Census reveals changing faces of population & housing

Nigel Howarth
-
8

THE POPULATION census that was launched in October last year has now been completed and the Cyprus Statistical Service (CySTAT) has published the preliminary results of its analysis relating to population and housing.

Population

The Island’s population has increased by 21.7% from 689,565 since the previous census in 2001 to reach 838,897. Paphos had the highest growth rate at 33.0%, followed by Larnaca at 24.4%, Famagusta at 23.1%, Limassol at 19.6% and finally Nicosia at 19.0%.

Foreigners now account for more than 1 in 5 of the population at 21.4% having risen from less that 1 in 10 (9.4%) a decade ago. The majority of those are from Greece, followed by the United Kingdom, Romania and Bulgaria.

Cyprus population at 2011 census

Housing

The number of housing units has increased by 47.2% over the past 10 years, rising from 293,985 in 2001 to 432,736 at the time of the latest census. Compared with 2001 the largest increase in the number of housing units is in Paphos, where they have increased by 88.0%, followed by Famagusta, where they are up by 79.5%.

It is worth noting that the number of vacant/secondary housing units has increased by 90.1% since the previous census in 2001. In Paphos and Famagusta, the areas once popular with overseas (most notably British) buyers, the number of housing units has more than doubled to reach 156.2% and 149.8% respectively.

It is also worth noting that number of vacant/secondary housing units in Famagusta and Paphos exceeds the number of occupied units in both districts.

Cyprus housing units 2001 and 2011

These numbers do not include the thousands of unsold and partly-built properties littering the areas once popular with overseas property investors.

Further reading

Cyprus Statistical Service Preliminary Results of the Census of Population, 2011

Vasilikon cement factory workers on indefinite strike

Nigel Howarth
-
7

EMPLOYEES at the Vasilikon cement factory in Limassol have promised to continue strike action indefinitely until the owners implement the terms of their collective wage agreement.

During a meeting of employees, union representatives appealed to the workers to accept the mediating proposal put forward by the Labour Ministry.

The strike action follows a 24 hour warning strike on 7th February. Employees say that the company is continuing to act unilaterally and is violating their collective agreement.

The employers and industrialists’ federation (OEV) expressed their disappointment on the workers’ decision and called on unions to consider the consequences of their actions on the cement factory as well as the Cyprus construction industry, which is facing a major crisis.

Cement sales in January 2012 fell by 33.4 percent compared with January 2011, while during the whole of 2011 cement sales fell by 40.6 percent compared with 2010.

The company has said that despite repeated calls to the unions for over a year to negotiate an agreement they had shunned all approaches.

(Although workers wages have been frozen at 2011 levels, their Cost of Living Allowance (CoLA) for 2012 has been handed out normally. In 2011, their wages were increased by 3.4 percent.)

Marfin Popular Bank posts €2.5 billion loss on Greece

Michele Kambas
-
2

CYPRUS’ second-largest lender said it had factored in a 60 percent impairment in the value of its Greek bonds, writing off some €1.9 billion in their nominal value.

Marfin is the most heavily exposed among Cyprus’ three major banks to Greek debt. Last week, Bank of Cyprus announced a €1.0 billion loss on a 60 per cent write-down on its Greek debt holdings.

Adding a goodwill impairment charge related to Greek operations, the bank said total losses after tax reached €3.33 billion. The bank said the goodwill impairment did not affect the group’s regulatory capital position.

The bank also referred to ongoing poor Greek macroeconomic conditions.

Unlike its peers, Marfin failed to factor in losses from the higher private sector involvement (PSI) agreed by the eurozone last year when it announced its nine-month results in November.

“We have acknowledged the problem in full transparency which enables us to embark on a new beginning,” said Michael Sarris, the non-executive chairman appointed to head the bank in December.

Adding to its damaging Greek exposure, Marfin needs some €1.35 billion in new capital to reach EBA requirements of a Core Tier 1 capital ratio of 9 percent by the end of June.

