Cyprus construction costs continue to rise

Cyprus’ construction material prices climbed further in May, according to the state statistical service (Cystat), with higher costs for metals, wood and electromechanical products continuing to shape the outlook for the island’s building sector. Specifically, the Price Index of Construction Materials reached 122.07 units in May 2026, with 2021 acting as the base year set at 100 units, representing a month-on-month increase of 1.16 per cent. Compared with May 2025, the index recorded an annual increase of 2.62 per cent, indicating that inflationary pressures remain present despite a broader easing in construction cost growth across Europe. According to Cystat, the largest increase among the main categories was recorded in metallic products, which rose by 4.31 per cent on a year-on-year basis. Prices for wood products, insulation materials, chemicals and plastics increased by 3.49 per cent. Meanwhile, electromechanical products registered a rise of 2.97 per cent, while minerals increased by 2.03 per cent. The category of mineral products posted a more modest increase of 0.22 per cent. For the period between January and May 2026, the overall index increased by 1.32 per cent compared with the corresponding period of 2025. The latest figures suggest that Cyprus is experiencing a continuation of the moderate upward trend in construction costs seen over recent months, even as Europe moves beyond the severe inflation shocks that followed the pandemic and the energy crisis. Analysis from the Royal Institution of Chartered Surveyors (RICS) showed that construction inflation across Europe has shifted from the sharp price surges of previous years to a period of more selective recovery. Although energy prices and supply chains have become more stable, costs remain above pre-2020 levels in many categories. RICS said that Europe’s construction sector is entering a phase characterised by slower inflation, improving supply chains and more stable logistics, although risks have increasingly shifted towards electricity availability, labour shortages and carbon-related costs. The organisation’s research also showed that Europe’s Construction Sentiment Index improved during 2025, with respondents expecting cost increases to ease further in 2026. However, RICS identified steel and copper prices as the principal source of volatility, affecting areas such as cables, switchgear, reinforcement steel and mechanical and electrical installations. That assessment aligns closely with developments in Cyprus, where metallic products recorded the steepest annual increase among all material categories. RICS also pointed out that cement and bricks have become more stable than during 2022 and 2023, although they remain structurally more expensive because higher energy and carbon costs continue to be passed through to consumers. As with other sectors of the economy, another issue affecting construction markets is geopolitical uncertainty. According to construction cost consultancy Compass International, Europe entered 2026 with a restrained recovery, with economic growth expected to remain relatively modest. The firm highlighted the ongoing war in Ukraine and tensions in the Middle East as factors weighing on confidence and investment decisions. While reports indicate that the conflict involving Iran is nearing a resolution, uncertainty remains over the longer-term implications for energy markets and inflation. Meanwhile, RICS also warned that rising energy prices remain the main channel through which geopolitical developments influence construction budgets, because higher fuel costs affect quarrying, smelting, cement production and transport. Compass International said much of Europe is expected to experience only slow growth in construction activity this year, although countries such as Poland, Portugal, Norway, the Netherlands and Cyprus itself are seeing improved prospects. While Cyprus continues to face moderate but persistent increases in construction input costs, construction activity on the island has remained robust. Separate Cystat figures released last week showed building permits soaring in the first two months of 2026, with residential development leading the expansion. The number of dwelling units approved rose by 79.2 per cent year-on-year, while the total value of permits increased by 56.5 per cent, highlighting resilient demand and a strong pipeline of future projects.