Construction industry riddled with uncertainty

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Despite building materials falling in price, the ongoing energy crisis has Cyprus developers unwilling to greenlight new projects until they have a clearer picture of where building costs are heading.

Cyprus construction sector stakeholders are wary of the price decrease, which they believe to be temporary as large industries producing building materials have threatened to cease operations, crushed by hiking energy costs.

In comments to news site Stockwatch, Stelios Gavriel, the Chair of the Federation of Cyprus Building Contractors Associations (OSEOK), said the price reduction might be temporary because developers have limited their purchases.

“Also, construction activity always drops in August due to the holiday season.

“Therefore, the true dimensions of the problem will begin to emerge from this month onwards,” argued Gavriel.

He said uncertainty affects large private projects, new houses, and villas due to the composite materials required, which skyrocket construction costs.

“On the other hand, the construction of apartments has not been affected to the same extent as building materials used are not as diverse.”

“If construction materials prices are not corrected, which despite the recent reduction are very high compared to 2019, people wanting to build a house will have to revise their plans, reducing buildable areas and any additional constructions”.

Constantinos Constanti, the chair of the Technical Chamber of Cyprus (ETEK), which advises the government, commented that globally, prices of basic materials, following a rally of increases that exceeded 70%, seem to be stabilising.

The prices of some materials, such as iron and steel, have dropped by 5 to 10%.

However, as he noted, the recent dip does not make up for increases recorded over the past two years.

Shipping costs are decreasing relative to the 2021 peak, but “they remain at much higher levels than 2019, on average 25% to 30%”.

According to Constanti, if prices remain at these levels, young couples will be unable to buy a house or an apartment, causing a vicious cycle as developers will not have buyers to sell their projects to.