25.04.2023
It has long been demonstrated that the performance of the financial sector is strongly correlated with the performance of the real economy, especially the real estate sector. Operating in a particularly difficult global economic environment characterized by delays, low growth and high interest rates on loans, economic agents are under significant pressure. The construction sector seems to have suffered more than other sectors.
Although the Cypriot economy has shown significant resilience, this environment is expected to affect the movement of financial institutions, especially with regard to the prospects for loan restructuring as well as the provision of new ones.
land bank Analytics has developed a dynamic tool that allows you to track trends in various sectors of the economy, including the progress of restructuring and new mortgages. This report examines the response of these indicators to the full year of 2022.
Restructuring
In the 1st quarter of 2023, the number of real estate transactions in Cyprus reached 3,900 in the amount of 904 million euros, of which 99 were loan restructuring transactions, i.e. at a rate of 2.5%. Compared to the same quarter of the previous year (Q1 2022), a decrease of approximately 65% was recorded. In quantitative terms, the largest number of restructurings was registered in the Nicosia district, which accounts for 31.3% of the total. This is followed by Limassol with 27.3%, Larnaca with 18.2% and Famagusta with 17.2%. Paphos recorded the least number of restructurings – 6.1% of the total.
The cost of restructuring in Larnaca and Limassol far exceeds the rest of the provinces. In Larnaca , restructurings worth €4.3 million were registered , representing 29.6% of the value of all restructurings . Accordingly, in Limassol the total cost was €3.7 million or 26%. This is followed by Famagusta with 3.52 million euros or 21.9% and Nicosia with 3 million euros or 20.5%.
Continuing the trend of previous years, the largest percentage of restructuring in quantitative terms falls on fields, and in value terms – on residential buildings.
Mortgage
In 2023, 2,672 new mortgage loans were issued in Cyprus for a total of € 684 million , according to the Cadaster and Land Survey data. The largest decrease in the number of mortgage loans (on an annualized basis) was recorded in February, when it reached 44.4%. In value terms, the largest decline was recorded again in February – by 36.5%. On an annualized basis, the decline occurs in all provinces, while in value terms only in the provinces of Nicosia and Limassol . The downward trend in the cost of mortgages compared to the previous year seems to be mainly due to activity in the Nicosia area.
Nicosia
During the 1st quarter of 2023, 31 restructurings took place in Nicosia, which is much more than in the rest of the provinces. Their total value amounted to €3 million. Compared to the same period last year, there is a significant decrease in both quantity (73%) and value (87%). The majority of restructurings involved fields, at 71%, followed by land plots at 12.9%. Refurbishment of apartments is 9.7%, and houses – 3.2% of the total.
Analyzing the values, renovations of fields account for 41.2% for a total of €1.2 million, followed by renovations of houses for €587 thousand, or 19.8%, and shops for €551.5 thousand, or 18.6 %.
Mortgage loans in the province of Nicosia in 2023 decreased by 40.3% in number and 49.6% in value compared to the corresponding period last year. A significant (annual) decrease was observed in February, which reached 62.7% in quantity and 49.3% in value.
Limassol
In the 1st quarter of 2023, a total of 27 loan restructurings were registered, amounting to about €3.7 million. On an annualized basis, a decrease in the number of loans by 44% and value by 80% was recorded. Most of the restructuring concerns land, 40.7% of which is fields and 26% land. Restructuring of residential premises account for 22%.
In value terms, the restructuring of residences exceeds 1.5 million euros, or 41.2% of the total value. They are followed by land with 1.1 million euros, or 30.3%, and fields with 600,000 euros, or 16%. The Limassol region recorded an annual decline in the number of mortgage loans by 43.3% and the cost of mortgage loans by 38.9%. The negative dynamics is mainly due to the February-March period, where the decrease compared to the last year’s period was 50.1% in quantity and 46.8% in value.
Larnaca
In Larnaca, 18 restructurings were registered for a total of €4.3 million. Compared to 2022, there is a decrease in the number of restructurings by 65% and the cost of restructurings by 46%. In terms of property categories, most of the restructurings concerned fields (7 or 38.9%) and land plots (5 or 27.8%). This is followed by houses (4 or 22.2%) and apartments (1 or 5.6%). Most of the value is in fields with €1.7m or 39.9% and at home with €1.4m or 31.8%.
The mortgage lending trend in Larnaca District records a year-on-year decrease in number (37.3%) but an increase in value (14.4%). The largest year-on-year decline was recorded in February (53.0% by number), followed by a significant increase in March of 174.4%.
Famagusta
In Famagusta, there were 17 restructurings (annual increase of 70%) for about 3.2 million euros (annual increase of 316%). 88.2% belong to residential buildings, 5.9% to apartments and 5.9% to fields. In value terms, the repair of residential premises reached 3.0 million euros, which is 95.9% of the total. This is followed by the restructuring of fields by 70,000 million euros or 2.3% and apartments by 58,000 euros or 1.8%.
Mortgages in Famagusta tend to be declining (41.3%) but rising in value (15.5%). The growth in the cost of mortgage loans amounted to 68%.
Pathos
The restructurings in Paphos have recorded an annual decline of 89% in quantity and 97% in value. In total, 6 restructurings were recorded in the amount of 298,000 euros. In general, 83.3% of the reconstructions concern fields and 16.7% – apartments. In value terms, the largest amount of restructured real estate, €155,000 or 52%, is for apartments, while about €143,000 or 48% is for fields.
Paphos appears to be recovering from the negative 2022 results, recording a 68.8% annual increase in value but a 21.3% decrease in quantity. The largest annual increase for the reporting period was recorded in February – 189.2% of the cost of mortgage loans.
