Building boom transforms skylines of the island's four main cities
After seven years of plenty, the Cypriot construction industry is heading for leaner times. A building boom has been in progress since the post-1974 recovery began. Construction the year of the Greek-Turk conflict amounted to only $57 million, but volume surged each year since then, reaching $266 million in 1979. More than half of that amount went to residential construction to house refugees.Skip to next paragraph
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The skylines of Nicosia, Limassol, Larnaca, and Paphos changed rapidly, and so much new space was created that rental prices today remain moderate, even though the business sector (both Cypriot and offshore versions) has expanded rapidly also.
Most of the construction capital came from foreign aid. The United States has channeled in $15 million per year, money aimed at housing refugees. Cypriot businessmen, always under legal restrictions preventing outflow of their capital from Cyprus, also contributed significantly to the boom. And the government did its share by guaranteeing loans for development companies.
"The climax was in 1978," notes Andreas Pantazis, general manager of the Nicosia-based Kermia Construction Company. "The activity was a great help to the economic condition of the island."
Although 1980 building activity may have exceeded the 1979 level, investment has been dropping, and economists expect a lower volume of new starts until at least 1982. A credit squeeze to cool down inflation, which registered 13 percent in 1980, is in effect.
This, however, does not necessarily spell doom for builders. Rather it signals, builders believe, an economic switch from widespread home, apartment, shop, and general-office projects to construction with surer targets in mind: hotels, tourist bungalows, offices for specific firms.
Consequently, even with tighter capital, the construction industry seems assured of steady growth in the next few years, if only to house the increasing flow of tourists and new foreign companies locating here.
Construction serves as a major income distributor, employer, and foreign-exchange earner for the economy. Considering the size of the island, Cypriot contractors are extraordinarily active abroad. An estimated 2,700 Cypriot construction workers are employed in the Persian Gulf, most of them on office, hotel, apartment, or dormitory projects in Saudi Arabia and Iraq.
The most active firms in this area are Joannou & Paraskevaides, Michael Apostolides & Co., and Parpas Brothers. J&P's British subsidiary is working on a $40 million building project at Basra University in Iraq. Apostolides and Parpas are both working on construction contracts at Baghdad University.
But Cypriot firms overseas are faced with inceasingly tough competition from Japannese, South Korean, Taiwanese, and Indian firms. And there is some evidence to indicate that overseas activity has skimmed the cream off the Cypriot skilled-labor pool.
Dometically, the building business employs 19,000 Cypriots. Almost every businessman with a little money to invest has a block of apartments, a rental house, or some waiting-to-be-developed property on the side. Kermia's Mr. Pantazis says Cypriots invest in land and buildings as substitutes for stocks and savings. (No stock market exists; interest rates on savings accounts are very low.)
"There is a tradition of property ownership here that goes back centuries," Pantazis says. "It means security for Cypriots and for their children. There is also a tradition of architecture and building. Therefore, the volume of construction is big, considering the population. This steady, high demand is reflected in increasing prices of land and buildings and also in the volume of construction employment."
The private sector follows European standards, on buildings, usually using a concrete structure reinforced by steel rods. Finishing and amenities are European in style and tend toward ultramodern, with especially flashy bathrooms and kitchens. In the hurry to rebuild, aesthetics has suffered and all-too-rare green space has been neglected. But the slowing-down period should help concentrate builders on the environment.
At present, land and office space in major cities are still reasonable by European and Mideastern standards. In Nicosia, first-class commercial land sells at between $67 and $110 per square meter. In Limassol it is $40 to $55. Prime office space costs $675 to $745 per square meter in Nicosia, and downtown shop sites fetch $1,600 to $2,200; prices are roughly 20 percent less in these categories in Limassol.
Taxation on land and buildings is considered the lowest in Europe.
Building is a traditional Cypriot forte --something developed to facilitate a history of change and adaptation on the island. In the Middle Ages, for instance, Cypriot workmen built the Gothic Cathedral of St. Sophia in Nicosia to the specifications of Venetian rulers. When Ottoman Turks threatened to invade in the 16th century, Cypriots dismantled houses, again under Venetian orders, and erected a thick wall around Nicosia.
And when Cyprus fell shortly thereafter, Cypriot workmen, under Ottoman orders, obligingly converted the Cathedral of St. Sophia into a grand mosque .