Emerging property market: Northern Cyprus
Saturday September 30, 2006Saundra Satterlee
An element of risk is attached to the purchase of property in any of the world?s emerging markets. The Turkish Republic of Northern Cyprus (TRNC) is no exception. But what makes the TRNC different from other emerging markets is that its seemingly complex property laws are related directly to a war some 30 years ago and the subsequent division of the island.
Property and WarSituated at the crossroads of Asia and Europe, Cyprus is no stranger to conquest and war ? from Assyrian to Arabic or Byzantine to British. Although the Crusades marked the first brief British conquest of Cyprus with Richard the Lionheart, wind forward to the 20th century and the British presence loomed large in the lead-up to the island?s partition. Following 300 years of Ottoman rule, for instance, Britain gained control (not sovereignty) in 1878 then annexed the island in 1914. By 1925 Cyprus had become a Crown Colony.
After an anti-British campaign by a Greek Cypriot guerrilla group closely aligned to the Greek military Junta that sought political union with Greece, Cyprus gained its independence and in 1960 established a constitutional republic. A subsequent Greek coup d?état prompted the 1974 invasion by Turkish troops. Greeks fled south and Turks north. This massive displacement of people led to the partition that we know today.
Although Turkish and Greek Cypriots share a common history and culture, with the de facto division of the island over 30 years ago, each side maintains its own distinct identity based on language, religion and close links to each respective ?motherland? ?manifested especially in Nicosia as the world?s only militarily divided capital city (with Islamic minarets and bustling bazaars on one side of the UN patrolled greenline and Starbucks and designer shops on the other). Nowadays, although the island is at peace, the war of 1974 reverberates across certain aspects of island life, not least of which is the property market.
The Market: In ?deed? we trust?Property laws in Northern Cyprus are complex. Take the case of Mr. and Mrs. Orams, a British couple who were happily settled in Northern Cyprus until Mr. Apostolides, a Greek Cypriot from the south, laid claim to their dream home as his property by ?pre-1974 right?. In 2004 a Greek Cypriot court ordered the demolition of the Orams? home plus damages. The case hit the international press when Cherie Blair QC, human rights lawyer and wife of Britain?s prime minister took up the Orams? cause. On the 6th of September this year the High Court in London ruled in favour of the Orams. Although Mr. Apostolides has been given leave to appeal, foreign investors have welcomed the judgement.
The TRNC?s legal system includes a number of different types of title deeds, two of which are internationally respected legal documents. Both are freehold ?pre-1974? issued deeds. The first is classified as ?pre-1974 Turkish Cypriot? and the second, ?pre-1974 Foreign?. Yaman Iyikan, previous finance manager at the European Bank for Reconstruction and Development and now at Property Republic, Northern Cyprus property specialists, says: ?These two internationally recognised title deeds offer absolute ownership security but naturally command top prices.? Here a spacious villa without a pool typically starts around UK£100,000. ?Add mountain and sea views, plus pool and you?ll pay upwards of £125,000 for a three to four bedroom 120 sq. metre villa,? according to Iyikan. ?And apartments range from £50,000 to £75,000.? Communal facilities usually include pool, children?s garden, fitness centre and underground or carport parking. Apartment buildings are restricted to three stories high.
A different type of deed, also freehold, is the TRNC Esdeger or Exchange title deed. This pertains to property originally owned by a Greek Cypriot prior to 1974, but with new title deeds issued by the TRNC government to Turkish Cypriots to compensate for property they owned but gave up in the south of Cyprus.
Richard Bryant of Hillcrest Estates in Cyprus (UK Guild of Professional Estate Agents) notes: ?The TRNC government has now set up a property commission to look at any claims that Greek Cypriots make against land in the north.?
That TRNC Exchange titled properties are not internationally recognised introduces a degree of uncertainty, which in turn is reflected in cheaper market prices. ?Three to four bedroom villas start around £80,000 to £85,000, including a pool and a full or partial sea view. Two to three bedroom apartments cost £40,000 to £60,000,? says Mr. Iyikan. The final type of freehold deed is referred to as TRNC Tahsis TMD. This property originally belonged to Greek Cypriots but was abandoned and should sensibly be avoided. Finally, leasehold properties are government owned and granted for 49 years.
