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Cyprus property sector should not expect help in crisis

ECONOMISTS and even a government official yesterday scoffed at any notion of state help if the Cyprus property market sector suffers in an extended financial crisis. Last week, the government said it was putting together a plan to combat any possible crisis. The plan, which is due to be announced shortly, will focus on the […]

ECONOMISTS and even a government official yesterday scoffed at any notion of state help if the Cyprus property market sector suffers in an extended financial crisis.

Last week, the government said it was putting together a plan to combat any possible crisis. The plan, which is due to be announced shortly, will focus on the two areas of the economy that may be most affected – tourism and the property market.

However, according to one government official close to the planning, help to the property sector was likely to materialize through government housing and other construction that could boost the building industry.

The main focus will likely be on tourism,” said the official, who spoke on condition of anonymity.

Asked about the possibility of help for the property sector, the official said: “That would be so wrong in my opinion. Ask any economist.

It was an overheated sector and some cooling down was necessary with the amount of over-development that was going on.

The official said statements that the property sector would be helped in the event of a crisis “had no meaning“.

It’s more likely that plans we have for housing from the state sector will be speeded up and incentives given for this. For the private sector? No way.

Mixed messages have been circulating for months on the real state of the property sector since the international crisis began to bite.

Economist Costas Apostolides said it all depended on what figures were being used. Some statistics cite building permits, some cite cement demand and others cite sales as the indicator.

It’s a little bit confusing,” said Apostolides. “We are in a fight with statistics. Personally, I don’t believe there will be a correction.

There might be a price correction for British buyers because they were charged too much,” he added.

Apostolides cited several reasons why housing would be still in demand in most areas. These included the rate of growth of wages, immigration that would result in housing needs, and low interest rates on mortgages.

He does not expect Nicosia to suffer, nor Limassol, “which is holding its own” with the help of Russian buyers. Paphos would be affected in the holiday home market, but balancing this out, he said Pontian residents were starting to move up economically and would be buying more apartments.

Larnaca, due to its cheaper prices would also see some demand on that factor alone, but Paralimni and Ayia Napa would likely have the worst of the problems, Apostolides said.

As for state support for the property sector, he said: “They can’t support it.

He said, however, that bringing forward development projects would not necessarily mean more employment because big machinery digging a road would not require the same number of employees as house building.

I think they will open up more plots for housing for poor families,” he said.

A similar view was expressed by Pambos Papageorgiou, European University of Cyprus research executive.

They will speed up the implementation of housing projects in the public sector through the Land Development Corporation and give them to poorer people,” he said.

As for the private property sector, [the government] haven’t even thought about it. That would be beyond the pale. They are not that stupid. Capitalism in Cyprus in that respect is harsher than it is in the US.

Copyright © Cyprus Mail 2008

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