irish model and prepare recommendations on the ‘mortgage-to-rent’ scheme, as discussed in the President’s meeting with the National Council for the Economy on Tuesday. At the same time, he said, the potential for transforming this semi-governmental organisation into an organisation that would manage state property was being examined.

Asked to clarify whether the CLDC’s transformation was in any way connected to the President’s strategy to prevent foreclosures, Votsis said that in the Finance committee’s view an effort is being made to avert repossessions through studying various options.

With regard to the CyBC’s budget, the committee’s acting chairman noted brutal budget slashes and a significant reduction in the level of state aid to the broadcaster. He added that the CyBC’s budget fell to €30 million – from €50 million in 2009. “From what the committee was told during the session, it is worth noting that while there appears to be no intention to reduce personnel – though this cannot be said for certain – the effort is for the CyBC to the perform the role that the law has entrusted it with,” he said.

Votsis expressed the hope that the broadcaster’s new board can strike a balance through which it can perform the duties of public broadcasting in the best and most cost-effective way. Meanwhile, Votsis said the Privatisations Unit will be managing the State Fairs Authority’s assets as it is being wound down.

DANNY Brewster, CEO of bitcoin vendors Neo & Bee, is wanted by police on suspicion of fraud.

Police issued an arrest warrant for Brewster on Friday. Sources told the Cyprus Mailthat Brewster is “a person of interest in an ongoing investigation” involving the alleged defrauding of Neo & Bee customers.

The Mail is told that so far three formal complaints have been filed against Brewster alleging he fraudulently obtained money from customers in exchange for bitcoins, which they never received.

The two earlier complaints filed last week concerned the amounts of €20,000 and €15,000.

A police source did not rule out subsequently issuing a European arrest warrant for Brewster.

Other media outlets have reported that the company halted operations late in March before its software to carry out transactions had even gone live.

Brewster dropped off the grid on April 2, when he last posted on a bitcoin forum claiming he had fled the island due to threats against his family. The entrepreneur also claimed that he reported the threats to authorities here, although police said no formal complaint was filed.

In his post, Brewster said he initially left Cyprus on a “short-term temporary basis” in order to raise additional capital for the business “through the sale of my equity as we had run out of liquidity.”

His plans changed, he added, the moment threats were made against his daughter, at which point he decided to remain abroad and to sell all of his equity in the company.

He denied claims of embezzlement, stating “every single bitcoin raised and spent is accounted for.”

Earlier, a source at Neo & Bee said they got word from Brewster on March 19 that he had gone abroad to raise capital, but didn’t hear from him since.

Bizarrely, an updated prospectus for LMB Holdings – the parent company of Neo & Bee – prepared by Brewster himself – is dated March 17, just two days prior.

Neo & Bee staff have not been paid their March wages, and it’s understood that most – if not all – have resigned.

Days before Brewster’s eyebrow-raising post on the web, Havelock Investments said it was halting trading of the Neo & Bee fund on its platform due to “abnormal activity.”

Trading in the fund has since resumed, though at very low volumes. The share price and market capitalisation of the Neo & Bee Payment Network have both plunged.

According to havelockinvestments.com, the owner and operator of Havelock Investments is the Panama Fund, a private investment company. The fund is administered by “a practicing legal license company that specialises in international business law in the Republic of Panama.”

Neo & Bee’s troubles arose barely a month after the business launched with a grand opening of its flagship store in Nicosia.

A common question from a buyer or seller is: what is the best time to buy or sell a home? In the clothing world, it makes sense to get the best “deal” on winter clothes at the end of winter and that you will likely will pay top dollar for a swimsuit in April. Does the same trend hold true for real estate purchases and sales? Not really. But there are some considerations a buyer or seller should make as they enter the market that could have an impact on the transaction.

Spring and fall are better times for buyers

Let’s be clear. You can’t ever time a home purchase. Buying a home isn’t like buying a car or an iPad. The home buying process is a journey, one that happens on your own time and only after you’ve done enough research, seen enough homes and have your financial house in order.

At any one time there is a brand-new buyer entering the market and then another who has done enough research and becomes a very serious buyer. Nobody can control the evolution. But something for a buyer to consider is that real estate inventory tends to fluctuate by season. Each spring and fall we tend to see an increase in home inventory due to the seasons. More inventory means more options for buyers.