On offerA highly desirable area for property purchase by foreign nationals is in and around the environs of the historic and picturesque harbour town of Kyrenia, where there is no shortage of new and re-sell villas and apartments on offer. A five-minute drive from Kyrenia in the village of Zeytinlik is a small development of spacious three bedroom villas that includes air conditioning, fireplace and double-glazing with sea and mountain views. They are on the market from Hillcrest Estates for £179,000 with the option of a pool for a further £15,700. Or for £180,000, in the village of Ozankoy is a three bedroom, three bathroom villa with views, including a pool. Or you can buy a three bedroom apartment with a communal pool and views over Bellapais Abbey and the sea for £74,000 ? both available from Property Republic. All the above properties have internationally recognised, pre-1974 title deeds.
When it comes to volume building from an international plc, Medview Homes, with its London HQ, has a large selection of properties throughout Northern Cyprus with a range different title deeds.
Buying procedure & practicalitiesForeign nationals are restricted to the purchase of one donum of land (one third of an acre). More land can be bought in the event of setting up a trust or by forming a local company (see ?Contacts?, TRNC Government). To close a deal with all the requisite paperwork signed, sealed, registered and paid will typically take six months to a year or even longer if there are complications, say, in confirming title. As a ball park figure you should expect to pay around 10% of the value of the property in costs, including legal fees, VAT, utility connections, stamp duty and so forth. ?The majority of Britons who buy TRNC property pay in sterling,? says Moneycorp?s private client manager David Kerns. HSBC is well represented in the region.
The property market is buoyant and, according to government minister Ozkan Murat, foreign applications to purchase property have increased substantially ? despite the Orams case ? over the last two years. It is anticipated that Northern Cyprus? first 18-hole golf course and country club due to open in September will be good for the property market.
What?s More?The TRNC is officially recognised by Turkey and no other state. However, representative offices are dotted around the globe from Australia to South Africa and China to the USA. Despite relative isolation, Kofi Annan has been rigorous in his attempt to broker a reconciliation deal between the two sides of the island, but hopes were thwarted in a 2004 UN backed referendum after the Greeks rejected re-unification, although the Turkish Cypriots overwhelmingly supported the initiative. Despite the failure of talks thus far, slowly but surely the outside world is softening its views on Northern Cyprus, for instance, the EU has now agreed to put more than Euros 400m into Northern Cypriot infrastructure development. On the cards too is Turkish accession to the EU. If Turkey joins the EU there is expected to be some type of bilateral agreement between the two sides of the island to protect foreign property ownership.
Although there are ribbons of unsightly development taking place in some parts of Northern Cyprus, much of the country retains a pristine natural beauty so admired by former resident Laurence Durrell in his book Bitter Lemons. But wherever the location, thorough research and independent legal advice are paramount. As a newly smitten London city broker explains: ?Emerging market or not . . . if you do your homework, buying property in Northern Cyprus is as safe as houses.?
The Final WordThe final word comes from TRNC Prime Minister Ferdi Sabit Soyer, who gave the following response when asked what reassurances he could give Guardian Abroad readers about the safety and security of the TRNC as an international property destination: ?One of the political problems within the Cyprus issue is property. At a recent meeting with the United Nations Undersecretary General for Political Affairs Ibrahim Gambari, Turkish Cypriot President Mehmet Ali Talat and Greek Cypriot Leader Tassos Papadopoulos, an agreement was made in principle for a federal settlement with a Turkish Cypriot Constituent State and a Greek Cypriot Constituent State and a partnership state which shall rise above them with an international representation and identity based on federal principles. Settling the property issues within these two zones requires a comprehensive settlement. Foreigners wishing to invest in Northern Cyprus shall be subject to this comprehensive settlement and also in this framework, may safely carry out their investments today. The total of all these investments ? with domestic remedies and with a settlement to be reached politically and economically ? are under the guarantee of the state.?
Turkish Republic of Northern Cyprus Government