Rising Construction Costs in Cyprus Threaten Sector Recovery

Рост строительных затрат на Кипре угрожает восстановлению сектора
1 November 2021 Liza Medvetskaya

Cyprus Real estate market participants demand that the government soften the blow caused by a sharp increase in construction costs. They warn that the implementation of new projects may be at risk of disruption.

The representative of the Federation of the Building Contractors Associations of Cyprus (Ο.Σ.Ε.Ο.Κ.) Yiannos Poumbouris said that many projects will be frozen if the government does not take measures soon to help the sector after the coronavirus crisis. He stressed that developers are concerned about the jump in prices for building materials, which are unlikely to decrease in the near future.

According to Poumbouris, Ο.Σ.Ε.Ο.Κ. believes that the construction industry in Cyprus is experiencing a turning point. Despite signs of recovery, many developers are unable to cope with the shock caused by rising prices for building materials.

Construction in today's conditions is at least 20% more expensive after the recent increase in diesel fuel prices and an increase in the cost of transporting raw materials," Poumbouris said.

He recalled that since October 2020, oil prices have increased by about 80%, and the cost of shipping a container has approached 18 thousand euros.

For Cyprus, all this means that the sector will receive another blow. A number of projects will be suspended, and the purchase of real estate will become even more inaccessible for certain categories of people. As for the current projects, the contractors will face a serious problem, since most of the units have already been sold. As a result, they will have to bear increased costs," Poumbouris said.

The Ο.Σ.Ε.Ο.Κ. representative also mentioned government projects. He noted that the state is obliged to take measures and find ways to compensate for the losses of contractors.

Unfortunately, the government seems unwilling to help contractors, not financially, not at the legislative level. However, the government can change the VAT rules, allowing contractors and developers not to pay tax on building materials immediately, but to shift VAT to the end user, - said Poumbouris.

The Scientific Technical Chamber of Cyprus (ETEK) called on the authorities to intervene and take appropriate measures, since an increase in the cost of construction will lead to increased inequality.

Buying real estate will become unaffordable for some categories of people, especially for young couples who want to get a home. The state should extend interest rate subsidies for the purchase of primary real estate until the end of 2022. In addition, the government should reintroduce grants for couples who want to buy a house in rural areas, - said the chairman of the Chamber Konstantinos Konstanti.

Konstanti also stressed that the government should consider the possibility of providing assistance to low-income families who had to abandon the construction of a house due to the pandemic and expensive building materials.

The authorities should take the initiative and inform banks about these cases and instruct them to be more lenient when it comes to issues such as extending a loan or issuing a larger amount of money than originally intended on more favorable terms. If no measures are taken to provide assistance, it is expected that in the coming months the situation will worsen with social consequences and will affect economic activity and employment, - said Konstanti.

Thus, the continued rise in prices can have enormous consequences for the construction sector. At the macroeconomic level, it will slow down the growth of the economy with all the consequences that follow from this. At the microeconomic level, an increase in prices for building materials will entail an increase in real estate prices, high risks for contractors, sellers and investors, freezing of new projects, delays, shortage of building materials or long delivery times, etc.

Рост строительных затрат на Кипре угрожает восстановлению сектора

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Source: news.cyprus-property-buyers.com
Photos: pixabay.com
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