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Construction sector hits rock bottom

The construction sector, one of the island’s key economic drivers, is in free-fall and the outlook is extremely bleak with only an estimated seven months of pending construction contracts on the books.

CURRENT construction projects will run out in seven months with nothing lined up past that time, a survey released yesterday showed.

The construction business, one of the main engines driving the economy, is in free fall and the outlook appears extremely bleak, according to research by the Federation of Associations of Building Contractors (OSEOK).

Yesterday the federation released data gathered so far this year indicating that construction has been hit hard by the on-going credit crunch.

Low demand, the lack of liquidity and loans, and the general economic crisis are identified as the main culprits for the on-going slump.

The federation said its most disturbing finding was that, on average across the island, there remain an estimated seven months for pending construction projects, after which no contracts are lined up.

OSEOK said this index of contracts has been dropping steadily over the past two years and is currently at its lowest-ever point.

“The index confirms the great crisis experienced by the construction sector,” the federation said. The research, conducted with RAI Consultants, covers all the districts.

“The data shows that activity in the construction industry remained close to its lowest levels during the period April to August 2012, while chronic trends do not in the least point to recovery, on the contrary, activity is expected to continue dropping,” the federation said.

It said the problem had worsened over the past four months for contractors across the island, with more and more layoffs being recorded during this period.

At the same time consumer demand is likewise going from bad to worse. According to the contractors, its ‘Purchase-Building Index’ for a 12-month period is currently at an all-time low since it began gathering data, and demand for renovation is likewise extremely poor.

The percentage of contractors stating that their business has increased over the past four months has decreased by 56 per cent for the period April to August, according to OSEOK’s research.

The data was gathered from contractors who were asked to fill out questionnaires.

“It would appear that this index has hit rock-bottom, since many contractors cannot afford to lose more business given that they have very few, or zero, projects to work with; at the same time, government statistics show that a large number of contractors are closing shop or have already done so.”

The federation said moreover that the gloomy numbers apply to all the districts, including Nicosia and Limassol which until recently appeared to be holding up better to the financial squeeze.

The crisis in the construction industry began manifesting itself as early as 2010, when as many as 10,000 workers lost their jobs according to the federation.

Readers' comments

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  • marktyler says:

    Wow, doesn’t the fair minded Commenter below capture the essence so perfectly:

    “Sort the title deed problem out then ‘maybe’ people might start to trust Cyprus again, but I think there is worse to come. If I’m lucky enough to ever sell my property (no deeds) I would never consider buying here again, as much as I love this Island, and certainly wouldn’t recommend anyone to buy in Cyprus. Very sad!!”

    Indeed!

    But where is the Leadership? Not just from Cyprus (we know it’s in a dirty hole), Where is the EU? It admits members, such as Cyprus, then allows its members to cheat, deceive, BS, without so much as a whimper. EU…. What Sayest Thou? ..Nothing?

    Shame on you Cyprus – the Cyprus People – You allow this to happen. So, Let natural justice follow in response, to be similarly overwhelming.

  • Richard Knowles says:

    …and to no surprise. Even before the economic slump, the Title Deed scandals, unknown and questionable developer loans and debts transferred to buyers as unknown risk and the double selling of property by the developers as well has made the buying of property in Cyprus too high a risk. Now that an economic slump has happened, there is no desire for foreigners to enter the country even though it could have become an amazing haven to move to when the rest of Europe would be crashing. The developers are suffering in the very beds they have made for themselves.

  • Robert Briggs says:

    I note that in the main, these people do not mention the significant contributory factors to this unfortunate situation.
    Ie; the Title Deed scandals, covert developer loans, concealed from the buyers & the criminal double selling frauds! ad nauseum. R.B.

  • Brian Aherne says:

    Three words – Title Deeds, Greed ……

  • Richard Francis says:

    Thanks.

    Without being too ‘Walter Mittyish’ – you have to hope that something positive will come out of it all. I am a great believer that action follows thought.

    As Gandhi said: “Be the change you wish to see in the world ”

    Any fix may be (and may come) from an unexpected source – as throughout history – they often have.

    Key thing is not to ever give up.

  • Road Warrior says:

    Maria,

    The first step in fixing any problem is to acknowledge that a problem exists, even now the government of the day is still vacillating and are issuing contradictory statements, to be honest I am not sure if Cyprus will ever recover for your problems are massive.

    It is not just the government who are in turmoil, your property industry is in meltdown, your legal system, the judiciary, developers and the banks have been complicit in covering up and facilitating the outright thieving which has been going on for years so where do you start, how do you begin to put things right ?

    Sadly, Cyprus will have to hit rock bottom, it’s not there yet but it’s coming, the island, whether it stays in the Eurozone or leaves is about to have a massive dose of reality, then, when the dust settles, maybe the rebuilding can begin but it will require a sea change in mentality and I’m not sure that it’s possible.

