22.10.2022
The dream of owning a home is becoming a nightmare for Cypriot millennial couples as a 20% price increase last year made it impossible to buy a home and the average sale is around 350,000 euros.
Stakeholders warn that with the pace of housing construction rising and unless corrective measures are taken, the fabric of Cypriot society will be destroyed.
Angelos Constantinou, head of research at BNP Paribas/Danos Real Estate, attributed the estimated 20% increase in the cost of new homes to the rising cost of building materials .
“After the COVID pandemic, we saw a boom in demand for housing projects as people tried to get their lives back on track after two years of restrictions and uncertainty. This was exacerbated by the war in Ukraine, which increased the pressure on the trade and transportation of raw materials, which led to a further increase in value, ”said the real estate expert.
Constantinou said the young couple would need to pay at least €340,000 to buy their own house.
“Buying an average house, nothing special, in low-cost urban areas will cost a family between 340,000 and almost half a million euros. For a small house of 170 square meters, for which a reduced 5% VAT applies, the family will definitely need more than 300,000 euros.” He added that if a family wants to buy a more comfortable house of 220 square meters, they will need at least 440,000 euros.
“And this is in the event that they want to be content with not so popular areas, like, say, Engomi and some areas of Strovolos in the capital. In the elite areas of Limassol, everything is completely different.” He said prices for the same property started at about 250,000 euros a year ago.
“Unfortunately, the situation for couples looking for a home to start a family is getting worse as the cost of building materials continues to rise. Last week, iron bars rose by 15%, from 115 euros per tonne to 135 euros. This will have a ripple effect on all materials in the coming weeks.”
Refusal
Constantinou said real estate agents saw a third of the home market’s customers give up their interest last year.
“They just can’t afford to buy a house anymore. People who were approved for loans, after the increase in construction costs, were forced to return to their banks to ask for more money. The vast majority of these cases were dismissed.” He added that falling demand will inevitably impact the construction industry as developers hesitate to move on to their next project without selling all available housing.
“To engage in new projects in the face of a sharp decline in demand would be playing with fire, which would lead to a new crisis.”
The Cyprus Technical Chamber (ETEK) advises the government on construction issues and is particularly concerned about the impact of rising house prices on society.
“Now it is almost impossible for young couples to have their own home. About 20 years ago, couples starting a family could get a home loan that they could repay within six to seven years,” said ETEK Chairman Konstantinos Constanti. He explained that it would now take more than 20 years for couples to repay a loan of several hundred thousand euros.
“One third of household income will go to repay the loan. The difference is that houses are many times more expensive than a couple of decades ago, and salaries have increased by only 30%.” He argued that the inability of young couples to buy a house results in the loss of future wealth.
“It is no secret that the growth of Cyprus in recent years has been supported by business loans taken out by people wishing to start their own business with their house as collateral. This will no longer be an option for young people who may want to venture into the business world. What’s more, people in the past have also taken out student loans to send their children to university. Now they will not have such an opportunity,” Constanti said.
He argued that the future generation of Cyprus was being denied potential wealth. In addition, as he noted, owning a house like a family is part of the Cypriot culture.
“Families who cannot afford a home are frowned upon by the rest of society, with complications including tension in their relationships and their children being bullied at school.”
Constanti said that authorities and stakeholders need to explore alternatives to affordable housing by learning about the building culture in Cyprus.
“We need to seriously rethink the materials we use to build our homes towards cheaper and more environmentally friendly materials.
“One of the studies we commissioned and expected to be completed next week will give us an idea of what and how recyclable materials can be used in residential construction.”
