Idle land is fuelling Cyprus’ housing crisis Loizou says

Cyprus does not suffer from a shortage of land. Instead, it faces a shortage of land utilisation, and new data from Ask Wire highlights the scale of the issue.

In the Akropoli area of Nicosia, only 53% of the permitted building density is currently being used. In other words, almost half of the development potential allowed under existing planning regulations remains untouched.

The unused capacity amounts to more than one million square metres of unbuilt floor space. In practical terms, that is enough room for approximately 10,000 additional apartments in just one central urban district.

A similar picture emerges from the Papas area of Limassol. Across these two important urban centres alone, more than 18,000 new homes could potentially be delivered if the full development potential already permitted under planning regulations were utilised.

The findings point to a key issue at the heart of Cyprus’s housing affordability challenge: supply constraints rather than a lack of demand. Cyprus continues to attract both domestic buyers and international investment. The problem is that substantial amounts of urban land remain underdeveloped despite having planning approval and infrastructure in place.

Rising land prices add pressure to housing costs

The trend in land values reinforces this assessment.

According to Ask Wire’s analysis of property transaction data from the Department of Lands and Surveys, the median price of urban residential land increased from €203 per buildable square metre in the first quarter of 2021 to €257 in the first quarter of 2026. This represents an increase of almost 27%.

The sharpest rise was recorded in Limassol, where prices climbed by 45%, from €245 to €356 per buildable square metre.

The cost of keeping urban land idle

Where development is delayed and effective housing supply is artificially restricted, prices inevitably respond.

The strongest land price increases are concentrated in urban areas where the gap between permitted and actual development is greatest. The relationship is visible in the market data itself rather than being merely a theoretical argument.

From an individual landowner’s perspective, holding land can be a rational strategy. Owners benefit from rising land values without taking on the financial risks associated with development. In a rising market, waiting can often prove more profitable than building.

However, the cumulative impact creates a market distortion. Fewer homes enter the market, property prices rise faster than household incomes and wealth becomes increasingly concentrated among those who already own land. Meanwhile, access to home ownership becomes progressively more difficult, particularly for younger households and first-time buyers.

Could taxing idle land unlock new housing supply?

The most obvious policy response is to encourage additional supply.

One option available to policymakers is the taxation of persistently idle or underutilised urban land. Similar measures already exist in several countries.

Ireland operates a Vacant Site Levy on serviced urban land that remains undeveloped. In the United Kingdom, council tax premiums of up to 300% can be imposed on properties left vacant for extended periods. Elsewhere in Europe, local authorities use targeted taxes on vacant property or land value to encourage development.

While the design of these policies differs, the underlying principle is increasingly accepted: when strategically located urban land remains unused, there is a measurable economic and social cost.

Why reform remains politically difficult

In Cyprus, the primary obstacle to such measures is not economic but political.

Those most likely to oppose taxes on inactive land are often the same individuals and companies that have held valuable property assets for many years, sometimes decades. These groups tend to be active participants in the political process and, in some cases, possess direct or indirect influence.

There is also a broader issue of public trust. Resistance to new taxes is often driven not only by cost concerns but also by perceptions that public funds are not always managed efficiently. When confidence in public spending is low, even economically sound policies can face strong opposition.

The economic case, however, remains clear. Bringing inactive land into productive use would increase housing supply and reduce upward pressure on prices. Yet those who benefit from the current system have both the incentive and the ability to preserve it.

As a result, policymakers frequently favour softer interventions such as subsidies, incentives and demand-side support schemes. While politically easier to implement, such measures can inadvertently push prices even higher if supply remains constrained.

Any future policy would need to be carefully designed. The objective should not be to penalise small landowners or owner-occupiers, but rather to target systematically underutilised sites in high-demand urban locations through clear thresholds, exemptions and effective enforcement mechanisms.

A defining choice for Cyprus policymakers

Cyprus now faces a fundamental choice.

The country can continue with a model in which urban land functions largely as a passive store of wealth, limiting housing supply and contributing to greater inequality. Alternatively, it can move towards a framework in which ownership of strategically located urban land carries a greater responsibility to support the functioning of the housing market.

The evidence is already available. The remaining question is whether political will can match the scale of the challenge.