By Elias Hazou
ALL told, the lifting of restrictions on property development within the non-military areas of the British Sovereign Base Areas (SBA) may be a step in the right direction, but on its own is not likely to be a game-changer for an economy in the dumps, observers said yesterday.
The government has said that under the deal struck this week with the British government, property owners within the bases will be allowed to carry out not only housing development, but also tourist and industrial development. And property owners will now be able to sell to non-locals, Europeans and third country nationals.
Under the arrangement, 78 per cent of the bases territory (about 200 square kilometres), in which all privately-owned properties are located, would be covered by island-wide town planning zones.
The government has been quick to sell the agreement as a big boost to the flagging economy, freeing up latent resources (primarily land) whose development had hitherto been tied up by administrative constraints.
At this point details are sketchy one can only speculate on how the SBA deal will pan out.
One thing is clear: real estate prices in the affected areas should go up.
“Because the value of land is tied to its use, real estate values are expected to get a significant boost,” said George Mouskides, general manager of FOX Smart Estate Agency.
“Previously, locals could only build one house on their land; now, they will be able to build, say, two or three houses on the same land plot.”
And there’s a great deal of prime real estate in the SBAs, including coastline land.
But with a deep recession, bank credit tight, the property market depressed and many developers themselves in the red to the tune of hundreds of millions, where will the cash come from?
Foreign investors and/or banks may be the first to bankroll development projects in the SBA territories, suggests Mouskides.
“It’s not unreasonable to expect financing from non-Cypriot organizations, given for example the recent upgrade – even if slight – of confidence in the Cyprus economy by Standard and Poor’s.
“But given that it will take quite some time for the economy to rebound, we should not get ahead of ourselves. On the other hand, since at any rate the lead time for town planning permits typically takes years – though the government has pledged to reform this – by the time current permit applications are approved the economy might look very different than it does today.”
Whenever the action in the SBAs does pick up, Mouskides sees a mix of both residential and non-residential development. For example, Limassol residents may start buying up land and moving to the Akrotiri SBA before real estate prices there equalize with the rest of the island.
“Overall, the SBA agreement is certainly a positive one…how it’s actually implemented remains to be seen,” added Mouskides.
And one should not imagine that people will be queuing up to buy and sell property in the SBA, cautioned a former official with the Technical Chamber (ETEK).
“I realise that this might rain on the government’s parade, but there you have it,” commented the source, who preferred not to be named.
He warned also of the risk of unsustainable and ‘out of control’ development.
“This goes for the whole of Cyprus, obviously. But if our track record is anything to go by – look at Ayia Napa for instance – then one is more pessimistic than optimistic. If by development we simply intend to sell homes and villas to the British and Chinese…then that’s shortsighted.”
Another factor to consider, the source said, is the type of planning zones that will apply to the affected SBA properties. In Cyprus, planning falls broadly into two categories: local plans for towns and heavily-built up areas, and countryside policy – also known as the Policy Statement for the Countryside – for areas not designated as local planning.
Though it’s too early to say for sure, the majority of the SBA areas would presumably fall under the countryside planning policy, in practice laxer than local plans as it’s subject to less checks and balances. Essentially, the source said, countryside policy is determined not so much by local communities and authorities, but from the top down – the interior ministry.
Pantelis Metaxas, former chairman of the Federation of Environmental and Ecological Organisations of Cyprus, echoed concerns about the risk of unchecked development.
From his experience, he said, the municipality of Akrotiri in particular has been traditionally ‘gung-ho’ for big development.
“This agreement now at the SBAs will probably whet their appetites,” he told the Mail.
The community leader of Akrotiri, which borders on the SBAs, was one of several who yesterday hailed the agreement, as did the Real Estate Agents Association.