The bank said it planned to raise €1.35 billion through a rights issue, or a private placement, or both. Bank executives have confirmed they are talking to potential new investors, but have failed to be more specific.

“The Group has received serious interest from a number of credible strategic investors,” the bank said.

Politis newspaper reported that Russia’s second-biggest bank VTB had shown an interest in the bank. A Marfin executive declined to comment.

VTB is active in Cyprus via the Russian Commercial Bank. (Reuters)

Editor’s comments

The exposure of the Cypriot banks to Greek government bonds is the prime reason for bringing the Island’s credit rating to near junk status.

Yesterday the European Central Bank reacted to Standard & Poor’s decision to downgrade Greece to “selective default” by temporarily suspending authorisation for Greek bonds to be used as collateral by banks seeking funds from the central bank.

Cyprus house prices predicted to fall further this year

Nigel Howarth
-
2

PROPERTY prices in Cyprus, Ireland and Spain suffered the largest falls during 2011 out of 23 European countries according to the latest European Housing Review from RICS (the Royal Institution of Chartered Surveyors).

Reporting on the situation with the Cyprus housing market, the review says:

“The housing market decline is now three years old, after an earlier boom. The RICS Cyprus index reported that apartment prices were -11% down in the first nine months of 2011 and house prices lower by -6%, with the overall fall expected to be -12% for the year. Since the inception of the index in the last quarter of 2009, prices have dropped by -19% for apartments and -11% for houses (in real terms by -23% and -15% respectively).

The housing market is actually made up of a series of sub-markets. The biggest division is between the holiday/ second home areas and the five main towns where most Cypriots live, to which the prices above refer. Price declines had been greater in the coastal areas but in 2011 economic problems caught up with the domestic market and price falls were more problematic there.

A noticeable change in 2011 was a considerable tightening of mortgage availability, resulting from financial turmoil as Cyprus’ banks were drawn into the Greek sovereign debt crisis.

Little mortgage credit was available from the banks, especially in the second half of the year. This and the weak economy drew even the best residential areas into the housing price downswing.

As the economic and financial situation is likely to get worse before getting better, prospects for 2012 are for continued housing market weakness and a further softening of prices.

The earlier housing boom was driven both by domestic and foreign demand and easier credit conditions following accession to the euro. Traditionally, overseas buyers are mainly from the UK, attracted by the climate, cheap lifestyle, good public facilities and widespread use of English. During the boom, however, a wider group was attracted, most notably from Russia.

While many sales take place smoothly, there have unfortunately been a series of problems with regard to property purchase, including misleading advertising, failure to complete off-plan bought properties and illegal construction.

Around 100,000 national and foreign owners are also unable to obtain title deeds. In some cases, they have been trying for 30 years and without possession of title purchasers find it difficult to sell. Under Cypriot law, title remains with developers until transferred after mortgages are fully paid off.

While still holding title to dwellings they have ostensibly sold, they can take out further mortgages, impose fees and charges, and if they default, the mortgage holder can take possession over the head of the unfortunate owner.

The UK Foreign Office urges potential buyers to proceed with caution and take qualified legal advice. This well publicised issue weakens overseas interest in the country; although the government says reforms are to be introduced.”

Further Reading

RICS European Housing Review 2012

Hellenic Bank takes €99.5 million hit on Greek debt

Editorial
-
0

CYPRUS’ Hellenic Bank posted a net loss of €99.5 million last year, hit by a 70 per cent writedown on its Greek sovereign debt holdings, the bank said on Tuesday.

Hellenic said its operating profit excluding the Greek impairment and other provisions rose 47 percent to €132.56 million, compared with a net profit of €9.19 million in 2010.

But the Hellenic prides itself in its “prudent management”, saying it enjoys “ample liquidity” and has “no dependency on the interbank market or the ECB.”

Last week the island’s largest lender, Bank of Cyprus, announced a €1 billion loss for 2011 after taking a 60 percent writedown on Greek sovereign debt.