Holidays and winter are best times for sellers

It’s not conventional for a seller to list their home before the holidays or in the dead of winter for obvious reasons. But serious, eager buyers don’t care about the season or timing. At any one point of the year, there will be a very motivated, experienced buyer ready to make an offer, no matter the season. I’ve written contracts on Christmas time, on New Year’s Eve and even had a serious buyer make an offer using CamScanner. Sellers believe that it’s more conventional to list for the spring “selling” season and then again after the summer. If you go the conventional route, you will see more competition. If you can sell “off season” you might fare better because there are still serious buyers, but less homes for sale.

NON-performing loans (NPLs ) reached €26 billion and continue their upward trend while property prices continue their downward march. Valuable time has been lost unnecessarily. More than 12 months have passed since the haircut and very little has been accomplished to stem the slump in prices and the rise in NPLs. Regaining trust in our banking system cannot be accomplished with conflicting statements, leaks, and populism.

In fact, you don’t understand what is going on until you consider the place and the context. This is the land of populism, favours and freebees, where “getting away with murder” is an accomplishment to be proud of; where almost no one is ever punished.

Jobs and houses we don’t deserve

Cancer specialists will tell you that metastatic melanoma is not an easily treatable cancer and is often fatal. The corruptive ways in which good jobs, promotions and positions of power are being secured have metastasized from the job market to the property market. If you can get a cushy job, a high position and a fat salary without deserving it why not an almost free house, preferably a big one with a sea view without having to pay for it?

You simply make a large loan from a bank (regardless of your income) putting as collateral the house you buy or build with the loan. You service your 20-year loan for a year or two and then you stop, claiming financial hardship. The bank cannot take your house away and throw you and your two Mercedes Benz out in the street. It is your human right to keep your house even if you didn’t pay for it; it has already been paid by some bank depositor who was gullible enough to trust his money with a banker who was greedy enough (for a bonus) to lend it to a borrower who had no intention to pay it back.

An imaginative system of social justice

This is actually an imaginative system of social justice, income redistribution and financial intermediation. The compassionate and financially disciplined bureaucrats of the Eurogroup should adopt it and institutionalise it throughout the Eurozone along with their successful Cyprus experiment of a deposits haircut which, by the way, they did not invent. Here, bank depositors and shareholders have been receiving regular haircuts for years by delinquent borrowers living in mansions. This is social justice the Cyprus way, and our bankers, until recently, were content to play the game since they received their cut until private debt reached the astronomical level of 300 per cent of GDP. If you continued to live in a small house, it was because you were not very smart. Not servicing one loan or two does not prevent you from getting another loan or a credit card to finance your overconsumption to go with the large house you secure with your non-performing housing loan.

NPLs induced by rumor and populism

But still, there were many good people who choose to service their loans until the economic crisis hit. The rising unemployment, the haircut of salaries and deposits, and the closing of failing businesses have robbed many people of their ability to service their loans. There is no question that people who stop servicing their housing loans because of genuine hardship deserve some assistance. The problem is that an even greater number of people, who are able to service their loans, exploit the situation. They expect to be helped too by a rumored loan haircut, or impending legislation to protect the first residence. They hoped that populism, another favorite Cypriot sport, practiced daily by politicians, will ensure that any legislation to protect poor people from eviction will be broad enough to include them too.

Moral hazard, pyramids and conflicts of interests

Another innovative financial instrument with which we accumulate loans we do not intend to repay is the short-term loan for land developers. Even though both the bank and the borrower know very well that a five-year loan for land development cannot be repaid in five years they proceed with it anyway. The viability and profitability of the development based on a sound business plan receive hardly any scrutiny. Soon enough the loan is extended and expanded for another five years, no questions asked. If the developer does not have the cash flow to service his loans he is given further loans to service them creating a sort of a pyramid founded on unsound financial and business assumptions and spurious thinking. The situation becomes even more muddled when the banker and the developer are the same person; In the past, the Chairman of the Board of a bank borrows from the bank he chairs for his land development gambles. The intermingled conflicts of interest are another favourite sport of bankers, businessmen and politicians (not all but many) in this Mediterranean paradise.