    Cyprus will survive, there is no doubt, it has been there for ever and will endure but, there is a difference between just surviving…….and living.

  • Janner says:

    I am not Cypriot but love Cyprus. That is why I ‘bought’ there. All of this was unnecessary and avoidable. But, this is well known by the powers to be. This is an institutional problem and not the fault of one person. The government need to put their hands up, admit the problems and ask for help from those that know about these things. Cyprus can be re-built. Yes, it will take time. Yes, it will be painful. But anything worth doing so often is. To say that Cyprus will never be any different is assigning it to constant failure. It can all be fixed, but only by honesty, excepting their wrongs, putting right their wrongs and taking proper advice on how to run a modern institution. Sadly, it looks like no one in power is willing to do this and it will take the destruction of Cyprus as we know it before things can be re-built. But, be re-built they will. Otherwise, Cyprus will drift off as some third world country.

  • Denton Mackrell says:

    A couple of posts have referred to Euro 12m being enough to sort out the mess. Er…..I think they mean the Euro 12 billion (not million), which by most estimates is likely to be close to or less than what the Troika will recommend. It could be Euro 15bn or more.

    Developer mortgage debt alone is thought to be somewhere between 6 and 12 bn Euros (see past articles and estimates on this site).

  • Maria says:

    Dear Gavin & Richard,

    I am English/Cypriot a (Charlie) as some may say, there is nothing to say that we can not recover from this, but as Gavin said ‘All of these facets are nowhere to be seen and the first stage in stopping the haemorrhage is the troika but they can only supply the discipline element’ that is why we need a strong good straight Government not just Troika to supply discipline but Government who wants to follow it. €12 Million would be enough to get things going or start, with title deeds, change Cyprus rules, that we make up, our reputation will take time I am sorry to say.

    Gavin with a good Government we can have the right mindset. I cannot say too much, what do I know.

  • Gavin Jones says:

    Richard & Maria.

    I assure you that there are quite a few of us who comment on this website who have a Cypriot “tilt”, despite our Christian names and surnames. In addition, many of us have had a lifetime’s association with the island.

    I for one feel that with the current crop of politicos in place, the dire straits of the economy and banks and grave issues such as the title deeds scandal, this is not a question of money. You can throw whatever figure you like at the problem because putting Humpty-Dumpty back together again requires the following three vital ingredients: a different mindset, an effective, even-handed judiciary and overall discipline.

    All of these facets are nowhere to be seen and the first stage in stopping the haemorrhage is the troika but they can only supply the discipline element. Without a fundamental change in the thinking of the ruling establishment and an overhaul of the judiciary, I rather suspect that nothing much will change.

    In conclusion, government, judiciary, financial institutions and developers are too intertwined and all indulge in flimflam, short-term would-be ‘fixes’ and downright untruths. These tactics have become de rigueur and they should all be ashamed of their out and out deception.

    From where I’m standing, the patient is simply too far gone for any meaningful recovery to take place any time soon.

  • Linda says:

    Sort the title deed problem out then ‘maybe’ people might start to trust Cyprus again, but I think there is worse to come. If I’m lucky enough to ever sell my property (no deeds) I would never consider buying here again, as much as I love this Island, and certainly wouldn’t recommend anyone to buy in Cyprus. Very sad!!

  • andyp says:

    I doubt a quick buck from Europe is going to fix the reputation of the Cyprus construction/property sectors and indeed many other sectors such as retail which relies on them.

    This and proceeding Cyprus Governments have had plenty of time and opportunity to resolve matters but instead simply ignored them or conjured up so called legislation such as The Amnesty Bills to aid developers and punish further innocent buyers who like a poster below thought, as marketed, that this would get them title deeds but as some of us knew and posted would not. This amnesty was not even required had Government enforced it’s own Streets and Buildings Regulations Act.

    I suspect the majority of buyers purchased in Cyprus because they too loved the country but in my opinion the old values have long gone thanks to the greed of a few at the expense of everyone else.

    A sea change is required for Cyprus to have any chance of recovery. Sort the title deed problem. Enforce existing building regulations. Clear out the crooks who are lining their own pockets on the basis of someone else’s grief. Make examples of rogue Bankers,Developers and Lawyers.

    Until Cyprus can prove it is willing and able to protect existing property owners and new buyers I think there is still some way to go before we hit “rock bottom”, and rightly so.

  • Richard Francis says:

    Good post Maria – and the first one enticing me to comment in a long time.

    May I ask you a couple of questions?

    First is are you Greek Cypriot? I only ask as you sound as if your connection with the country goes deeper than just having ‘overseas’ property there. If so – then I’d like to hear more as the forum is heavily ’tilted’ towards British investors.

