Cyprus’ construction sector continued to perform strongly during the first half of 2026, with new research from Eurobank confirming healthy growth in development activity, investment and property demand.
Eurobank’s latest report highlights a strong pipeline of projects, rising mortgage lending and increasing property sales, showing that the market remains resilient despite growing geopolitical tensions in the Middle East.
Building permits show strong development pipeline
The construction pipeline expanded significantly during the first quarter of 2026. Building permits rose by 44% year-on-year to 2,276, while the number of approved homes increased by 58% to 5,403.
The total approved floor area reached one million square metres, up 40% from the same period last year. The value of approved developments also climbed by 41% to €1.3 billion.
These figures suggest developers remain confident and are investing in larger, higher-value projects across the island.
However, Eurobank notes that these building permit figures cover the period between January and March 2026, before the latest conflict in the Middle East escalated. Future data will provide a clearer picture of whether investor confidence remains at current levels.
Construction activity continues to grow
The report shows that construction activity remains strong across Cyprus.
Gross value added in the construction sector increased by 4.9% year-on-year during the first quarter of 2026, compared with 3.9% in the same period of 2025. This indicates that the growing pipeline of approved projects is translating into real construction work.
The construction production index also continued its upward trend, reaching 120.7 during the quarter.
Meanwhile, construction output prices rose by 4.7% year-on-year to an index level of 129.5, suggesting developers have maintained pricing power despite slower growth in production volumes.
Property market demand remains healthy
Cyprus’ property market also continued to perform well.
Sales contracts reached 10,007 during the first six months of 2026, representing a 15% increase compared with the same period last year. This builds on the strong performance seen in 2025, when annual property transactions also increased by 15%.
Demand remains strong among both local and overseas buyers.
Purchases by Cypriot nationals increased by 10%, while foreign buyer activity rose by an even stronger 23%.
Interest from European Union buyers was particularly impressive, with transactions increasing by 29%. Purchases by non-EU buyers also grew by 20%, underlining Cyprus’ continued appeal as an international property investment destination.
Importantly, property sales have remained resilient despite the recent escalation of tensions in the Middle East, suggesting regional uncertainty has not yet weakened buyer confidence.
Mortgage lending supports housing market
Mortgage lending continues to provide support to those buying property in Cyprus.
During the first five months of 2026, new mortgage lending increased by 19.5% year-on-year. This points to healthy demand for housing and suggests residential construction activity is likely to remain strong over the coming months.
Labour shortages become a growing challenge
Despite the positive outlook, the report identifies several challenges facing the construction industry.
Labour shortages have become the biggest concern for developers. Around 38% of construction firms now say a lack of available workers is their main production constraint, compared with just 11% in 2022.
Businesses are also reporting increasing uncertainty, with sentiment beginning to resemble the pattern seen during the COVID-19 pandemic. At the same time, expectations for future construction costs have continued to rise.
Outlook for the Cyprus construction sector
Overall, Eurobank believes Cyprus’ construction sector enters the second half of 2026 from a position of strength.
A strong project pipeline, rising construction activity and healthy property demand continue to support growth across the market. Although labour shortages and geopolitical uncertainty remain important risks, current indicators suggest the sector is well placed to maintain its positive momentum throughout the remainder of the year.
