13.08.2022
The recent Financial Stability Report of the Central Bank of Cyprus included some interesting data on loans and properties that have been taken over by credit acquiring companies (CACs), shedding a little more light on what they own and how much market power they have.
As at 31 December 2021, CAC held and managed 80,192 loans for a total contractual amount of €19.2 billion .
About 50% of loans were provided to individuals, 47% to non-financial companies and 3% to other financing.
The value of collateral (mainly real estate) as a percentage of the loan portfolio owned by AS was 52%.
At the same time, KAK owns a significant number of real estate properties that were acquired either as part of the purchase of portfolios of problem loans from credit institutions or under debt-for-asset swap agreements with borrowers.
In particular, as of December 31, they owned 5,679 objects with a total value of 978 million euros.
In other words, the Central Bank data confirms what we have been talking about for a long time: the balance of the real estate sector has changed because the owners and sellers of real estate have changed. Dramatically.
In addition to developers who are clearly building and selling for profit, as well as private sellers and banks who are also looking to sell their properties for a decent amount, another category of sellers has now been added: CACs and related services.
These organizations have the advantage of obtaining their loans and collateral at a relatively low cost, assuming the associated management costs and risks, and seeking to get rid of them as quickly and cost-effectively as possible in order to maximize their profits.
By analyzing public data, WiRE has now identified approximately 18,000 properties for sale across the market.
In particular, banks and CAC put up for sale 5700 pieces, the total asking price of which is about 1.6 billion euros.
About 900 properties with a total reserve value of 110 million euros are in the process of being foreclosed, while Bazaraki, the largest real estate promotion platform, lists about 11,300 properties with a total asking price of about 3.5 billion euros.
We want to clarify that this is a property that is currently for sale.
It is estimated that banks and CACs also have other properties worth around € 500-600m that are not yet on the market (and there are many people who have their property on the market but prefer not to promote it because ” they don’t want people/their neighbors to know”).
For comparison, we note that in 2021, the Department of Lands and Land Management registered a total of 20,916 transactions for a total amount of about 4 billion euros.
It should be noted that most of the properties promoted by banks and CACs do not reflect current demand.
Basically, they own large tracts of land, golf courses (more specifically, licensed land), aging warehouses, etc.
Meanwhile, the real demand for apartments, low-cost houses and offices in the city center. It is reasonable to expect that a significant part of these objects will end up in the hands of developers who have turned them into an attractive product for the market, but many will remain on the shelf.
Over time, we will see a decrease in prices for some objects whose time has “gone”.
This will make life even more difficult for some people/salespeople as they face a reality check – you see, the days of “that’s what I’m asking if you don’t like the price, go elsewhere” are over.
However, since this is Cyprus, it is difficult to have a strategy and policy to deal with the upcoming problems in the economy and the real estate market, as the pace of monetization by these institutions is accelerating.
Let’s see what’s going on!
Pavlos Loizou, CEO of WiRE
