THE RAPID GROWTH of the construction sector has reached the utmost limit and is expected to slow down. According to Eurostat’s data, the growth of the construction output in the third quarter of 2007 fell to 5.5%, while in the second quarter of the year, it had reached 8.6%. The Finance Ministry believes that constructions will slow down in 2008 and in the next few years the sector will grow slower than economy.
Market sources relate this slowdown to the deterioration of the conditions in the Cyprus property sector. The sector, which is 8.5% of the Cyprus GDP, grew rapidly in the past few years due to the increased external demand and other domestic factors.
“There is an increased demand for houses and flats, partly due to the involvement of several persons in the profession (persons who are not professionals). At the same time, demand by non-Cypriots has been reduced by 30 – 35%”, Chairman of Real Estate Agents’ Association, Solomon Kourouklides said.
The Finance Ministry expects that the growth rate of the construction sector will reach 6.7% in 2007, recording the highest growth since 2003, when it stood at 6.9%. The growth rate is expected, however, to reach 4.6% in 2008, 4.2% in 2009 and 3.3% in 2010. Until 2011, the construction sector will grow by 2.8%, much lower than the anticipated 4% for economy.
“The construction industry will slow down in the next few years. The Central Bank’s measures on the cut of the lending ceiling for the purchase of a home have affected negatively the sector”, Chairman of the Pancyprian Land Developers Association, Lakis Tofarides told StockWatch.
The slow down – in Paphos and Larnaca mostly – is reflected in the latest figures of the Statistics’ Service on the building permits. The area of the licensed projects in Paphos and Larnaca in the first nine months of the year declined by 10.3% and 0.4% respectively.
Despite the slowdown, construction output in Cyprus grows faster than that of EU27 and the euro area. The average EU and euro area growth in the third quarter of the year stood at 2.6% and 2.2% respectively.