According to the rating agency Moody's, the real estate marketin Cyprus has shown a stable upward trend, which has also increases the demandfor building permits on the island. Restoration of the construction and realestate sector, in its turn, positively affects the quality of assets of Cypriotbanks.
According to thestatistical service of Cyprus, the number of building permits issued in thecountry in the first quarter of 2017, has reached its peak since 2013, when abanking crisis occurred in Cyprus.
Moody's notes that inthe first four months of 2017, 1881 construction permits were issued, which is8% higher than in the same period of 2016. In connection with this, the numberof 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 notedthat "restoring demand for new real estate and general improvement in thesector will increase the cash flows of construction companies, which willpositively affect the quality of assets of Cypriot banks in theconstruction and real estate sectors , being 18% of gross loans as of March2017."
Cyprus banks, whichaccount for 31% of gross loans as of March 2017, will definitely benefit inthis situation through the exchange of debt for assets; and the restoration ofthe real estate market can facilitate the sale of these assets and reduce thelikelihood of losses for the banks of the island. "