A guaranteed investment?

The taxpayer pays for provident fund gambling

Notwithstanding my 42 years operating in the real estate market of this country, I’m still learning from the wrongdoings and sick mentality that we all seem to share.

We have got negative reactions from some when we have written in the past that the main cause of the prevailing economic situation is our mentality and the brainless politicians that we have. A small country such as ours could have been a jewel and acted as an example in the EU, yet here we are, in the state that we are in.

In Cyprus we have huge funds from the local provident funds, mainly from semi-governmental authorities, who manage their own funds and have their own administrations which make decisions.

We have found out the con of the Dromolaxia project and various other investments in real estate by the Cyta provident fund, exceeding €100 million. In addition, the Electricity Authority fund investment in huge amounts of shares went wrong.

Some fund officers have gone to prison for this, but the wrongdoings remain, and, shockingly, we have been informed that, we, the tax payers will be called upon to pay for the provident fund losses.

So, if the funds make a gain on an investment, it is to the benefit of the funds and if they experience a loss the rest of us have to compensate for their loss!

Who on earth came up with such an idea?

Don’t you think that the public has every reason to push for the privatisation of these funds and authorities given this unacceptable situation?

So far we, the taxpayers, have to foot the bill for the But do our politicians dare to raise such matters in public? Votes are their main concern and no one cares about the economy.

Well done to the funds that have invested in real estate, provided it was done honestly and correctly. There is much opportunity for the same funds to invest in the real estate market now, especially now that loan packages are going to come up for sale, at expected prices of around 50 per cent less.

We have even discovered that some funds are playing with exchange rates and foreign shares. Not a particularly bad idea under normal circumstances, especially those who bought dollars and now converted them to Euros, but, having said that, is this the goal of provident funds which are supposed to be highly secure?

There are all sorts of attractive real estate investments in the region of €5-€10 million regarding commercial buildings to let to grade A tenants which would have a return of around ±5 per cent a year.  Considering that bank deposits earn nowadays ±2 per cent a year, less 30 per cent tax, the above yield is quite attractive.

Distribution centres and showrooms of top quality are also up for sale with similar returns.

Banks distress sales are another source of real estate attractions. These funds could buy housing in bulk and sell the units at reduced prices to their members, using their excess liquidity (funding of their members purchases for their own projects).

Whatever direction these funds decide to follow, what is unacceptable is the guarantee that we offer them.

The situation in the real estate market is still a bit fluid at present but opportunities are gradually emerging and will increase in the immediate future.

Antonis Loizou & Associates EPE – Real Estate Valuers, Estate Agents & Property Consultants, www.aloizou.com.cy, [email protected]