THE credit crunch is hitting the property market in the Paphos region of Cyprus. Other businesses are also being affected including restaurants and hairdressers according to a report in today’s Cyprus Mail. It seems that the only ones seeing a boom are the charity shops.

Credit crunch: Paphos feels the squeeze

Businesses and charities in Paphos are already feeling the effects of a slowing economy, as people try to curtail spending habits.

Small businesses and charities seem to be the worst affected, as consumers manage their money with ever greater care. Paphos is feeling the brunt of the problem because of its dependence on the British expat market – particularly hit by the credit crunch.

For Monica Antoniades of Capital homes in Paphos, the global financial crisis “is definitely affecting us“. Capital homes were established in the UK more than 30 years ago, and have had offices in Cyprus for the past five years.

“The last three months have seen a massive reduction in the number of house purchases being completed. I would estimate we’re already down about 90 per cent compared with the same period last year,” she said.

“People are still eager to buy in Cyprus, but I think they’re exercising caution, and waiting for the situation to stabilise before taking the plunge.”

Antoniades added that rentals of apartments and houses were up though, “and I think this is because of people waiting to see the outcome, and also there’s an increase in younger families moving here from the UK. I think they’re coming out to Paphos and testing the ground first, before committing themselves to buying anything.

“I’m hoping things will improve,” she said. “There are still people who can’t afford to buy in the UK, and they’re moving out here. People are just taking a more sensible approach.”

The property market isn’t the only sector to suffer; food and drink outlets are also experiencing a drop.

Restaurateur Yiannis Solomou owns the popular Jade Palace Chinese Restaurant in Coral Bay and Porto Bello in Kato Paphos.

He told the Cyprus Mail, “Trade is down all over the world, so of course Cyprus is being affected. When the UK is down, we’re down because we’re so dependent on this market.

“I would estimate that in the last three months, our trade is down at least 30 per cent on the previous year, and guests are tending to spend less when they go out to eat.”

Solomou said repeat custom was still there, but visits were less frequent than when the financial market is buoyant.

“Cyprus is too expensive for the British market, and I think we need to lower our prices.

The government must do something to help. For example, airport taxes could be lowered. I haven’t raised my prices for two years. We have to make sure we give the best to help us survive this crisis.”

Beauty shops, spas, nail salons and hairdressers, are all noticing a fall in custom.

Mandy Maskell of Golden Girl hairdressers in Paphos said, “I’ve noticed a decrease in the number of people getting their hair done in the last three months. I would say it’s dropped by at least 15 per cent. Clients are still coming, but just not as regularly,” she added.

According to Maskell, it seems the group worst affected is the older generation, as they’re receiving a poor rate when they exchange sterling UK pensions for the euro.

“I hope we will be able to weather the storm, and I’m lucky to have a loyal client base. I’m aiming to keep the prices low and giving good service. The important thing in situations such as this is not to be greedy,” she said.

The only ones seeing a boom in business are charity shops.

Caroline Harman-Smith, the social event organiser for the Paphos Friends hospice charity, confirmed the trend: “We’ve just had our best month ever. In October, I believe our takings were around €7,000.When you consider the nominal sale price of each item, you realise that’s a lot of sales,” she said.

The charity has two shops, one in Chlorakas in Paphos, and a further one in Pissouri.

“We’ve had the shops for about two years, and takings are steadily rising. When there’s a credit crisis, people have less money to spend on clothes and household items, and many people turn to thrifty spending and recycling,” she confided.

But although shop takings may be up, Harman-Smith expressed concern over social fundraising events.

“I was organising a mid-summer ball, but we had to cancel it as we didn’t sell enough tickets. People just don’t have the money to spend on these occasions at present, and charities will suffer.

“I’m having to look at cheaper ways to raise money for the hospice, as the support is there, but people are tightening their belts.”

Bob Windsor, the deputy director of the Cyprus Samaritans agreed sales figures for their charity shop were healthy.

“October was a good month for sales in our charity shop in Paphos, as people are watching what they spend; they will try and find alternative sources to purchase clothes. We sell shirts for as little as €1, and I think we’ll see sales figures increase over the coming months,” he said.

By Bejay Browne

Copyright © Cyprus Mail 2008

ECONOMISTS and even a government official yesterday scoffed at any notion of state help if the Cyprus property market sector suffers in an extended financial crisis.

Last week, the government said it was putting together a plan to combat any possible crisis. The plan, which is due to be announced shortly, will focus on the two areas of the economy that may be most affected – tourism and the property market.

However, according to one government official close to the planning, help to the property sector was likely to materialize through government housing and other construction that could boost the building industry.

“The main focus will likely be on tourism,” said the official, who spoke on condition of anonymity.

Asked about the possibility of help for the property sector, the official said: “That would be so wrong in my opinion. Ask any economist.”

“It was an overheated sector and some cooling down was necessary with the amount of over-development that was going on.”

The official said statements that the property sector would be helped in the event of a crisis “had no meaning“.

“It’s more likely that plans we have for housing from the state sector will be speeded up and incentives given for this. For the private sector? No way.”

Mixed messages have been circulating for months on the real state of the property sector since the international crisis began to bite.

Economist Costas Apostolides said it all depended on what figures were being used. Some statistics cite building permits, some cite cement demand and others cite sales as the indicator.

“It’s a little bit confusing,” said Apostolides. “We are in a fight with statistics. Personally, I don’t believe there will be a correction.

“There might be a price correction for British buyers because they were charged too much,” he added.

Apostolides cited several reasons why housing would be still in demand in most areas. These included the rate of growth of wages, immigration that would result in housing needs, and low interest rates on mortgages.

He does not expect Nicosia to suffer, nor Limassol, “which is holding its own” with the help of Russian buyers. Paphos would be affected in the holiday home market, but balancing this out, he said Pontian residents were starting to move up economically and would be buying more apartments.

Larnaca, due to its cheaper prices would also see some demand on that factor alone, but Paralimni and Ayia Napa would likely have the worst of the problems, Apostolides said.

As for state support for the property sector, he said: “They can’t support it.”

He said, however, that bringing forward development projects would not necessarily mean more employment because big machinery digging a road would not require the same number of employees as house building.

“I think they will open up more plots for housing for poor families,” he said.

A similar view was expressed by Pambos Papageorgiou, European University of Cyprus research executive.

“They will speed up the implementation of housing projects in the public sector through the Land Development Corporation and give them to poorer people,” he said.

“As for the private property sector, [the government] haven’t even thought about it. That would be beyond the pale. They are not that stupid. Capitalism in Cyprus in that respect is harsher than it is in the US.”

Copyright © Cyprus Mail 2008