Procrastination and uncertainty

The first thing that should have been done when the new management took over the Bank of Cyprus last September, was taken measures to arrest the growth of NPLs and tumbling prices of properties used as collateral to stabilise the situation and to regain trust in the bank. Instead of immediate and drastic measures, the issue of NPLs was allowed to falter for months with rumours being spread for massive divestitures and haircut of loans resulting in falling property values and rising non-performing loans. The lingering uncertainty contributed to reduced deposits and increased outflows while the leaks and mixed messages about splitting the BOC into good and bad bank further affected the psychology of the world and the reliability of banks.

What should be done?

We must now proceed without further procrastination but avoid also kneejerk moves. We need strategic planning, imaginative solutions, clarity and immediate and concerted action by all involved. Since the Bank’s management expended its grace period on secondary matters and failed to responsibly manage the destiny of our only remaining systemic bank, the Central Bank and Ministry of Finance must take a more active role. Failure to save the Bank will have severe macroeconomic as well as social consequences.

Real VS strategic NPLs

First of all we need to distinguish between NPLs due to real economic hardship because of the crisis and NPLs for strategic reasons. To terminate strategic non-servicing of loans, which could very well be the great majority, incentives and penalties must be established. An incentive / penalty could be to offer an interest-rate reduction for timely payments.Genuinely non-performing loans should be separated into housing loans and business / development loans. The mortgage loans should be further divided into those deserving of social assistance based on specific income and asset criteria for social policy. Venture / development should be divided into potentially viable and non-viable based on specific business and economic development policy criteria.

Mortgage loans

Specify the number of genuinely non-performing housing loans that need and deserve social assistance on such criteria as the primary residence up to a moderate size, unemployment or substantial reduction of earnings of low-pay debtors, the absence of other significant assets, and the servicing of the loan before the crisis. This limited number of debtors should receive assistance from the government (ie. the taxpayer), unless the economic situation of the debtor is expected to improve in the foreseeable future. Helping people in dire need is part of the social policy of the state.

All other mortgage loans not serviced should be restructured with or without the help of the mediator. If the borrower and the bank fail to reach agreement, the property and the loan should be transferred to a Housing Finance Corporation (endowed or guaranteed by the state but independent from it) which would service the loan while the borrower would continue to reside in the house paying rent. If the rent is not enough to cover the interest on the loan, the difference will be added to the principal of the loan to be repaid over time. The debtor would have the right to repurchase the residence after a period of time 10-15 years ) at a predetermined price.

Business and property development loans

Genuinely non-performing loans should be separated into potentially viable and non-viable. A nearly bankrupt economy cannot afford to continue to maintain and support insolvent debtors and non-viable developments. On the other hand an economy seeking to restart growth cannot ignore the existence of potentially viable land developments and enterprises which, if supported to attract investors, would be the quickest way to recovery.

Property values will rise again

Property prices are currently low and likely to fall even lower, but the long-term outlook is bullish. In three to four years property prices are likely to return to the levels before the crisis; this time, not in the form of a new bubble but due to our genuine comparative advantages, including climate and location and the limited supply of land in an attractive Mediterranean island. The exploitation of natural gas deposits and possible settlement of the Cyprus problem would result in further increase in property values. We need a well-planned strategy which will end uncertainty, highlight our real comparative advantages and encourage foreign direct investment in the real economy.

By Theodore Panayotou

Depositors are to be better protected by one of a number of measures approved by the European Parliament earlier today and there will be less political meddling to keep ailing bank costs down.

THREE measures to ensure that banks shoulder the risks of failure rather than relying on taxpayers to bail them out were approved by the European Parliament on Tuesday.

Two of the measures deal with restructuring and winding down troubled banks, and the third ensures that banks, not taxpayers, guarantee deposits under €100,000 in the event of a run on a bank.

These measures complement the single bank supervision system, already in place, and take the EU far down the road towards banking union.

Parliament won substantial concessions from finance ministers, especially on the rules establishing the bank single resolution mechanism and its related €55 billion bank-financed fund, steered through Parliament by Elisa Ferreira (S&D, PT). These greatly reduce the scope for power-play politics that could otherwise block action against banks, and ensured that the fund can be established faster and used more fairly.

Parliament won substantial concessions from finance ministers, especially on the rules establishing the bank single resolution mechanism and its related €55 billion bank-financed fund, steered through Parliament by Elisa Ferreira (S&D, PT). These greatly reduce the scope for power-play politics that could otherwise block action against banks, and ensured that the fund can be established faster and used more fairly.

