Costs hamper construction
The industry is suffering from several problems, including worker shortages and price hikes
The cost of new housing construction has recorded an increase of 65-70% from mid-2021 to date due to the successive crises – first the disruption in the supply chain caused by the pandemic and then the war in Ukraine.
At the same time, as real estate market officials report, there are also phenomena of speculation by some material trading companies, while the increase in labor costs has also been steep.
“The lack of staff is a daily headache, which puts back the delivery times of new homes and therefore limits the supply on the market,” construction industry officials note.
The high demand for both construction and infrastructure projects, as well as the fact that many – especially economic migrants – have left the sector due to the crisis, makes it particularly difficult to replace workers and pushes wages higher.
Another reason is that in recent years there has been significant growth in building permits and new housing developments, thanks also to the 24% value-added tax suspension measure, which has even been extended until the end of 2024. These properties are now being channeled gradually into the market. However, according to established practice in the construction business, revenue should first be secured through sales before funds can be channeled into new projects, which means new building permits.
The above conditions have now started to contain construction activity, combined with the interest rate rise, which also seems to have started to negatively affect the market; this has mainly affected the particularly expensive newly built properties, which are even more difficult to finance exclusively with equity capital. In 2021, nationwide, there was a large increase of 26.8% in the number of permits, 47.2% in surface area and 45.9% in volume. By contrast, in 2022 the picture was mixed, with slowing trends in the second half of the year. The number of permits increased by 4.6%, but the area and volume recorded a decline of 8.9% and 2.2% respectively. The picture appears similar in the first two months of 2023.