Inflation and interest rates threaten property market

Rising costs of living and rising interest rates have hit the construction industry, with building permits declining in the first eight months of the year.

Data from the Cyprus Bureau of Statistics showed that 5,031 building permits were issued from January to August, down 4% from 5,240 in the same period last year.

The total amount of these permits decreased by 2.3% from €1,667 million to €1,630 million, and the total area covered decreased by 7.7% from 1,542,426 square meters to 1,423,457 square meters.

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 annual basis, all districts recorded a reduction in the area of ​​approved projects, with the exception of Nicosia, which exceeded pre-pandemic levels.

All districts recorded a decrease compared to eight months in 2019. Nicosia and Paphos.

Danos/BNPRE Group CEO Panos Danos said in comments to the Financial Mirror that stakeholders in the real estate sector had recorded lower demand in the housing market due to rising inflation and interest rates. Stated.

“The recent rise in interest rates will have a knock-on effect not just on mortgage costs, but on savers and those looking to borrow money,” Danos said.

He noted that housing prices are expected to cool due to low demand in the market.

“There are fewer people wanting to buy a house. There are two reasons for this.

“First, higher interest rates have pushed mortgage rates higher.

“This simply means that it will be more expensive to take out a mortgage than it was at the beginning of the year, even if the mortgage amount is the same.”

Real estate experts also argued that people generally have less money in their pockets because inflation is soaring.

“Food, energy and fuel prices are soaring and people have less disposable income.”

According to Danos, the average housing prices Cyprus is expected to see its first decline in two years in 2023.

Asked if now is a good time to buy a home for those with cash in their pockets, Danos said the time is in the housing market and favorable for those who don’t need a mortgage. .

“Now is the time to buy as prices are falling.

“It would be a good idea to wait until next year when prices are expected to reach their lowest levels.”

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