The Cyprus Renovate – Rent scheme is struggling to gain traction, despite offering property owners incentives that are generally seen as attractive enough to encourage them to refurbish and rent out homes and apartments.
The scheme was announced in November 2024 and can also cover renovation work carried out up to one year before an application. Yet, as of yesterday, just 86 applications had been submitted through the Cyprus Land Development Corporation. Of these, 54 had been approved, while a further seven were still awaiting examination.
The figures suggest the scheme has yet to develop any real momentum. Its original target was to bring 1,000 residential units back into the rental market. Based on the current take-up, however, that target appears increasingly difficult to achieve.
The scheme was initially backed by a €25 million budget. Its first period of operation has now ended, but it has been renewed and will remain in force until 2027.
Why are property owners staying away?
The key question for those involved in the housing market is why so few owners are taking part. There is no single answer, but market conditions appear to be playing an important role.
According to industry estimates, owners of older residential properties can earn more by renting them to groups of foreign workers on a per-person basis. This can involve letting a property to five, 10 or more occupants at an agreed rate.
For some owners, the choice is therefore straightforward. Joining the government scheme means making an application, leaving a property vacant while renovation work is carried out and initially paying for the work themselves. The property must then be rented for four years at 70% of the market rent.
This may be particularly difficult for owners with just one residential unit. They face a lengthy process and a period without rental income, followed by a four-year commitment at a reduced rent.
Developers may have other priorities
Another question is why professional housing operators and property owners with greater financial resources are not making greater use of the scheme.
One view among market participants is that financially stronger owners are responding to high housing demand in a different way. They may prefer to build new homes and apartments, renovate existing buildings for sale, or refurbish properties and sell them at a profit.
The proceeds can then be reinvested in another project. This may be more attractive than entering a government scheme that involves an application process, a four-year rental commitment and rents below the market rate.
Is the scheme too complicated?
Some property professionals also believe that the scheme has been held back by its complexity.
The original call for applications and implementation guide ran to 34 pages and contained provisions that could be difficult for the average homeowner to understand. Several of the requirements were later simplified.
Many of the conditions were introduced for a clear reason. They were designed to prevent abuse and ensure that public funds were used for their intended purpose.
However, the safeguards may also have made the scheme harder for individual property owners to access. For a homeowner unfamiliar with housing regulations, funding rules and renovation requirements, the application process can appear daunting.
Renovate – Rent: maximum financial support
The maximum level of financial support available under the scheme is:
- One-bedroom home: up to €20,000
- Two-bedroom home: up to €30,000
- Three-bedroom home: up to €40,000
On paper, these incentives can make a significant contribution towards renovation costs. The low number of applications suggests, however, that the financial support alone has not been enough to persuade large numbers of owners to participate.
Cyprus renovate-rent scheme launched to unlock empty homes
The scheme was introduced following estimates that around 30,000 residential units across Cyprus were effectively out of the market. Many were considered unsuitable for occupation because of their physical condition, appearance or other problems.
The idea was simple: bring these homes back into use through renovation, increase the supply of rental properties and, ultimately, ease pressure on rents.
The challenge is that the wider housing market has changed rapidly. According to the 2021 population and housing census, Cyprus had 492,931 residential properties. Of these, 354,818 were homes of usual residence, while 138,113 were vacant or used for temporary residence.
Some of the vacant properties are likely to be holiday homes, so the figures do not mean that all 138,113 units could readily become long-term rental properties.
Most homes in urban areas
The geographical distribution of housing also helps explain where the pressure is greatest.
Some 298,020 homes, or 60.5% of the total, were recorded in urban areas. These are also the areas where housing demand is generally strongest.
A further 194,911 homes, or 39.5%, were located in rural areas.
Nicosia district accounted for 163,350 homes, or 33.1% of the total. Limassol followed with 132,574 homes (26.9%), while Larnaca had 82,274 (16.7%), Paphos 74,473 (15.1%) and Famagusta 40,260 (8.2%).
Population growth adds to housing pressure
Cyprus had a population of 923,381 in 2021, up 9.9% from 840,407 recorded in the 2011 census. That represents an increase of 82,974 people who needed somewhere to live.
Over the same period, the number of homes increased by 59,719, or 13.8%.
Since 2021, legislation has also made it easier for companies and third-country nationals to come to Cyprus for specialised employment. This is widely seen as another factor behind rising demand for residential property.
There have also been reports of pressure on Cypriot families and students to leave rented homes and apartments so that landlords can re-let them to foreign tenants at higher rents.
The bigger housing policy question
The weak take-up of the Cyprus Renovate – Rent scheme raises questions about how government housing incentives should be designed.
The scheme offers meaningful financial support, but owners are weighing that support against renovation costs, lost rental income, administrative requirements and a four-year commitment at a below-market rent.
At the same time, strong housing demand creates other opportunities for property owners, including new development, renovation for resale and higher-yield private rentals.
For the government, the challenge is now to determine why a scheme designed to unlock thousands of unused homes has attracted so few applicants.
Unless the economics and application process become more attractive, the target of returning 1,000 homes to the rental market by 2027 could remain well out of reach.
(Translated from an article in Philenews)
