The British parliament concerned about inability of Cypriot authorities’ to protect the property rights of United Kingdom citizens, who become investors in Cyprus real estate back in 2007. Buyers suddenly found out that all of them would get no title deed despite the fact they bought real estate through a law office, implies that buyer automatically get a title deed. In 2007 nobody worried about rapidly developing Cyprus real estate market, despite all dangers for an economy making efforts to sell properties. Government agencies, which are obliged to protect property rights, are responsible for not solved problem.
Economy can’t function in a good way without rule of law and real protection of citizen’s property rights. Main tool protecting property rights is a title deed. Absence of title deed shouldn’t be a reason to real estate change hands. Application of austerity measures which can force authorities to abandon from expansive bureaucratic procedures would help to avoid subsequent systemic problems.
Absence of any title deeds makes it virtually impossible to resell real estate, that leads to property prices explosion. Under such conditions functioning of property market is not normal. As in good times prices rise fast, in bad time can happen disproportionately rise due to property illiquidity in Cyprus leveraged economy. Also, when central bank don’t have necessary tools to supervise credit expansion and it is no central credit register, credit, given by the banking sector can rapidly increase. Another systematic problem – lose of subsequent property taxes and substantial revenue from transfer fees, that would receive state.
The only way for state, if authorities respect citizens of Cyprus, is not to expect for the imposition of a simple solution by the Troika. All property transaction without any title deed should be recognized illegal, and must be a central credit registry. Correctly applied instructions from the Troika in 2007 can made the financial crisis more manageable. That’s why in the next years we will see the real crisis in Cyprus economy.
