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Funds should invest in real estate

Funds should invest in real estate

07.03.2022

After 42 years in the Cyprus real estate market, there are still reports of wrongdoing and wrong mentality. I was criticized by many when I wrote that the main reason for the current economic situation is our mentality and the brainless politicians that we have. Such a small country like ours could become a pearl and an example for the EU.

Thank God, we are not as bad as in Greece, Hungary or even Italy. Iceland (not a member of the EU) appears to be the champion in this incomplete, but other countries seem to be striving for it, such as Poland.

We have huge sums of money from local reserve funds in Cyprus, mostly from semi-state authorities who manage their own funds with their administration and decision making.

Then, unexpectedly, we discovered a scam in the Dromolaxia project and various other investments in real estate by Cyta’s reserve fund, exceeding 100 million euros. In addition, the Electricity Authority of Cyprus fund invested huge sums in stocks, which fell sharply in price. Some fund managers have gone to jail, but the offenses remain. I was informed that we, the remaining taxpayers, would be called upon to pay for these losses of the reserve fund.

Thus, if the funds make a profit on the investment, it benefits the funds, and if not, let’s say, at a loss, the rest must compensate for this.

Who came up with the idea of ​​security anyway?

Don’t you think it makes the most sense for the public to have every reason to insist on the privatization of these funds/authorities, since we are fixing their problems?

So far, we (the taxpayers) have had to pay the bills for the Dromolaxia scam, plus another €50 million for other real estate investments, while the EAC savings fund has suffered losses on equity investments, receiving a building plot in exchange for their loss .

But do our politicians dare to raise such questions publicly? Votes are the main reason, and who cares about the economy? Have you noticed that any member of parliament raised such questions? Considering that the semi-state part has about 18,000 employees (plus families), this is one reason.

Well done funds that invested wisely in real estate (provided that they were honestly and correctly managed).

The same funds have a great opportunity to continue investing in the real estate market, especially now that delinquent loans and mortgage packages are being offered for sale at a discount of about 50% of their market value.

It will be better if they can properly manage their investments in the real estate market. I have even heard that some funds invest in exchange rates and foreign stocks. Not a bad idea under normal circumstances, especially for those who have bought dollars and are now converting them to euros. But is this the purpose of savings funds, which should be provided at the “A” level?

There are all sorts of attractive real estate investments in the region of 5-10 million euros, including the leasing of commercial buildings to class A tenants with a yield of about 5% per annum.

Given that today bank deposits bring at best 1% per annum (minus 30% tax), the above yield is very attractive.

In addition, some properties are in demand, while other investments, including top quality showrooms/garage centers, are also up for sale with a similar rate of return.

Troubled bank sales are a source of heightened interest in real estate, while for housing these funds could buy flats in bulk and sell them at discounted prices to their members using their excess liquidity.

Whatever direction these funds decide to take, the guarantee we offer them is unacceptable.

The situation in the real estate market is still vague.

However, opportunities are slowly emerging and this circumstance will show up more regularly in the near future, while private/direct deals with troubled real estate companies are also desirable.

Antonis Luazou – real estate appraiser, real estate agent and real estate consultant

Source and photo: www.financialmirror.com, Editor estateofcyprus.com
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