    Second is your claim that it would not take much money to put Cyprus (presumably the South side) back on it’s feet. As I understand it – Christofias and Co have asked for €12m. What do you think is a reasonable alternative figure to this and where would consider it best spent?

    Thanks & regards – Richard

  • Maria says:

    The problem with Cyprus is we have never looked into the future of our Country, it is the quick fix profit and dam the Country’s future.

    The Government has known this for a very long time and they invested their own personal money in the UK and other places so they are not bothered, it is a shame we cannot get a Government who cares about Cyprus and its future, we could have been one of Europe’s success stories, but greed stopped it.

    I love Cyprus, but Cyprus do not like people and the beauty of what this Country can offer, we are more interested in making up rules and using them on our visitors. I am not sure if Cyprus can come out of this, it has created a bad reputation and would take a lot of hard work to get rid of our reputation.

    It would not take a lot of money to get Cyprus back on its feet, but no lets give the money to Banks, Governments that just line their own pockets.

  • Hector says:

    And yet there are those who still promote buying in Cyprus – Cyprus: Mediterranean enclave for upmarket expats

  • Gavin Jones says:

    The days have long gone when one could hear the incessant drone of machines but this level of activity vanished some two to three years ago.

    A glaring omission to this article is the ever present title deed factor which has effectively finished off sales to non-Cypriots – if not to everyone.

    Many developers are on their knees anyway as their indebtedness to the banks is such that they can’t finance new projects and are saddled with unfinished, unsold, deedless properties.

    In addition, they’re struggling or have ceased altogether servicing their interest payments on their outstanding loans because the supply of fresh ‘victims’ to pour into the sales funnel has all but dried up.

    These non-performing loans have been picked up by the troika so expect to see much blood on the proverbial carpet in the not too distant future.

  • Maxwell Hannah says:

    Can they still not see the problem ?? can you tell them anything ? sad, so so sad!

  • UBoat says:

    It’s not a surprise to any of us is it ?

    I liken it to a green house full of plants, you sow them treat them right and they grow, but to continue growing year on year a certain amount of effort and investment has to be put back towards the plants. If this is done they generally grow and produce fruit or flowers every year there after. If they are neglected and the fruit and flowers just picked for profit at the end of the season then they slowly wither and die.

    Seems to me like the Cyprus property and construction sector?

    There was and still is, clearly take take take and more take with NO re investment where it counted. Broken promises and broken dreams.

    I feel sorry for all of us and the Cypriot people who in general have by now realized (I hope) what’s gone on. But like us they can do virtually nothing as the power and the money is held by but a few, whom shall we say don’t play by the rules to keep hold of it.

    I guess these people will become even more desperate in the coming months and year to keep a grip on the money they have hid away from the country.

    BYE Cyprus ………..

  • Mike says:

    I fear the message is still not getting through as the Global economic recession is always cited as the cause for the construction slump. This in spite of successive finance ministers assuring us that Cyprus would not be affected as it is in a special and strong position. No one of any intelligence believed it of course but they repeated it ad neuseum nevertheless.

    As much as I accept the commercial construction sector will be affected by recession the domestic market rarely is as it is at that time that astute property investors choose to buy, and they are, but in most parts of the world except Cyprus. The Tronka (Developers / Lawyers / Lenders) have assured that anyone with any degree of sense would not touch property here with a barge pole.

    Prices are still vastly over inflated, despite the reductions from the dizzy heights they reached and until they do reach where they need to be the industry will remain stagnated even assuming the title issue is resolved.
    Sadly Cyprus is a ‘no go area’ as far as property is concerned and was approaching the same status where tourism was concerned, although I note that prices in the tourist sector are easing thereby attracting further interest. All aspects of property purchase needs addressing from legislation downward, until then RIP construction.

    Now, if anyone has a 2.5 tonne mini excavator or 3CX, compaction plate, vibrating poker, scaffolding, vibrating Roller, Beam screed, mixers or any other plant and equipment they wish to sell as bankrupt stock then please give me first refusal.

  • Cyprodite says:

    Does this mean that with less properties being developed the land registry can finally catch up with their work and give me my title deeds? I half bankrupted myself to pay an ETEK approved engineer to apply for the planning amnesty which was supposed to put me in line for getting my title deeds. But it seems nothing is happening on that front. Was this just another job creation scam designed by ETEK to make up for jobs lost from the construction industry?

  • MARTYN says:

    Just as forecast, 24, 18 & 12 months ago. The Cyprus economy is running rudderless on Empty!

  • Costas Apacket says:

    You make your bed, you lie in it.

  • andyp says:

    Sorting the liquidity problem is in the hands of The ROC, so that will not happen.

  • Geo says:

    There it goes the Golden Goose is officially terminally ill. Well done to all involved in Cyprus.

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