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Cyprus construction NPLs highest in Europe

The percentage of non-performing loans (NPLs) linked to the Cyprus construction industry are the highest in Europe according to a press release issued by the European Banking Authority.

NPLs - non-performing loansTHE CYPRUS construction industry holds the record for non-performing loans (NPLs) in Europe which, at the end of 2017, stood at 76.3% of total loans to the island’s construction sector and which remain a serious threat to the Cypriot banking system.

The disturbing statistics were published in a press release issued by the European Banking Authority (EBA) – Exposures to Real Estate activities and Construction.

The EBA figures also show the very progress Cyprus made in reducing construction NPLs in 2017 in percentage terms – at the end of Q1 2017 they stood at 74.4%, Q2 75.1%, Q3 73.8% and Q4 76.3% (€3.4 billion).

At the end of 2017 the average NPL ratio in the construction sectors of European Union member states stood at 21.1%.

NPLs related to real estate activities are even bleaker reaching 43.3% (€1.6 billion) at the end of 2017.

At the end of 2017 the average NPL ratio in real estate activities of the European Union member states stood at 5.3%.

Last month the European Commission, European Central Bank and the International Monetary Fund have called on Cyprus to tackle its non-performing loan problems following their recent post-programme surveillance (PPS) missions,

Further reading

EBA – Exposures to Real Estate activities and Construction

Readers' comments

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  • Richard says:

    I’d be interested to see if that ‘leaked’ list (published a few years ago) is progressing w.r.t developer NPL debt?

    How much the developers NPL debt has been cleared or settled/re-negotiated v.s individual borrowers NPL debt?

    Trouble is – re-negotiation is a relatively moveable feast isn’t it? Someone owes £500k – it’s their problem. Some organisation owes £500m – it’s the banks problem.

    Ed: As far as I am aware the list of defaulting developers hasn’t been leaked again. It isn’t only developers, ‘construction’ includes a range of activities:

    F – Construction

    F41 – Construction of buildings
    F41.1 – Development of building projects
    F41.1.0 – Development of building projects
    F41.2 – Construction of residential and non-residential buildings
    F41.2.0 – Construction of residential and non-residential buildings

    F42 – Civil engineering

    F42.1 – Construction of roads and railways
    F42.1.1 – Construction of roads and motorways
    F42.1.2 – Construction of railways and underground railways
    F42.1.3 – Construction of bridges and tunnels
    F42.2 – Construction of utility projects
    F42.2.1 – Construction of utility projects for fluids
    F42.2.2 – Construction of utility projects for electricity and telecommunications
    F42.9 – Construction of other civil engineering projects
    F42.9.1 – Construction of water projects
    F42.9.9 – Construction of other civil engineering projects n.e.c.

    F43 – Specialised construction activities

    F43.1 – Demolition and site preparation
    F43.1.1 – Demolition
    F43.1.2 – Site preparation
    F43.1.3 – Test drilling and boring
    F43.2 – Electrical, plumbing and other construction installation activities
    F43.2.1 – Electrical installation
    F43.2.2 – Plumbing, heat and air-conditioning installation
    F43.2.9 – Other construction installation
    F43.3 – Building completion and finishing
    F43.3.1 – Plastering
    F43.3.2 – Joinery installation
    F43.3.3 – Floor and wall covering
    F43.3.4 – Painting and glazing
    F43.3.9 – Other building completion and finishing
    F43.9 – Other specialised construction activities
    F43.9.1 – Roofing activities
    F43.9.9 – Other specialised construction activities n.e.c.

  • embapaphos says:

    Agree and disagree with many posts here, banks are after the developers and I even had one last week tell me that BOCY ‘took’ 3 of his €300,000 apartments he had for sale to offset his debts….the banks are fast becoming estate agents…the state (ie tax payer) is footing the bill for wrongdoings and shabby to say the least policies of the ‘friendly co-ops.

    Last but not least AKEL contender for presidency during his campaign did mention over an over again that the Cypriot development model was short sighted, and other forms of sustainable development needed to give the economy a boost….nobody listened.

  • MartynG says:

    Sad thing is, Steve, nobody in Government, Banks or most Public Services in this country seem to care. It seems to be a ‘Med+ attitude – ‘something else will come along, we’ll be o.k., we got Sun, we got (fairly safe) beaches, moneyed people elsewhere lacking sun n sea most of each year see Cyprus as a (fairly) safe place to park their money, buy Citizenship, buy top-end, front-line properties they use only infrequently. And now Interest rates are set to climb considerably – putting added pressure on many – individuals, businesses, large corporates. The global outlook ain’t looking too good either after a few years of relative ‘feel-good’ factors. Don’t think much will happen here to remedy things – until the next ‘crash’ of course, few people seem to want to even talk about, let alone plan-for such eventualities.

  • Deanna says:

    What we’ve all suspected for a very long time.

  • MartynG says:

    This is Appalling!

    I’ve been saying to friends, potential property buyers, investors that the commercial residential/property developments underway, mainly it seems in Limassol, are already completely out of control. O.K. much of it will probably have been supported from buyers, investors ‘overseas’ – mainly Russia and China, but the pace and scale of all this suggests, I reckon, an Almighty CRASH within the next few, probably only TWO years. The recent, current developments, many badly planned and located – with little or no consideration for existing road, drainage, water and other essentials – not even to mention all those owners, residents being blocked out by mega-multi storey ‘front-line’ developments, currently it seems with little or no proven under-pinning demand.

    And now we learn of massive, speculative NPL lending from Cyprus and other Banks, many still well hungover from 2008 and 2013 fiascos.

    Even if global matters falter, they will likely prove ‘modest’ compared to the likely spectacular crashes in building, construction, services and banking, commercial and private/commercial sectors.

    Maybe the Cyprus government – and banks – simply feel the agreed Mega-Casino with its massive additional 500 room luxury hotel will see the country through yet another NPL fuelled fiasco? Unlikely, and this even could simply Add to the mega-problems still on the fairly-near horizons.

    Gambling on huge high-end property fuelled economy growth seems massively risky. We’ve seen it happen before elsewhere in the world and there have been ongoing NPL fuelled problems before in little old Cyprus!

    I haven’t even mentioned in the above the likely early increases in lending rates, globally – projected to hit, hard, within the next 18 months!!

  • steve r says:

    And the only people that the banks target and threaten are the purchasers that have already been robbed by the developers and the solicitors. These people have paid the developer in full for their properties.

    To rub salt into the wound the banks have mis-sold the mortgage leaving the purchaser with a massive debt and no asset to show for it.

    Why haven’t we heard of the bank chasing any of the developers that have debts running into millions of euros. If I could get my title deeds I could put the property up for sale, pay the bank back and get off of this corrupt island for good.

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