The banking sector is the cornerstone of both the domestic and global economies. It is important to the economy because of its role in storing wealth (deposits) and providing loans to individuals and businesses (loans).
A positive correlation between the stability of the banking sector and the growth of the real economy is recorded both in periods of stability and mainly in periods of instability. In addition, the confirmed instability of the banking sector increases the uncertainty about future output growth. In other words, the level of stability of the banking sector of the economy leads to a significant underestimation / overestimation of the GDP trajectory in the coming quarters.
Landbank Analytics has developed a dynamic tool that allows you to track trends emerging in various sectors of the economy, including (i) the progress of restructuring and (ii) new mortgages. This report examines the response of these indicators during the first quarter of the year (January-March 2022) in a notoriously turbulent global environment.
During the first quarter of the year (January – March 2022), the number of real estate transactions in Cyprus amounted to 4345, of which 291 were loan restructuring, i.e. at a rate of 6.7%. In relation to the corresponding period of last year, an increase of approximately 24% was recorded. In terms of numbers, Nicosia leads with a share of 42% of all restructurings. They are followed by Paphos and Larnaca with 19% and Limassol with 16%. In terms of cost, the restructuring in Nicosia far exceeds the rest of the provinces, since with a total amount of 22.4 million euros, it represents 37% of the cost of all restructurings. This is followed by Limassol with 18.6 million euros or 31%, Paphos with 9.9 million euros or 17% and Larnaca with 8 million euros or 13%.
Continuing the trend of previous years, the largest percentage of restructurings, both in terms of quantity and cost, falls on industries.
According to the Cadastre and Land Registry, in the first three months of 2022, 4372 mortgage loans were issued in Cyprus for a total of €939 million. Compared to the corresponding period last year, the mortgage loan increased by 24.6%. in quantity and 38% in value. The largest increase in the number of mortgage loans (on an annualized basis) was recorded in March, where it reached 38%. In value terms, the largest increase was recorded in February – 75.2%. It is important to note that there was no decrease in the number or value of mortgage loans compared to the corresponding period last year.
During the reporting period, 121 restructurings were carried out in Nicosia for a total amount of approximately 22.4 million euros. Compared to the corresponding period last year, there is an increase in both quantity (24.7%) and value (63.5%). Most of the restructurings affected fields (39.7%), followed by apartments (24.8%). The restructuring of plots was fixed at 14.9% and apartments at 14% of the total. Analyzing the values, the restructuring of the fields is 48.5% for a total of €10.8 million. This is followed by the restructuring of houses for €3 million, or 13.5%, and apartments for €2.85 million, or 12.7%.
Mortgage loans in the province of Nicosia in the first quarter of the year increased by 18.9% in number and 96.3% in value compared to the corresponding period last year. Significant (annual) growth was observed in February and March, reaching 179% in value and 43.6% in quantity, respectively.
In the first quarter of 2022, a total of 48 loan restructurings were registered, amounting to around €18.6 million. On an annualized basis, an increase of 17.07% in number and 264.7% in value was recorded. Most of the restructuring concerns land, 41.7% of which is fields and 8.3% land. They are followed by restructuring of residential buildings with 27.1%. In value terms, the restructuring of residences exceeds 7.7 million euros, or 41.3% of the total value. This is followed by fields with 5.4 million euros, or 29.3%, and offices with 2.3 million euros, or 12.1%.
Limassol seems to have managed to cope with the negative pressure of the last year, recording an annual increase in the number of mortgage loans by 42.8% and the cost of mortgage loans by 38.7%. The positive dynamics was mainly due to the two months of February-March, where the increase compared to the previous year averaged 71.9% in terms of quantity and 58.6% in terms of volume.
In the province of Larnaca, 54 restructurings were registered for a total of €8.06 million. Compared to the corresponding period last year, there is an increase of 10.2% in number and 0.75% in value. In terms of property categories, the largest number of restructurings concerned fields (20 or 37%) and plots (16 or 29.6%). This is followed by apartments (9 or 16.7%) and houses (7 or 13%). In terms of values, the largest part is land plots worth EUR 3.4 million, or 42.3%, and residential buildings, worth EUR 1.9 million, or 23.1%.
The mortgage lending trend in Larnaca District is positive year on year both in terms of quantity (18.7%) and value (13.9%). The largest year-on-year growth was recorded in January (56.5% in quantity) and February (103.6% in value), limiting any negative performance in other months.
The lowest number of restructurings were registered in the Famagusta area, with 12 restructurings (an increase of 9.1% y/y) for around €1 million (a decrease of 53.5% y/y), with 58.3% being apartments and 16 .7% of housing and land. In value terms, the renovation of apartments reached 0.6 million euros, which is 54.6% of the total. This is followed by residential buildings with 0.2 million euros or 23.2% and fields with 0.2 million euros or 17.8%.
Although the number of mortgages in Famagusta increased by 14.9%, their value decreased by 56.8% compared to the same period last year.
It is noted that the downward trend in the cost of mortgage loans was universal throughout the reporting period.
Finally, Paphos District recorded an annual increase of 14.3% in the number of restructurings and in the cost of restructurings by 24.2%. In total, 56 restructurings were registered for the amount of €9.94 million. Of these, 75% of restructurings concern fields and 10.7% of land plots.
In value terms, the largest amount of restructured real estate, 3.4 million euros or 42.3%, falls on fields and about 1.9 million euros, or 23.1%, falls on residential buildings.
Paphos appears to be recovering from the negative results of 2021, recording an annual increase of 16.6% in quantity and 43.7% in value. The recovery trend began at the beginning of the year, and the largest annual increase for the reporting period was recorded in March, both in quantity (51.8%) and value (60%).