This contribution is part of a series of personal views invited by Cyprus Mail on the subject of consumer prices.
Michael Hagisoteri, Managing Director, Toni & Guy Cyprus Ltd
“I must say that prices have gone up a lot over the last 12 years, probably more than anywhere I’ve lived and worked – and that includes France, the UK and Greece. The introduction of the euro here pushed up prices significantly, which made it more obvious.
The consumer’s willingness to pay is one factor. Cypriots just don’t seem to object to paying higher prices – it’s not just a consumer society, we have more of a show-off society.
Another factor, which is not talked about enough, is that there is a kind of false economy based on “old money”, where parents are paying to sustain the younger generation’s lifestyle.
There is also an unreal aspect to the economy from the business point of view. Start-up costs – key money, for instance – are very high within a fairly limited market, so the only option in order to make a profit seems to be to set consumer prices high. The rents we are paying for locations here are on a par with affluent London suburbs like Richmond and Kingston – we are paying €54,000 rent per year for one location.
The Cyprus economy is starting to mirror the UK economy, especially with the rise in property prices, but without the real substance behind the growth in the UK. I cannot fathom how the property market here has reached the heights it has, without the comparable growth in earnings. In the UK, while property prices were going up, salaries did as well, keeping the market buoyant. Here, property prices keep going up, but I can’t see how people can now afford to pay €500,000 or €600,000 on their current incomes.
Regarding our own business, we’ve had 28 per cent growth since last year, despite the impact of the crisis. I think one factor is that we offer value for money, and nowadays consumers are looking more for that. If people are changing their habits, I’d say that rather than having a blow-dry twice a month, they are now coming to us for a good haircut once a month.
One thing that is definitely good value for money in Cyprus is private education – I know people who have moved here specifically for that. On the other hand, a lot of my customers have stopped shopping here altogether, and simply wait until they can travel elsewhere to shop – to the UK, for instance.
Overall, the economy is suffering. Someone told me recently they had had to lay off 320 people, which relatively speaking is a huge number. The tourism sector is failing, there are a lot of redundancies out there, but people simply aren’t talking about it.
I don’t think we’re anywhere near to how bad the crisis will be – the worst is still to come. We’ve prepared for it by streamlining, but I’m not sure that enough other businesses have.
(Interview by Charles Charalambous)
