Real Estate: 50 % increase in construction costs for the year - High investor interest - Economic Courier

"Train without brakes": The rising cost of building materials over the past two years has led to an explosive rise in construction costs.

While before the war in Ukraine and the coronavirus pandemic, the average cost of typical construction was between 1,000 and 1,200 euros per square meter, not including the cost of land, today it has risen to around 1,500 to 1,800 euros per square meter. This means that the cost of building a new 100-square meter is now between €150,000 and €180,000, up from €100,000-120,000. Almost 50% increase.

The most revealing situation is the increase in the prices of certain materials. For example, the cost of bricks increased by 14.3%, heating appliances by 11.9%, cement by 6.2%, and tiles by 8.1%, and all of these increases occurred in one year! A comparison to 2021 is even more revealing of the increase in construction costs, as the overall price index for materials increased by 19.6%. In terms of individual materials, the cost of marble increased by 18.1%, wood by 17.8%, plumbing materials by 15%, and electrical materials increased by 24.4% over two years!

Sustainable demand

Despite a significant increase in construction costs, resulting in higher prices for new construction, demand for real estate remains strong. "It will be difficult to find housing in Athens, especially in the northern and southern suburbs, for less than 3,000 euros per square meter," real estate market participants said.

At the same time, new modern apartment buildings, especially in the northern and southern suburbs of Athens, are appearing like mushrooms after rain. Total construction activity (private and public) in May 2023 nationwide amounted to 2,570 construction permits in May 2023, corresponding to an area of 494,482 square meters and a volume of 2,171,565 cubic meters, i.e. an increase of 15.8% in the number of construction permits and an increase of 7.5% in the area compared to the corresponding month of 2022.

Investors from abroad

According to the latest figures released by the Bank of Greece, the annual increase in new home prices across the country reached 13.8%.

It is clear that increased construction costs are one of the main reasons for the rise in sales prices over the past two years. Another important factor in supporting and developing the real estate market is the demand from foreign investors. As Kosmas Theodoridis, president of the European Real Estate Union, points out, there is strong interest from Israeli investors. "Israelis sell an apartment in Tel Aviv and buy an apartment building in Greece. There is also strong interest from foreign investors who want to obtain a visa through the Golden Visa program. Turks, Chinese, Lebanese are the ones who are investing in the Greek real estate market," notes Mr. Theodoridis, adding that forecasts for the next years show that price growth will continue at a rate of 8-10% annually.

The suspension of VAT on construction, a decision made by the government in 2019, has stimulated property sales and new construction. For an apartment worth 300,000 euros, the cost to the buyer before the suspension of VAT reached 372,000 euros, and with the special treatment applied to the value of the apartment, only the 3% transfer tax will be added and the final cost will be 309,000 euros.