Hellenic, in which the Church of Cyprus holds a sizeable stake, is the least exposed among the three major Cypriot banks to Greek government debt, holding an estimated €110 million in such bonds. The size of the writedown was €77 million, Hellenic said. Its provision for the writedown on all Greek debt, including private sector loans and non-performing loans, amounts to a “manageable” 142 mln euros, the bank said.

The island’s second biggest bank, Marfin Popular, is scheduled to announce its results this morning. This will be followed later in the day by a briefing from its chairman, former Finance Minister Dr Michalis Sarris, and the Group’s Chief Executive Officer, Christos Stylianides.

Depressing outlook for Cyprus’ economy

Alan Lawton
-
7

On Thursday, the European Commission revised its forecasts for the Cypriot economy downwards and it expects that recovery will start in the second half of the year.

European Commission Interim forecast February 2012

Cyprus

The Cypriot economy grew by a modest 0.5% in 2011. After a good first half year when GDP rose by 1.5% year-on-year thanks to an exceptionally good tourist season, economic activity was badly affected by the accident in July that destroyed the Vassilikos electricity producing plant, which accounted for half of the total generating capacity of Cyprus.

Moreover, a worsening external environment and tightening financial and fiscal conditions compounded the adverse effect on economic activity.

Domestic demand, traditionally the main driver of growth, shrank in 2011. Tightening bank lending conditions along with a worsening labour market outlook and weakening confidence weighed on private consumption. In addition, weak foreign demand for housing and a restructuring of corporate balance sheets kept investment on a correction path for a third year in a row.

On the other hand, the external sector made a positive contribution to growth. Tourist arrivals and revenues posted an increase of 10% and 13% respectively. This was due to political instability in competing Mediterranean destinations and an increased flow of arrivals from developing markets such as Russia. Also, import growth decelerated, in line with the contraction in domestic demand.

GDP is projected to contract by 0.5% in 2012 due to weak domestic demand. The downward revision relative to the autumn 2011 forecast is explained by the worsening of the external environment and by the adoption of additional consolidation measures, not accounted for in the autumn 2011 forecast.

Furthermore, the deterioration in financial markets and the tightening of credit conditions may raise the cost of financing to the private sector and limit access to it. Leading indicators point to weak albeit improving consumer and business confidence. This suggests that recovery should set in slowly, during the second half of 2012, with the improvement of the external environment, the start of the tourist season and the resumption of investment projects as uncertainty dissipates.

Housing investment is expected to remain weak, while other construction investment is likely to benefit from reconstruction work in the destroyed Vassilikos power station and from other infrastructure projects. Moreover, the contribution of the external sector to growth is set to remain positive.

While slowing global trade and worsening economic prospects in Cyprus’ main trading partners is likely to weigh on exports of goods, this is expected to be partly offset by the healthy performance in business services and tourism. Imports are set to decline, against a backdrop of weak domestic demand.

The Harmonised Index of Consumer Prices (HICP) inflation is projected to decline to 2.8% in 2012 from 3.5% in 2011 on the back of easing commodity prices combined with weakening domestic demand. Furthermore, the base effect of increased electricity prices is set to dissipate in the last quarter of the year. Core inflation is forecast to remain contained at about 1.8%.

Overall, risks appear to be balanced. On the one hand, greater spillovers from potential worsening conditions in Greece, due to the large exposure of the financial sector, are substantial. Also, tightening credit conditions, coupled with already-higher financing costs and the high indebtedness of private agents, could delay the rebound in consumption and investment.

On the other hand, external demand may strengthen more than expected if the announced strategic plans by the Cyprus government for attracting more tourists and foreign investors succeed (e.g. plans for the introduction of new destinations, for tourist traffic growth, and incentive schemes for winter tourism). Investment, for its part, may be sustained through various announced construction and infrastructure projects.

For the whole of the Euro area, the Commission expects a recession of 0.3% compared with its initial forecast of a 0.6% growth.

1...497498499...695Page 498 of 695