Cyprus - Crisis in the construction sector

Construction Crisis in Cyprus

The construction sector is one of the key drivers of economic development in Cyprus. However, in recent years, the industry has faced serious challenges, the main ones being the acute shortage of labor and the shortage of building materials. Despite high demand from local and foreign investors, many projects are delayed and remain unfinished. This situation not only undermines investor confidence, but also poses a threat to the country's economic growth as a whole. Let us highlight the main reasons for this situation:

1. Labor shortage — the labor shortage in the construction sector in Cyprus is due, firstly, to the consequences of the COVID-19 pandemic, when many foreign workers, mainly from Eastern European countries, left Cyprus during the lockdowns and restrictions on movement, and after the restrictions were lifted, a significant number of them did not return, which led to a sharp reduction in the number of available specialists. And secondly, a series of attacks and aggression against foreign workers by the local population. These incidents were caused by the social tensions and economic difficulties that many Cypriots have faced during the pandemic. As a result, a significant number of foreign workers chose to leave the country for safety reasons, further exacerbating the labor shortage in the construction industry.
2. Construction materials shortage — A number of factors contributed to this, including high demand for real estate and the large number of projects being carried out simultaneously in both the private and public sectors. This increased activity led to an overheated market and the rapid depletion of stocks of necessary raw materials and supplies. The situation was exacerbated by delays in importing construction materials from abroad. Disruptions to global supply chains caused by the pandemic led to longer delivery times and higher prices for many types of raw materials. As a result, construction companies faced difficulties in securing the necessary materials for their projects, causing further delays and increasing construction costs.

Economic Impact of the Crisis

The economic impact of the construction crisis in Cyprus could be severe. Many projects remain unfinished due to a shortage of labor and materials, which not only delays their completion dates but also undermines investor confidence. Cyprus has long been considered an attractive property market for foreign investors, especially from the Middle East and Russia. However, project delays and disruptions can seriously damage the country’s reputation and lead to capital outflows. Unfinished construction projects also pose a threat to Cyprus’s overall economic growth. The construction sector is an important source of jobs and tax revenues. A slowdown in this sector could lead to increased unemployment, lower incomes and a slowdown in the country’s economic development. Given that Cyprus is still recovering from the 2012-2013 financial crisis, a new blow to the economy could have far-reaching consequences.

Possible solutions to the problem

• One possible solution is to attract labor from Middle Eastern countries such as Syria, Egypt and Lebanon. Many workers from these countries have experience in the construction industry and can fill the gaps left by the outflow of workers from Eastern Europe.
• Another potential solution is to simplify the employment procedures for refugees, in particular from Syria, who are already in Cyprus. Granting them the right to work in the construction sector can partially compensate for the shortage of labor and at the same time facilitate the integration of refugees into local society.
• To address the shortage of construction materials, Cyprus should consider investing in the development of local production. The establishment of domestic capacities for the production of cement, steel, bricks and other key materials can reduce dependence on imports and ensure uninterrupted supply for construction projects. Government support and incentives for the development of such production can be an important step in this direction.

Download the mobile app!

Install our app and get all the tools you need to search for real estate abroad in your smartphone! The mobile application will allow you to quickly access your personal account, manage your favorite properties and track your requests, directly exchange messages with sellers and buyers.

Prospects for the development of the industry

• Despite the current difficulties, the construction sector in Cyprus retains significant potential for growth. High demand for residential and commercial real estate from local and foreign investors, as well as the government's ambitious plans for infrastructure development, create favorable conditions for the development of the industry. However, to realize this potential, it is first necessary to overcome the crisis associated with the shortage of labor and materials.
• In addition to solving current problems, the construction sector in Cyprus requires deep reforms and innovations. The introduction of modern technologies, such as BIM (Building Information Modeling), can improve the efficiency of design and construction, reduce time and costs. Improving the skills of local personnel through training and certification programs will also help strengthen the human resources of the industry.
• Attracting foreign investment will remain a key factor in the development of the construction sector in Cyprus. To do this, it is necessary to restore the country's reputation as a reliable and promising real estate market. A clear and transparent regulatory framework, simplified procedures for obtaining construction permits and guarantees for the protection of investors' rights can be important steps in this direction.

In conclusion, the construction crisis in Cyprus, caused by the shortage of labor and materials, poses a serious threat to the country's economic development. Unfinished projects, loss of investor confidence and risks to economic growth require urgent and decisive measures from the government and business. Attracting foreign labor, integrating refugees, investing in local production of construction materials, as well as reforms and innovations in the industry itself can become key factors in overcoming the crisis. If these measures are successfully implemented, the construction sector of Cyprus will be able to realize its potential and become the engine of economic growth and development of the country.