The growing inflationary pressures facing the construction market are creating stifling conditions for infrastructure projects and residential development, even leading to project cancellations.
Developers and builders are reporting costs spiraling out of control, while public works contractors are citing force majeure due to the rapid increases in material prices.
Climate of uncertainty in residential construction
Continuous price hikes have created a climate of uncertainty and high risk in the construction market.
Market players report 30% increases in construction materials since the start of the war in Iran, while data for specific products show even higher increases.
At the same time, demand for apartments remains high, yet the market appears to have reached its limits. Data from the Bank of Greece published a few days ago indicate that double-digit price growth rates are likely a thing of the past.
For the first quarter of the year, apartment prices rose by 5.7%, compared to 8.3% in the previous quarter and 7.5% in the first quarter of 2025.
Overheating is subsiding
Consequently, developers are unable to pass on increases in construction material costs to final sales prices for many projects, as was the case with their projects until recently. Market sources tell Euro2day.gr that in the current inflationary environment, development companies have fewer “tools” at their disposal for risk management.
“When you can’t raise selling prices, profit margins shrink. In some cases you accept it, in others you don’t, especially when there is debt. That’s why we now examine new projects we undertake much more carefully, as there is significant uncertainty regarding costs,” market sources note.
“There are projects we would have taken on 18 months ago, but today we’re saying no because the numbers just don’t add up,” they add.
The effects of both the war and the new wave of inflation have not yet been reflected in the official construction activity data.
It should be noted that ELSTAT has published market data through February, while the war began in late February. Construction activity data for March will be published on June 29.
Pressure on liquidity
Beyond the pressures on profitability, higher prices—and their unchecked rise—are creating a stifling liquidity environment.
Fotis Gioftsios, CEO of the Dutch firm Ten Brinke in Greece, noted at a recent conference that credit conditions in the market have changed radically. “In the past, when we received quotes from our suppliers, they gave us a 40- to 45-day payment window. Now the window is 24 hours, or at most 48 hours. Because, unfortunately, conditions are changing every day,” said Mr. Gioftsios.
A critical problem in public works
In public works, conditions are described as extreme by construction companies, which are demanding an adjustment to their fees.
In a joint letter from PEDMEDE, PESEDE, and SATE, sent a few days ago to the Ministry of Infrastructure and Transport, the organizations emphasize that “the initial impression that the phenomenon of rapid price increases would be temporary has long since been disproved.”
Now, all relevant analyses indicate that price and inflation levels will remain high, even if some form of agreement is reached between the opposing sides, they state in their message.
“This situation has created force majeure conditions in the implementation of public works contracts, as construction companies are required to fulfill their contractual obligations without the legislature’s provision for a substantial adjustment of the contract pricein line with market price increases, so as to maintain the initial financial balance of public works contracts at a critical juncture for the completion of the projects,” the letter emphasizes.
This is the second letter they have sent to the Ministry’s political leadership requesting intervention so that the projects may continue as normal.
Specifically, they are requesting the activation of the provision in paragraph 23 of Article 153 of Law 4412/2016, according to which “by decision of the Minister of Infrastructure and Transport, adjustment factors may be established if the competent services of the General Secretariat for Infrastructure determine a significant deviation from the prices of the tender quarter.”
“Clearly, the magnitude of the increases is such that the problem must be resolved immediately and decisively by taking appropriate measures to ensure the smooth operation of ongoing projects throughout the country,” the organizations conclude.