RENTAL prices in Cyprus are increasing at record speed with rents going through the roof at an alarming annual rate in almost all regions of the island.
According to data cited by the Labour Ministry, the annual rate of increase is highest in Paphos at 68%, 58% in Limassol, 45% in Nicosia, 43% in Larnaca and 5% in Famagusta.
The data was collected in a study conducted for the Labour Ministry and presented by Minister Zeta Emilianidou during a joint press conference with Interior Minister Constantinos Petrides last month.
According to the Property Valuers Association, prices for a two-bedroom flat in Nicosia are between €550-950, €600-950 in Limassol, and €450-550 in Paphos and Larnaca.
This is indicative of the level rents have reached in recent years which has forced the government to revisit its housing policy and issuing new incentives for affordable housing.
The state’s policy revolves around two axes, the pre-existing subsidizing of rents, new incentives given to developers to build affordable housing while drawing up plans to have the Cyprus Land Development Corporation build homes to house poor families.
As decided in 2014, the rent subsidy was set at 70% of the average price to exclude excessively high prices that affect the average family, while it is expected that beneficiaries of the Guaranteed Minimum Income make efforts to secure housing at more favourable prices.
The Labour Minister recently presented changes to the rents subsidy rules which are to include criteria similar to those for beneficiaries of the GMI.
Documents accompanying the regulations to be examined by parliament also show examples of the change in the rent allowance based on the results of a new study.
According to the examples, the rent allowance for a two-bedroom apartment with an average rental price of €2.80 per square meter increases from €224 from the 2014 study to €324.80 based on the 2019 study.
Another prong to the state’s housing policy will see the government raising the building coefficient by 25% or 30% for apartment buildings. In the context of the “affordable housing” scheme, developers will be allowed to keep part of the construction built with the additional space, while the remainder will be used to accommodate vulnerable groups.
According to the scheme, 70% of flats being built with the extra coefficient will have to be rented out to vulnerable groups for a minimum of eight years, with the developers having the right to use the flats as they wish after the eight-year period.
If developers opt to sell the additional flats built, then 60% should be sold at a cost price to people meeting the criteria to be set.
However, the government’s housing policy has been criticised by the opposition and a number of stakeholders in the real estate sector.
The Opposition is unhappy over the delaying in implementation while other stakeholders say the measures don’t go far enough.
Main opposition party AKEL doubts the government’s intentions to go ahead with the scheme as it argues there has been no movement on the subject.
Talking to the Financial Mirror, AKEL MP Stephanos Stephanou, said the government has not brought the proposed housing-related bills before parliament.
He said even more worrying is that the two authorities which are to be involved in implementing policy have not been informed of possible tasks they will be taking on.
Campaign trick
“We hope the announcement of the government’s policy was not just a pre-election campaign trick, as society is in desperate need of measures to reduce the housing problems faced by young couples and middle-income families,” said Stephanou.
He said young couples are having a hard time finding affordable housing.
“According to recent Eurostat data, 7 out of 10 men and 8 out of 10 women up to the age of 30 are still living with their parents,” said Stephanou.
Stephanou argued that the government will have to revisit its finance policy for young couples seeking to buy a home.
“A number of financing packages from the Land Corporation have been cut over the past few years leaving young couples with no option but to rent and be at the mercy of the rising rates”.
Some stakeholders in the Cyprus real estate sector are critical of the government’s proposed affordable housing policy as they find it to be shoddy and ineffective.
Chairman of the Cyprus Property Owners Association (KSIA), George Mouskides said the government’s new policy to be dangerous as it will create ghettos much like those in the old Soviet Union.
“The government wants to give money to the Cyprus Land Development Corporation to build housing to house poor families instead of giving them the right to choose their apartments by subsidizing rents,” Mouskides told Stockwatch.
He argued that the government’s action plan was drawn up to serve the interests of a specific group of businesses without caring whether ghettos will be formed in the long run.
“I see a complete lack of sensitivity on the part of the state.”
Mouskides said government incentives to the private sector are in the wrong direction as they include the “unacceptable condition that for a development to be included in the affordable housing scheme, it would need to have a net area of at least 2000 sqm”.
“This measure excludes 99% of land parcels in Cyprus because the majority cover around 520 – 560 sqm.” He said the scheme is essentially facilitating big developers.
Furthermore, the chairman of KSIA said the problem of high rents is being fed by a shortage of supply. He argues that as more properties come on to the market, prices will stabilise.
“What the government could do to facilitate the increase in supply is to give incentives for owners to renovate old buildings, especially in the centre of towns which are not being used for housing.
There are also a number of older buildings for which owners are allowed to add a couple of more floors, which could be rented out,” said Mouskides.
One of the problems of renovating buildings in town centres would be the lack of parking. Mouskides suggested that multi-story parking lots adjacent to such buildings could be built.
Danos Real Estates CEO, Panos Danos, added that the government did not prepare its policy based on an expert study.
“We have not seen the conclusions and the findings of such a study,” he said.
Danos said: “Whom are they addressing when they talk about affordable housing of €80,000 or €100,000 and what are the criteria…what criteria will be applied to choose areas where the affordable housing will be built, and to choose who will build them? “
He said that the coefficient incentives given to developers are clearly tilted in their favour.
“What are we trying to achieve? To satisfy developers or the need for affordable housing? I’m not sure.”
THE PRICEWATERHOUSECOOPERS (PwC) annual Cyprus real estate market review provides information about the Cyprus economy in general and a snapshot of key real estate market developments.
