Cyprus Mail
Property

More properties for rent needed

flats

In my previous article I talked about the introduction of a new tax on the sale of real estate, to be paid by the seller, and I wondered how the government, which wants to rein in high rents and sales prices, particularly of residential units, will achieve this by adding to costs.

In Greece, which is facing a similar problem to us and other European countries, the government is introducing new incentives in order to help increase the supply of properties for sale and rent. This is an idea worth considering.

The Greek government’s proposal, as part of a refurbishment and rental scheme, is for residential owners, who are prepared to let out their units for at least three years, to be eligible for a governmental subsidy of €4.000 to go towards refurbishment of at least €10.000 per unit. It applies to units with a maximum covered area of 100 square metres and a value of no more than €300.000.

The reasoning is that by increasing the supply it will help restrain the price increases, while, at the same time, it will improve the housing stock and keep a check on undeclared income, which is quite common in Greece.

However, reading between the lines, it seems the government grant will require the provision of security (mortgage) by the beneficiary – a major problem if the unit has other burdens on it – and the non-payment of rent by tenants is not addressed.

The problem of lack of supply, as mentioned, exists in most European countries. The Danish government, in order to help low-income groups, has allowed developments using containers, especially in locations which are close to higher education establishments. In other countries, including the UK, boats on rivers or canals are often used as accommodation.

If one looks at the local housing market, the circumstances are leading to some embarrassing developments. An example that recently came to our attention in Limassol, is a project with 12 studios created with containers, most likely without any permits, being let for €600 a month, mainly to immigrant residents. The units are embarrassing and barely liveable.

Once again I make the following suggestions to help address the issue:

  • Reduction of the VAT of 19 per cent to 5 per cent for properties that are to be let for a minimum period of 10 years. If the property is sold before the 10 year period lapses then the discount would have to be offset
  • Revision of the unwisely set minimum building extent for housing units by at least 20-30 per cent so that two-bedroom units could be 70-80 square metres, rather than 100 square metres
  • Increase of building density of housing zones by 20 per cent

It is a difficult situation all around and a package of measures is needed to address it.

 

Antonis Loizou & Associates EPE – Real Estate Appraisers & Development Project Managers, www.aloizou.com.cy, [email protected]

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