Banks must take losses and pay for fire-fighting funds

During the economic crisis, many banks’ losses were transferred onto the taxpayer, leaving the value of the banks themselves virtually intact. “Bail-in”, enshrined in the two laws on bank crisis resolution, by contrast means that bank owners (shareholders) and creditors (primarily bondholders) will be first in line to absorb losses the bank could incur, before outside sources of finance may be called upon.

The two laws on bank resolution will also require banks to finance reserve funds to cover further losses after bail-in has been used. Countries in the banking union (all the Eurozone and possibly opt-ins) will share a bank-financed €55 billion single resolution fund, to be established gradually over 8 years. Those outside banking union will be required to set up their own bank-financed fund amounting to 1% of covered deposits within 10 years.

Less political meddling to keep ailing bank costs down

MEPs have long argued that when a bank runs into trouble, decisions on how to proceed need to be taken on sound technical grounds. Some member states on the other hand wished to give finance ministries a key role in deciding how to handle specific cases falling under the single resolution mechanism. The final compromise limits their influence and political pressure significantly to allow more fairness, speedier action and lower costs to resolve bank problems.

Depositors better protected

The update to the deposit guarantee scheme will oblige EU countries to set up their own bank-financed schemes to reimburse guaranteed deposits (up to €100,000) when a struggling bank is not able to do so itself. This will ensure that taxpayers would not have to bear the costs of guaranteeing such deposits.

MEPs also ensured that depositors will get their money faster. The total amount of their guaranteed deposit would be available within 7 working days, and a subsistence amount (decided country by country) within 5 days. MEPs also inserted clauses which include “temporary large balances” in the guarantee. If a deposit account temporarily has more than €100,000 in it, e.g. due to the sale of a house, all or a part of this higher amount is protected for at least 3 months.

Vote results Ferreira – single resolution mechanism approved by 570 votes to 88, with 13 abstentions

Hökmark – bank recovery and resolution approved by 584 votes to 80, with 10 abstentions

Simon – update to the deposit guarantee directive approved without a vote (this was a second reading approval of the Council position, which reflected the agreement in trialogue)

By: Nigel Howarth (Cyprus Property News)

The Registrar of Companies has been reported as saying that one in four construction firms in Cyprus are going bankrupt due to the pressure caused by the island’s financial crisis.

CONSTRUCTION firms are facing severe problems as the industry is collapsing under the massive pressure caused by the financial crisis according to a report in today’s Cyprus Weekly.

According to the report, the Registrar of Companies says one in four constructors are going bankrupt, while liquidators are busy at work.

Companies are seeing their property auctioned off as repossessions spike, although finding buyers has proven to be a difficult task. Repossessed properties are not only coming from liquidated companies but also from buyers who were left stranded after property developers were unable to repay their loans.

Buyers who paid part or the entire amount for a home and were expecting the Title Deeds are now effectively faced with having to pay for their property a second time.

Registrar Chris Iacovides said the problem is that companies have gone bust but their property was used as a guarantee. An imploding construction sector is causing deep concern due to its contribution to the economy, and its collapse would have a domino effect.

The Board of Directors of Bank of Cyprus (BoC) is expected to decide at a meeting today whether to proceed with the creation of a separate unit, a “development bank”, to help deal with the problem of non-performing loans (NPLs).

The possible separation was mentioned by Chairman Christis Hassapis after a meeting of the Board with President Nicos Anastasiades yesterday. However Hassapis clarified that they were not talking about a so-called `bad bank`.

Rejecting allegations of disagreement on the issue among the members of the Board, Hassapis said that the entire Board was talking about a “development bank” and discussing the most appropriate way of setting it up. For that reason, he said, they have hired HSBC who was expected to brief the Board today.

Hassapis also made it clear there was no political pressure on dealing with the NPLs, or any conflict with the CEO of the Bank John Patrick Hourican, as reported in the media.

Regarding the NPLs, Hassapis said there is at present a special unit within the Bank, consisting of about 500 people led by Euan Hamilton, former Deputy Chief Executive of Royal Bank of Scotland. He added that the Bank had also called in four experts from KPMG London to help in the process of restructuring these loans.

