Construction boom – is it sustainable?

There is an evident upswing in the sale of construction materials and what appears to be a nascent revival in the whole property and development sector. More homes and other development projects are being built than in recent years, especially after the bubble at the beginning of this decade that gave way to the mortgage crisis and near collapse of the banking sector.

The question that needs to be asked is whether there is sustainable demand for new houses or is it just the result of the investment-for-passports scheme attracting overseas buyers of homes, expensive high-rises and other such high-value projects.

Some fear that what is happening in the property sector is another bubble in the making with two or three more years before it bursts.

Nearly half of all property contracts deposited at the Land Registry offices in the first half of the year were for properties purchased by non-Cypriots, a number that could dwindle if the government continues to restrict the number of property-forpassport investors to 700 a year.

This means that instead of the property development sector relying on more sustainable markets (student housing, locals buying first homes and holiday homes, buy-to-let investors, etc.), we are seemingly, again, rushing to desperately find overseas buyers, with the hope that apart from boosting state coffers, these investments will also subsidise efforts to bring down unemployment.

Limassol could soon face the possibility of hosting yet another Costa Del Sol bonanza with open spaces and green areas being sacrificed in the name of highrise development and quickly-found prosperity. Then again, apart from the accountants and lawyers, what other sectors of the economy are benefitting from the sale of expensive properties to foreign investors? And how many of these luxury developments are going to be occupied permanently?

With many of these properties expected to remain empty, it will not take long for them to fall into disrepair, projecting an image of a ‘ghost town’ or shabby skyscrapers.

For sure, the establishment of a casino resort will greatly contribute to supporting the property sector, but gaming alone is not a sustainable reason for holidaymakers to become property buyers.

Cyprus needs to look at alternative scenarios and think more seriously about how to maintain steady, even if small, growth in tourism numbers, as long as these will generate the sort of repeat visitors we need. Otherwise, this will be just another boom-bust cycle in our tourism/property sectors, with economic growth and employment levels held hostage to the whims of greedy developers who are in it for a quick buck and are not obliged to see the bigger picture or the longer-term view.

Therefore, the authorities are urged to consider sustainable construction growth when issuing town planning and building permits.