Cypriots prefer to invest any surplus income in the purchase of a new home or renovation of existing ones rather than saving it in banks, according to the 2019 Fiscal Council Autumn report.
Despite the island’s economic recovery and the significant reduction in unemployment, household savings in Cyprus remain at very low levels compared to other EU countries, the report also said.
In fact, data shows that after 2013 the households’ savings rate began to decline and even had a negative sign as a percentage of gross disposable income.
In 2013 it stood at -1.8% and with the recession even higher in 2014 it reached -6.2% as a percentage of gross disposable income. In 2015, it was down to -4.5%, then -3.2% in 2016 and -3.1% in 2017.
Between 2007 and 2017, the year with the largest percentage of household savings (9.2%) as a percentage of gross disposable income was 2009. And 2007 was the best year in terms of market investment and home renovation.
Cypriot households had invested 20.3% of disposable income in housing market and renovation that year. This figure was 19.6% in 2008, 15.9% in 2009, 13.7% in 2010 and 10.7%. in 2011. In 2012, the rate of investment in real estate or home renovation fell to 8.6% and to 7.5% in 2013.
In 2014 and 2015 the picture did not change significantly with real estate investment from disposable income at 7.6% and 7.8%, respectively. In 2016 and 2017 home equity investment as a percentage of gross disposable income increased to 8.6% and 10.2%, respectively.
Households in the Eurozone are choosing to have their surplus in savings rather than buying or renovating a home. The euro area average for home investment was at 8.8% in 2017 from 11.5% in 2007 and at 11.7% in 2018 compared to 12.5% ten years ago.
At the same time, there is concern over the proportion of pensioners to the active population (Old Age Dependency Ratio) in Cyprus, according to the Autumn report.
The Council notes that initial forecasts included in the actuarial study of December 31, 2014, prepared by the International Labour Office were based on assumptions that were not subsequently verified.
For example, to assume that the proportion of retirees to the working age population will rise from 21% in 2015 to 42% in 2070 is significantly different from the European Commission’s estimate.
In Cyprus, the forecast is that over the next 50 years a significant change will be recorded in the index under consideration which is to reach 61% by 2070.