“We are moving ahead, in the right direction, with the proper planning,” he added. Hassapis described the meeting with the President as “a very good meeting” saying that BoC, as a systemic bank, influences and is influenced by the economy.

The CEO of BoC, John Hourican, said that he had not experienced any political pressure on the issue of the NPLs.

“I think is really important that you understand that we are dealing with every borrower in a very specific and deliberate way, to recover the bank`s position and to ensure that we treat them fairly,” Hourican told journalists.

“There`s a consideration in a professional way by the board of the bank of the various options that are available to us and this is a matter of discussion and debate and we have not concluded on what we are need to do but we are looking at all options as you would expect us to do”, he said.

“We have stabilized the asset quality of the bank during the last six months and it is our job to explore all options to try and accelerate the progression of the bank against its recovery plan. We are running ahead of our recovery plan today and it is our job to try and accelerate that journey to ensure that we contribute to the recovery of Cyprus”, he added.

Brought to you by GOLD NEWS

The Finance Ministry said in a statement Friday that a prohibition on cashing checks as well as caps on domestic transactions and payments that don’t require central bank vetting have been removed.

THE Ministry of Finance announced new but not complete relaxation in the restrictions on capital movement.

With the new 29th decree, all restrictions on transactions within the Republic are abolished, following the roadmap for relaxations agreed on 8 August 2013, except for the opening an account at another financial institution.

Specifically the relaxations are: the cashing of checks is allowed the limits on transfers and payments of €50,000 for natural persons and €200,000 for legal persons, per institution, are abolished. However, capital control restrictions on money transfers abroad remain in place.

The authorities hope to lift them by the end of the year.

The 20th decree on the international banks is issued without changes.

The Land Registry should complete its revaluation of all properties by June 2014 and the Finance Minister expects it to complete the issuance of Title Deeds as agreed with the troika by the end of the year.

INTERIOR Minister Socrates Hasikos has announced that the exercise to bring property values up-to-date will be completed by June 2014 and by the end of the year the Land Registry will have reduced the backlog of outstanding Title Deeds to 2,000 cases (the target agreed with the troika).Responding to a journalist’s question on the subject, the Minister said that “the titles of 45,000 properties that are currently pending nationwide will be reduced to just 2,000 by the end of the year. It’s a great effort, but we will get there.”

The Minister expressed his optimism that the Land Registry will complete property revaluations within the stated timeframe and on the subject of the outstanding Title Deeds he said “we hope that we will succeed.” He added that the Land Registry has drafted in staff from other agencies to help clear the backlog of outstanding deeds.

Referring to the task of revaluing properties the Minister admitted that “we have a few problems with some of the municipalities.” He repeated the need for more help from the municipalities which he said had been requested from them both verbally and in writing. Turning to the Mayor of Limassol, Andreas Christou, Mr Hasikos said that “the Limassol Municipality is among those who are helping with property revaluations.”

Andreas Christou said that the Limassol Municipality had recruited twelve people to help: young graduates, architects and engineers to help at total cost of around €50,000, adding that everyone was interested and anxious for a positive outcome for the exercise.

By: Nigel Howarth

Times have changed since the real estate boom of the 1980s. New technology, the flow of information, the global economy and a shift in societal structures have altered the real estate game forever. This isn’t our parents’ real estate market. And some of the strategies that were put to use in the ‘80s, if implemented today, would cause financial harm or result in missed opportunities — or both.

Here are five tips to consider as you explore buying or selling in this next generation of real estate.

We have evolved: Owning might not be for everyone

A long-standing vision of Anastasios G. Leventis was to establish a Museum of Fine Arts in his homeland where people would be able to enjoy the works that he had collected over a period of many years. For this purpose, he established a Trust which would provide the necessary funds for the creation of the gallery and to cover its running costs.

The gallery’s highlights include numerous works by celebrated artists such as El Greco, Canaletto, Boucher, Renoir, Sisley, Monet, Chagall, Utrillo, Volanakis, Rallis, Moralis, Parthenis, Diamantis and Kissonergis. The A.G. Leventis Gallery has already received international attention, including an enthusiastic article in the Financial Times which noted that “It is a handsome building, filled with exceptional art, a place of rigorous international scholarship, of contemplation and…potentially of inspiration too.”