Cyprus building permits up by 18.7% by value in Jan-Mar

Apartment blocks dominate

The number of building permits may be falling but the value of permits is going strongly in the opposite direction as residential apartment blocks spring up all over town.

In the first quarter of 2007, the value of building permits rose by 18.7% to CYP 423.3 mln compared with the same period of 2006. However, in the same period the actual number of permits issues fell by 0.9% to 2,357.

The main reason for this odd-looking trend is the fast rise in permits for apartments. â€œBuildings with two or more housing unitsâ€ rose by 4.8% (to 463) in number but 49.6% in value (to CYP 206.4 mln) in the first quarter. Thus, apartment blocks account for just under half of the value of new building permits this year.

The sharp rise in value is not surprising given that some plots in Lykavitos are going for over CYP 1 million, according to anecdotal reports.

In the first quarter there was only a 1% increase in the number of single houses to 1,561 and a 1.9% increase in value to CYP 172.3 mln.

Empty offices: will office rents fall?

Non-residential buildings continued their decline, down by 18.5% in number to 274 and down by 13.4% in value to CYP 33.2 mln. Within this category, offices buildings were down 20.8% to only 19 in number and by 48.8% in value to CYP 3.8 mln.

This could suggest that we have reached overcapacity in office space. In most markets, this would lead to a fall in commercial rents as landlords seek to fill their office space (and pay their mortgages) at any cost.

But that depends on how indebted the landlord is. Some can afford to sit it out with an empty building and wait for the best price. But as land prices rise, this will be less of an option in the future.

Meanwhile the prices of construction input prices rose by 4.6% year on year in May, bringing the average to around 4.5% for the year, compared with 5.0% in 2006.

Construction materials prices have an impact on the prices of new buildings.

Fiona Mullen