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Rapidly recovering Property Market helps Cyprus Banks to improve their asset quality

17.07.2017

According to the rating agency Moody's, the real estate market in Cyprus has shown a stable upward trend, which has also increases the demand for building permits on the island. Restoration of the construction and real estate sector, in its turn, positively affects the quality of assets of Cypriot banks.

According to the statistical service of Cyprus, the number of building permits issued in the country in the first quarter of 2017, has reached its peak since 2013, when a banking crisis occurred in Cyprus.

Moody's notes that in the first four months of 2017, 1881 construction permits were issued, which is 8% higher than in the same period of 2016. In connection with this, the number of permits issued for the construction of new properties has increased by 38%, while the total value of permits issued in the first four months of 2017 is 36% higher than in 2016.

Moody's also noted that "restoring demand for new real estate and general improvement in the sector will increase the cash flows of construction companies, which will positively affect the quality of assets of Cypriot  banks in the construction and real estate sectors , being 18% of gross loans as of March 2017."

Cyprus banks, which account for 31% of gross loans as of March 2017, will definitely benefit in this situation through the exchange of debt for assets; and the restoration of the real estate market can facilitate the sale of these assets and reduce the likelihood of losses for the banks of the island. "

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