The soaring cost of living and higher interest rates are taking their toll on the construction industry, as building permits dropped in the first eight months of the year.
According to data from the Cyprus Statistical Services, from January – August, 5,031 building permits were issued compared to 5,240 in the same period last year, marking a 4% decrease.
The total value of these permits decreased by 2.3% to €1.63 bln from €1.667 bln, and the total area covered fell by 7.7% from 1.542,426 sqm to 1.423,457 sqm.
The number of residential units showed a decrease of 3.4%.
Compared to the first eight months of 2019, the area of licensed projects declined by 7.5%.
Building permits are an important indicator of future activity in the construction sector.
On an annual basis, all districts recorded a decrease in the area of licensed projects, except for Nicosia, which exceeded pre-pandemic levels.
Compared to the eight months of 2019, all districts recorded a decrease except for Nicosia and Paphos.
In comments to the Financial Mirror, Panos Danos, CEO of Danos/BNPRE Group, said real estate sector stakeholders have recorded a drop in demand in the housing market due to rising inflation and interest rates.
“The latest increase in interest rates will have a knock-on effect on savers and anyone who wants to borrow money, as well as impacting mortgage costs,” said Danos.
He noted that house prices are expected to cool down because there is less demand in the market.
“Fewer people want to buy a house. This is for two reasons.
“First, hikes to interest levels have resulted in higher mortgage rates.
“This simply means it is more expensive to take out a mortgage than earlier in the year – even if the mortgage amount is the same.”
And the property expert argued that people generally have less money in their pockets because of soaring inflation.
“Food, energy and fuel have become more expensive, meaning people have less disposable income.”
According to Danos, the average house price in Cyprus is expected to fall for the first time in two years in 2023.
Asked if now is a good time for someone with cash in their pockets to buy a house, Danos said the period is favourable for those in the market for a home and do not need a mortgage.
“Now is a good time to buy because prices are dropping.
“It would be a good idea to wait until next year when prices are expected to hit their lowest ebb.”
