Cyprus building permits defy global trends

The number of building permits authorised in Cyprus rose by 1% year on year in November, to 826, compared with 818 in November 2007.
The value of building permits increased by considerably more, rising by 39% to EUR 301 mln compared with EUR 217 mln in the same month of 2007.
Similarly, the area of building permits authorised rose by 38.7% to 382,457 square metres.
The number of dwellings authorised rose by 38.4% to 2,252.
Such a strong increase in building permit authorisations in such a difficult global environment raises questions about how this can be the case.
One explanation is provided for in the figures for November 2007, in which a sharp decline in the number value and area of building permits authorised was recorded. In other words, the base in 2007 was a low one.
However, this does not provide the full explanation, because whereas the value of buildings permits authorised fell by 14.7% in November 2007, they rose by 39% in November 2008.
Therefore, the fall in 2007 cannot provide the full explanation.
Perhaps another explanation is that building permits have begun to pick up after a fairly long period of decline.
The number of building permits authorised fell for 11 months in a row between October 2007 and August 2008.
Perhaps, therefore, the building industry retracted too much and is now faced with a situation in which supply is not yet meeting demand.
Another suggestion that has been made is that building permits in Cyprus are in fact, a lagging indicator, because companies apply for permits after they have actually built the properties.
However, this is only anecdotal evidence, and we are not sure if this is the case.
Either way, the Cyprus economy seems to be continuing to defy international trends.

Fiona Mullen
www.sapientaeconomics.com