In Cyprus, houses cost more as cost of construction materials climbs

A Cypriot union representative recently declared that homeownership in Cyprus has become an ‘impossible dream’.

In Cyprus, the rising cost of construction materials has resulted in property values increasing by an estimated 10 per cent. Speaking to local outlet Stockwatch, Danos Real Estate’s Angelos Constantinou explained that the rise in the price of steel, wood, copper and aluminium means that a 200 square metre property that might have been sold for €270,000 before will now be on the market for €300,000.

The Building Contractors Associations of Cyprus (Oseok) has expressed concerns about the rise of construction material costs.

Citing the Cyprus Statistical Service (Cystat), Oseok mention a 7.71 per cent increase in construction materials as an aggregated category, with metals showing the biggest cost increase on the island with 17.22 per cent, followed by wood, insulation materials, chemicals and plastics with 6.08 per cent as an aggregated material category.

The association also warned that this increase in cost will inevitably be passed onto consumers.

“All of these factors have an effect on construction companies’ liquidity and therefore their projects,” Oseok president Stylianos Gabriel said, explaining that the biggest construction companies refuse to absorb the additional costs, instead choosing to pass them onto smaller construction companies they hire as subcontractors, which then increases the overall price of the final project even further.

“All of this affects the timely delivery of works and the meeting of project timelines, but also the deliveries of materials, machinery and spare parts from abroad,” Gabriel added.

However, this phenomenon is far from a localised one. Indeed, Cyprus is at the end of the proverbial food chain when it comes to importing materials and how their costs have ramifications here. But what has caused this sharp increase in construction material costs?

Using data provided by the European Commission, Dutch banking and financial services company ING has detailed the rise of raw and synthetic materials over the past five years, with wood and processed wood products exhibiting the highest rise with a near 60 per cent increase in cost since April of 2016. Concrete has also risen in cost, rising by around 28 per cent since March of 2020, nearly matching its highest increase in five years, a value reached between 2018 and 2019.

The reasons cited for the rise in material costs include the surprising endurance of the worldwide construction market which has resulted in a continuous demand for construction material. However, the ceaseless demand has coincided with broken or disrupted global supply chains and inflated freight and transport costs. A second side effect of this has been the inability of retailers and wholesalers to keep their inventories stocked, resulting in higher prices due to excess demand.

“With retailers still struggling to keep inventory levels up and already looking to get a leg up on peak season, there may be no relief from high costs, long delays, and equipment shortages,” international freight online marketplace Freightos explained.

“An estimated 5.5 per cent of all ocean capacity is currently waiting outside a port and storage space for finished goods waiting to be shipped is becoming scarce, exacerbating the already critical capacity crunch,” Freightos elaborated, explaining that though global warehouse space may be at the same level, storage space at critical junctures in global supply chains is currently at a premium.