Uncertainty prevails in house building market

Real estate stakeholders are cautious over the immediate prospects of the construction sector and warn against being duped by a rosy picture drawn by an upward trend in building permits.

According to the statistical services (Cystat), an increase in the area covered (10.1%) and the value (3.4%) was recorded in the building permits issued by local authorities in January 2022, compared to last year.

This follows an encouraging trend in 2021, when an increase of 16.2% in building permits was recorded, at 8,164 compared to 7,023 in 2020.

However, a prominent real estate stakeholder warns that the trend will end in the coming months and be overturned as the industry is in for a bumpy ride due to the war in Ukraine.

In comments to the Financial Mirror, Panos Danos, CEO of Danos/BNPRE Group, said the increase in building permits reflects the recovery euphoria prevailing in 2021, following the lifting of COVID restrictions.

“The permits issued in recent months were submitted in 2021 when things were picking up.

“However, a lot has changed since then, with the cost of building materials taking off in mid-2021, only to be further pushed up by the war in Ukraine and sanctions on Russia,” said Danos.

He added that many developers have second thoughts on whether to go ahead with licensed projects, as the hiking costs in energy and raw materials have significantly compressed their profit margin.

“I would expect the consequences of hiking costs to be reflected in building permit reports in the second half of 2022 and the first half of 2023,” said Danos, noting that investors will be more cautious.

“On the other hand, a lack of investment alternatives on the island could lead investors with available cash to invest in property rather than keep their money in banks with negative interest rates.

“The coming months will be challenging, as uncertainty prevails”.

According to Cystat, the number of building permits issued by authorities in January rose to 535.

The total value of these permits reached EUR 165.5 mln, covering a total area of 158,000 square metres.

With these permits, 640 housing units are planned to be built, an annual drop of 8.8%.

Compared to January 2021, the number of building permits issued increased by 8.3%.

The total value of these permits increased by 3.4% and the total area by 10.1%.

In January, building permits for residential buildings decreased by 3.5% compared to 2021, non-residential buildings increased by 27.7%.

Civil Engineering projects rose 52.2%, and road construction increased by 233.3%.