Cyprus construction stakeholders fear the industry may be growing too fast, endangering a healthy recovery from the coronavirus pandemic and a steep increase in the cost of building materials.
Developers believe the construction sector will not be able to handle all the projects in the market, from housing to public infrastructure.
In comments to news site Stockwatch, George Chrysochos, the CEO of Cyfield, said: “Activity in the construction sector has increased sharply and dangerously, with the result that the industry cannot absorb and execute all the projects that are on the market”.
He argued that developers are facing various difficulties, ranging from the labour shortage following the coronavirus pandemic, and the delay in the delivery of building materials.
He advised the government to redesign its development plans, postponing some projects for next year.
He added that there is high demand for small and large projects from the private sector, mainly involving offices and housing units from local and foreign buyers.
The Chief Operating Officer of D.K. Dimitriades LTD, a company importing construction materials, Marinos Stasis, said: “Our sales in steel and other materials have increased, reflecting the reheating of the real estate market with a large number of ongoing projects.”
Stasis referred to the biggest private project, the €1.2 bln redevelopment of Larnaca port and marina, which includes offices, housing units and hotels.
“In Nicosia, a large number of apartment buildings are being erected.
“Combined with an equally large number of public projects, this had led to the overheating of the market,” said Stasis.
He said a drop in the cost of iron from a record high of €1,120 per tonne to €850 has significantly improved things for developers, although transport costs for Cyprus are more expensive.
The managing director of C. Roushas Trading & Development Ltd, Costas Roushas, said the domestic market had been boosted by a reduced VAT rate for purchasing a first home, which is still at 5%.
MPs are looking to accommodate an EU directive to reduce the size of homes entitled to a lower 5% VAT.
The EU directive dictates that member states introduce legislation of 5% VAT on homes up to 140 square metres.
Currently, this is applicable for homes over 275 square metres.
“Limassol and Larnaca have seen increased interest from investors from Israel as well as Ukrainian businesses looking for office spaces, new apartments and houses”.
The Technical Chamber of Cyprus (ETEK) advises the government on the building and is particularly concerned about the many public projects.
ETEK chair Constantinos Constanti said the increased construction activity concerns mainly public works, with many large public projects mature for some time.
“Better planning is needed about the announcement of large public projects, so there is a better time distribution, but also a more balanced distribution in terms of the size of the projects.”
“We are in a pre-election period, while also many projects are being funded by the European Union Recovery Fund, which has narrow and strict time frames”.