Cyprus economy slows but optimism high for construction market upturn

As the third largest island in the Mediterranean, the republic of Cyprus is also a member of the EU since 2004 and the EMU since 2008.
Cyprus’ GDP is one of the highest per capita in Europe and with a very low corporation tax of 10% it has one of the most enticing markets for any new business.

But how is business doing in Cyprus in 2011?

Economic Conditions:

Cyprus like most of the World has suffered from the financial slow down in the global market due mainly to credit restrictions and the obvious corrections that are ongoing related to this pressure.

Fiscal Forecast:

Cyprus has however started to stabilise over the last few months though many believe it should look at reducing its own fiscal deficits and move towards encouraging the sustainability of continued public financing and encourage more public sector investment in general.
Cyprus has however been seen to be much more prudent and decisive in dealing with issue in it’s financial sector, along with much less exposure to the sub-prime market which has caused so many financial institutions and governments the headaches that have caused such a stagnation on many western economies over the last three years.

Banking Sector:

The banking sector has largely been unaffected due to the largely less risk taking institutions that operate in Cyprus, there has however been a steady incline in bad debt that needs to be looked at more vigilantly.

Construction Sector:

The construction industry is one of the main indicators of how Cyprus is doing in general terms in it’s own economy and there has been a large increase in the price of property over the last ten years until around 2008 with a fairly sharp decline in the last two to three years.
The main adjustments have largely been in the tourist areas of Paphos with some 20% decrease in values since 2008.
Markets less focused on foreign investment such as Nicosia and Famagusta showing much smaller drops in the range of 4-8%.

Risk assessment:

Cyprus is widely regarded as being on the less risky scale compared to overburdened countries such as Ireland and Greece and Portugal who all borrowed and managed their finances in ways that have caused mass unemployment and a huge retraction in their own particular native industries including the construction sector of all countries named.
Cyprus has started to rely a lot more on export and has a much less risk based banking sector meaning that financially more opportunity’s now exist than in the past when a reduction in tourism would have been a major blow to the economy.

Oil Discovery:

Recent oil discoveries between Cyprus sand North Africa in the seabed is almost definitely going to give the general economy a steady boost.

Overall:

The increase in taxes levied on new property purchases has been a poor move fro the Cypriot government when many of the rest of Europe has sought to reduce the entry cost to buying new property.
The effect has seen building projects grind to a halt and recently developed plots having to rescue their prices considerably to make up for the new tax placed on new builds in Cyprus.

Source: www.cypruspropertynews.net

 

28 February 2011