Lower Construction Costs Have Boosted Development

The real estate market is recovering, but there is still much uncertainty in the world, the economy, and among people. At the same time, now is a good time to start real estate development projects, as construction costs are low.

News of new development projects, construction starts, and bond offerings quite well describe developers' positive expectations for the future. Although the sale of new apartments is not yet very active, the most significant reason to start new projects is the lower cost of materials and labor.

In 2020, construction prices began to rise rapidly, driven primarily by the increase in material costs. The peak was reached in 2022, when the full-scale war in Ukraine disrupted all supply chains. By 2025, the price level had fallen back to the level from which the increase began in 2020.

Well-capitalized developers now have a favorable opportunity to build new homes knowing that in a broader perspective, as the economy recovers, construction costs will rise again. If there is no direct pressure to sell quickly, such a small risk could pay off.

The expectation that people's interest, ability, and willingness to buy new homes will recover also supports the more active start of development activities. There are first signs that uncertainty is beginning to fade, but what is happening in the world can very easily shake it. At the same time, people want to move forward with their lives and finally begin to implement plans that were put aside in the meantime.

The fact that during difficult years, well-located properties with established detailed plans and even building permits have come on the market also has an impact on the implementation of new projects. This allows work to begin quickly.

Currently, most prospective buyers find housing in the secondary market more accessible. In new developments, cheaper apartments on the outskirts and in nearby municipalities are more preferred, although luxury properties also have buyers, but sales proceed at a slower pace in that case. A developer starting a new project should carefully calculate what the demand is, the asking price, and the expected sales time, in order to sell more successfully even during quiet periods. Competition in the market is ruthless, and buyers decide.