Cyprus’ construction industry maintained strong growth in the first half of 2026. According to a new study by Eurobank, the real estate market continues to expand, driven by an increase in new projects, investment, mortgage lending and housing demand. At the same time, the sector is demonstrating resilience despite escalating tensions in the Middle East.
Record Number of Construction Projects
In the first quarter of 2026, the volume of new construction increased significantly. The number of building permits issued rose by 44% compared with the same period last year, reaching 2,276. Even stronger growth was recorded in the number of new residential units, with the number of approved homes increasing by 58% to 5,403.
The total area of approved projects reached 1 million m2, up 40% year-on-year. At the same time, the value of approved construction projects increased by 41%, reaching €1.3 billion.
These figures indicate that developers continue to invest actively in large-scale projects across the island, anticipating further demand. Eurobank analysts note that the data cover the period from January to March 2026 — before the latest escalation of the conflict in the Middle East. Subsequent statistics will therefore show the extent to which the geopolitical situation has affected investment sentiment.
Real Estate Market Maintains Strong Demand
Strong buyer activity remains one of the main drivers of growth in the construction industry. During the first six months of 2026, 10,007 property sale contracts were registered in Cyprus — 15% more than during the same period last year. By comparison, the market also grew by 15% over the whole of 2025, indicating that the positive trend is continuing. Interest from foreign investors is growing particularly strongly:
- purchases by Cypriot citizens increased by 10%;
- the number of transactions involving foreign buyers rose by 23%;
- demand from European Union citizens increased by 29%;
- buyers from non-EU countries purchased 20% more properties than a year earlier.
Additional factors supporting the market include Cyprus’ attractive tax system, high level of safety, favourable climate and continued interest in the island as a destination for permanent residence, investment and rental income. Despite tensions in the region, the real estate market has so far shown no signs of declining activity.
Mortgages Boost Construction, but Industry Faces Labour Shortage
The banking sector is also supporting market growth. During the first five months of 2026, the volume of new mortgage lending increased by 19.5% compared with the previous year. This indicates strong housing demand and creates favourable conditions for further growth in construction. However, alongside these positive trends, the industry is also facing serious challenges. The main one remains a shortage of skilled workers.
While in 2022 only 11% of construction companies identified labour shortages as the main constraint on their development, by 2026 this figure had risen to 38%. At the same time, developers report growing market uncertainty and expect construction costs to increase further. Project costs continue to be affected by material prices, logistics and shortages of skilled professionals.
Outlook
According to Eurobank, Cyprus’ construction industry is entering the second half of 2026 from a strong position. A large pipeline of new projects, sustained demand for real estate, active mortgage lending and strong interest from foreign investors continue to support the market.
At the same time, geopolitical instability and labour shortages remain the key risks. If external conditions do not deteriorate significantly, the construction sector has every chance of maintaining positive momentum through the end of 2026, while the Cyprus real estate market is likely to remain one of the most attractive in the Eastern Mediterranean for both homebuyers and international investors.