07.11.2022
The skyrocketing cost of living and higher interest rates are taking a toll on the construction industry as building permits declined in the first eight months of the year.
According to the Cypriot Statistical Office, 5,031 building permits were issued from January to August, compared to 5,240 in the same period last year, a decrease of 4%.
The total cost of these permits decreased by 2.3% to 1.63 billion euros from 1.667 billion euros, and the total area decreased by 7.7% from 1,542,426 sq.m. to 1,423,457 sq.m.
The number of residential units decreased by 3.4%.
Compared to the first eight months of 2019, the area of licensed projects decreased by 7.5%.
Building permits are an important indicator of future activity in the construction sector.
On an annualized basis, all districts recorded a decrease in the area of licensed projects, except for Nicosia, which exceeded the pre-pandemic level. Compared to the eight months of 2019, all districts recorded a decrease, except for Nicosia and Paphos.
Panos Danos, CEO of Danos/BNPRE Group, said real estate players have seen a drop in demand in the housing market due to rising inflation and interest rates.
“The latest increase in interest rates will have a domino effect on savers and anyone who wants to borrow money, as well as affect the cost of mortgages,” Danos said. He noted that house prices are expected to decline due to lower demand in the market.
“There are fewer people who want to buy a house. This happens for two reasons. First, the increase in interest rates led to higher mortgage rates. It simply means that it is more expensive to take out a mortgage than it was at the beginning of the year, even if the mortgage amount is the same.” A real estate expert argued that people usually have less money in their pockets due to soaring inflation.
“Food, energy and fuel have become more expensive, which means people have less disposable income.”
In 2023, the average house price in Cyprus is expected to fall for the first time in two years, Danos said.
When asked if now is the right time to buy a house, Danos said that this period is favorable for those who are looking for a house and do not need a mortgage.
“Now is a good time to buy because prices are falling.
“It would be a good idea to wait until next year when prices are expected to reach their lowest level.”
