Europe may already be entering its second major energy crisis in just a few years. For Cyprus, a small, open and highly energy-dependent economy, the consequences could be significant, particularly for the property sector.
The conflict involving Iran and growing instability around the Strait of Hormuz, through which roughly a quarter of the world’s seaborne oil trade passes, have already triggered fresh increases in energy prices, transport costs and raw materials. While global markets have not yet entered full panic mode, the data is beginning to point towards a more concerning reality.
Across Europe, the impact is becoming increasingly visible. Economic growth is slowing, inflationary pressures are re-emerging and policymakers are warning that elevated energy costs may persist for an extended period. For the real estate sector, this is not simply a macroeconomic concern. It represents a direct challenge to housing delivery and affordability.
Cyprus construction costs face renewed pressure
Construction remains one of the most energy-intensive sectors of any economy. From cement and steel production to the transportation of materials, site operations, heavy machinery and international supply chains, almost every stage of property development is influenced by energy costs.
Cyprus is particularly exposed. The country imports almost all of its energy requirements, while a significant share of the building materials and equipment used by the construction industry comes from overseas. As a result, any increase in oil prices, natural gas costs or shipping rates is quickly reflected in overall construction expenses.
Early indications suggest these pressures are already returning. Diesel prices across Europe have risen since the latest conflict began, with Cyprus among the countries experiencing some of the largest increases. At the same time, European natural gas prices have climbed following attacks on energy infrastructure in the Gulf region.
This comes at a time when the Cypriot construction sector has yet to fully absorb the shock of the 2021-2023 period, when building material costs surged due to inflation, supply chain disruptions and the war in Ukraine.
Construction costs in Cyprus remain close to record highs. Although recent months had shown signs of stabilisation, the latest energy market turbulence threatens to reverse that progress.
Housing affordability risks deepen
The consequences extend far beyond developers and contractors. The issue is fundamentally social as well as economic.
When construction costs rise, the ability to deliver affordable housing declines. Projects that were only marginally viable become financially challenging. New developments may be delayed, scaled back or cancelled altogether. Smaller developers often face the greatest pressure.
The result is a reduction in housing supply at precisely the moment when demand remains strong.
Europe is already grappling with a housing crisis, and Cyprus is no exception. In a market where residential supply is constrained by slow planning approvals, high financing costs and infrastructure limitations, a renewed energy crisis could significantly accelerate existing affordability challenges.
Market confidence could also be affected
A less visible but equally important risk is investor confidence.
The construction industry relies heavily on predictability. Major property developments are planned over many years and require confidence in future costs and market conditions. When developers face geopolitical uncertainty, volatile energy prices and persistent cost inflation, appetite for risk inevitably declines.
A slowdown in property investment has wider implications for the economy. Contractors, suppliers, engineers, banks and the labour market all feel the impact when development activity weakens.
Cyprus must respond proactively to this changing environment. Faster planning approvals, reduced bureaucratic delays, greater investment in energy-efficient buildings and more resilient supply chains are no longer simply measures to improve competitiveness. They have become essential tools for strengthening economic resilience.
If Europe is entering a new era of energy uncertainty, the Cypriot property market cannot afford to remain a passive observer. The decisions taken today will play a crucial role in determining the affordability, sustainability and stability of housing in the years ahead.
Yiannis Misirlis is President of the Cyprus Property Developers Association.
(Translated from an article published in Politis)
