Real estate prices continue to rise

After three quarters of decline, the property price index began to recover in the first quarter of 2021. According to a report by the Central Bank of Cyprus, the increase was driven by an increase in property prices. In the first quarter of 2021, the property price index rose in Limassol (+ 1.5%), Larnaca (+ 0.6%) and Famagusta (+ 0.1%), decreased in Paphos (-0.6%) and nothing has not changed in Nicosia. On an annualized basis, prices rose in all regions except Paphos. In Nicosia, they increased by 0.2%, in Famagusta by 0.3%, in Larnaca by 0.7%. In Limassol, the growth was as much as 2.8%.

Undoubtedly, the main factor that influenced the rise in prices is a sharp jump in the cost of building materials and transportation. Developers raise prices for off plan properties and under construction stages.

Stelios Gabriel, President of the Federation of Cypriot Building Contractors Associations (OSEOK), told Philenews that the problem seems relevant for one particular sector of the economy, but in fact, all citizens will experience its consequences. In his opinion, construction costs will grow by 15-20%.

Let us try to figure out what factors influenced the jump in prices for construction materials and cargo transportation.

In addition to the prevailing demand for housing, below we present the main factors contributing to the growth of construction costs.

 - Rise in oil prices. Since the end of 2020, oil prices have jumped by about 80%. Oil is essential to the construction industry because the production of building materials, their transportation and the operation of construction equipment depend on oil.

- Increased home improvement activity and reduced supply. The pandemic has made its own adjustments in this industry. Long periods of lockdowns have inevitably resulted in homeowners taking advantage of the momentum to devote a lot of time and money to renovation of their home (renovating some rooms, expanding existing ones, etc.).

- Interruptions in the production of building materials due to the pandemic. This caused an imbalance between supply and demand, which persists to some point.

The combination of low mortgage rates and the tendency to work on line has convinced some apartment owners to buy a home, and thus the growing demand for large areas has caused the prices of building materials to rise further.

- Transport. Recent transport problems due to capacity shortages, container shortages, a surge in online commerce and increased demand for transport space, and labor shortages in ports are causing higher import costs and therefore higher costs of the final product that is passed on to consumers.

Summing up, apparently those planning to build in the near future will have to adjust the costs and increase the budget by at least 15%. In addition, for those wishing to buy real estate, turn their attention to key ready housing or to the resale market.

We are happy to advise you and offer you the best options on the market.