Cyprus Suspends Real Estate Foreclosures

The Cyprus House of Representatives approved a controversial measure that prevents property foreclosures through October.

The bill was passed over the objections of the finance minister, who argued it would punish homeowners and small businesses that pay their mortgages on time.

The decision, which 34 lawmakers approved and 16 disapproved of, came last week, citing the dual effects of COVID-19 and Russia’s war in Ukraine on the economy, as reasons.

The legislation is limited to homeowners whose primary residence does not exceed 350,000 euros, or $354,800, and for business offices whose firms do not exceed 750,000 euros in annual revenue, or $760,000. It also includes agricultural land with a value not exceeding 100,000 euros, or $101,300.

The value of residential real estate in Cyprus increased in the first quarter of 2022 by 1.5 percent year over year, according to the Central Bank of Cyprus. The number of foreign buyers also increased. The growth was expected to slow down, however, the bank noted. Immigrant Invest reported the data.

Over the same first quarter period, residential property sales rose in Cyprus, with 23.8 percent more contracts signed, year over year. Foreign buyers also purchased 117.9 percent more real estate there in the same period.

Government says suspension of foreclosures threatens the economy

Finance Minister Constantinos Petrides said Congress’ move to suspend foreclosures threatened the “credibility and the economy of the country, at a time when any downgrading of the Cypriot economy can turn out to be disastrous,” according to reports.

Petrides said those in favor of the extension were protecting people he called “strategic defaulters at the expense of depositors and consistent borrowers.”

The House of Representatives had approved the original measure in July 2021, but Cyprus President Nicos Anastasiades balked at signing it. When Congress said it would not remove the bill, Anastasiades sought a ruling from the Cyprus Supreme Court.

In June, the Supreme Court ruled the bill was not unconstitutional and should be enacted, according to Cyprus Mail.

The court said the bill did not violate the right to freely enter into a contract nor the principle of separation of powers between the executive and legislative branches of government.

The finance minister also claimed the measure threatens to kill the country’s 400 million euro debt relief plan—yet to take effect—which is meant to protect the primary homes of vulnerable households, including borrowers unable to pay their mortgages. The measure’s approval by the European Union is contingent in part on how well the country handles its foreclosures, the finance minister said.