Rising construction costs in Cyprus have surged by 10 per cent over the past two months, with a five-year increase reaching 35 per cent, as reported by Stelios Gavriel, president of the Cyprus Federation of Building Contractors Associations (Oseok).
Gavriel attributes these increases to geopolitical developments in Iran and escalating energy prices, alongside the rising costs of emissions allowances impacting raw material industries. He highlighted that essential materials like iron, aluminium, and steel are facing significant price pressures.
Construction costs: Current Trends in Construction Materials
The statistical service revealed that the construction materials price index for April 2026 stood at 120.67 units (with 2021 as the base year), showing a 0.64 per cent increase compared to the previous month. In comparison to April 2025, the index recorded a 1.38 per cent rise.
Specific categories have seen notable increases: electromechanical goods rose by 2.29 per cent, metal products by 1.81 per cent, and wood, insulation, chemical, and plastic products by 1.76 per cent. Mineral products recorded a lesser increase of 0.06 per cent.
Impact of Global Events on Costs
According to Gavriel, the rise in construction costs began with the crisis triggered by the war in Ukraine, which led to an energy crisis. This situation has been compounded by the ongoing conflict in Iran and rising oil prices. “These factors do not help reduce costs but instead maintain them at high levels,” he explained.
The final impact on construction and property prices largely depends on which materials are affected most. “If iron increases, because it is widely used in construction, the construction cost rises more,” he noted.
High Construction Activity Amidst Cost Pressures
Despite these pressures, construction activity remains robust across both public and private projects in Cyprus. Gavriel stated, “The data available to Oseok, along with market indicators, show a continuation of the sector’s growth trajectory during the first months of 2026.”
Property Market Dynamics
In terms of property sales, Larnaca has witnessed the largest increase at around 40 per cent, with Nicosia following at approximately 30 per cent. Limassol and Paphos continue to show strong momentum in the property market.
Gavriel highlighted that the increase in Nicosia is primarily driven by domestic buyers, alongside growing interest from foreign investors and companies. “The capital is seen as an attractive option due to the affordable cost of living and the concentration of administrative and business activities,” he said.
Shifts in Housing Preferences
The property market is adapting to new conditions, with an increased demand for smaller homes and apartments. This shift is linked to higher construction costs and new energy requirements that complicate the development and purchase of larger homes.
Modern constructions now require energy upgrades to category A, thermal insulation materials, energy-efficient frames, photovoltaic systems, and smart technologies, all of which elevate initial costs. However, these investments are expected to lower long-term operating costs for households.
Labour Market Challenges and Solutions
The construction sector also faces challenges related to labour, with the departure of experienced workers in previous years impacting productivity and increasing labour expenses. Efforts are underway to fill workforce gaps with employees from third countries, which Gavriel believes will enhance productivity. “They will help increase productivity,” he said, adding that improved efficiency could help ease construction costs over time.
