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Cyprus investment in distressed properties


Cyprus Banks need to offload billions of Euros of property left on their books by bankrupt developers and offer 100 percent mortgages spread over 40 years, similar to those being offered in Spain.

Cyprus banks are involved in ambitious capital raising exercises to cover massive losses sustained on their Greek sovereign debt exposure and distressed property holdings in Cyprus and abroad.


The attempt to reach the capital targets may however not be successful if the banks don’t rush to offload distressed and non-core assets. Bank of Cyprus have already disposed of some assets abroad but the proceeds from such sales is not enough to cover the massive capital injections that the banks need.

The banks need to offload billions of Euros of property and the way to offload the distressed property is very simple and is already being done in Spain with great success and I’m sure will be repeated in Cyprus soon. A few weeks ago, Reuters had an article on how Santander, the euro zone’s largest bank, offered a two-bedroom apartment in Sesena area near Madrid with a communal swimming pool for €65,000, with 100 percent mortgage over 40 years, costing as little as €242 a month to service. At the peak of the decade-long property boom that preceded the crash, similar apartments would have sold for at least twice that.

Like Santander, most Spanish banks offer 100 percent financing over 40 years at interest well below the market rate to get rid of the homes that sit on their balance sheets, eating up capital in provisions and costing money in taxes and maintenance.

Cyprus banks will quickly realize who much Cyprus property is expensive compared to similar property offered in Spain and Greece, which is also on the radar screen of foreign buyers.

Banks also need to offer 100 percent mortgages spread over 40 years, similar to that being offered in Spain to allow Cypriots who were forced out of the property market to come back and purchase decent property at affordable rates. As the Reuters article revealed, the €242 a month mortgage offered by Santander in Spain is about a sixth of the average Spaniard’s monthly income. Assuming that the average monthly income of a Cypriot male is €2,250 a month, such a ratio would mean a monthly payment of €375, spread over 40 years.



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