Cyprus’ housing shortage crisis: causes & possible solutions

Nigel Howarth
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Cyprus’ housing shortage crisis: causes & possible solutions

There has been much in the news recently about the housing shortage, caused by a combination of factors that have intensified in recent years.

In this article I summarise what has caused the housing shortage, the solutions put forward by Government to address the issue, and other suggestions.

Housing shortage cause & effect

One major factor is increased demand from foreign investors, particularly through the Cyprus Investment Program (Golden Passport scheme), which granted citizenship to nearly 7,000 individuals from its launch in 2007 to its ignominious termination in November 2020. This led to rising property prices, making homes less affordable for locals.

The rise of short-term rentals on platforms like Airbnb has further reduced long-term rental availability, increased rents and making housing inaccessible for local residents.

Additionally, insufficient new housing supply has worsened the issue. Economic uncertainties, including the COVID-19 pandemic, have slowed construction, leading to an imbalance between supply and demand.

Housing costs have also risen significantly relative to income, with many households spending over 40% of their income on rent or mortgage payments. This has made homeownership difficult, especially for middle-income and young buyers.

Finally, declining homeownership rates reflect the growing affordability crisis. Two decades ago, 78% of Cypriots owned homes; today, that figure has fallen to 68.8%, slightly below the EU average.

Government solutions to the housing shortage

To tackle the crisis, the government has launched several initiatives. A €77 million housing investment plan (2023-2028) aims to provide financial aid to middle-class and young homebuyers.

The Renovate-to-Rent program incentivizes property owners to renovate unused homes and rent them at affordable rates, with a target of adding 1,000 units in two years.

For low-income families, building plots are being allocated, with around 1,300 beneficiaries since 2019 and plans for 300-500 more in the next three years.

The government is also exploring funding from the European Investment Bank (EIB) as part of a €10 billion initiative to support affordable housing projects and help the housing shortage..

The Interior Ministry has implemented a fast-track building licence procedure designed to simplify and shorten the time taken to issue building permits and speed the delivery of new homes to market.

Lastly, the Cyprus Land Development Corporation (CLDC) is implementing a development program to expand affordable housing for purchase and rent.

Other suggested measures

A call to limit the number of short-term Airbnb rentals by allowing each person or company to register only two properties has been rejected by the Attorney-General’s office.

Another suggestion is changing rules by which non-EU citizens are permitted to acquire as many properties as they wish through companies. Although EU countries generally permit non-EU citizens to own property, many impose restrictions.

AKEL has proposed scrapping the 5% reduced VAT rate for non-EU citizens buying or building homes in Cyprus arguing the reduced VAT rate should help lower and middle-income families rather than benefiting foreign investors.

Summary

The housing shortage in Cyprus remains a major issue, affecting both the property market and residents’ daily lives.

Addressing this crisis will require collaboration between the government, the construction sector, and the local community to ensure affordable housing for all.

Housing shortage could deter foreign investment in Cyprus

Nigel Howarth
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Housing shortage could deter foreign investment in Cyprus

The Association of Large Investment Projects has issued a statement highlighting the shortage of affordable housing and its potential consequences. The association stressed that this issue, coupled with the general lack of housing availability, requires urgent attention.

According to the association a primary concern is ensuring Cyprus remains an attractive destination for corporate headquarters, which requires prioritising housing for employees of large companies. It warned that the current housing shortage is becoming a major obstacle to corporate relocations.

“The benefits of establishing corporate headquarters in Cyprus are undeniable,” the association stated. “Such investments create new jobs, foster technological innovation, and strengthen the local economy.”

Furthermore, these headquarters attract international business interest and play a crucial role in boosting trade and investment in Cyprus. Politically, they enhance the business climate and encourage further investment, while economically, they improve the country’s competitiveness, increasing employment, GDP, and commercial activity.

With ongoing infrastructure development and government support, Cyprus has the potential to cultivate an investment-friendly environment, solidifying its reputation as a global hub for corporate headquarters. However, securing affordable housing for employees and their families remains a major challenge, exacerbated by a shortage of residential units and rising rents.

The association cautioned that this issue could lead companies to reconsider relocating their headquarters to Cyprus or deter new firms from setting up operations, despite the island’s initial attractiveness. This highlights the complexity of the problem and underscores the need for strategic, comprehensive planning.

The association suggested that the government could encourage the construction of employee housing by foreign companies through targeted incentives, such as increasing the building rate in designated areas to help address the shortage.

Additionally, tackling inefficiencies in the development licensing system is crucial. Despite efforts to streamline procedures, delays linked to newly introduced environmental impact assessments (EIAs) continue to hinder approvals, further worsening the housing crisis and inflating prices.

The association emphasised that harnessing technology is vital to creating a more business-friendly environment. Delays in approvals negatively impact Cyprus’ competitiveness, obstructing investment opportunities that could benefit the economy and society.

If these issues remain unresolved, they could significantly harm the country’s economic and strategic goals, the association concluded.

 

Will property sales in Cyprus continue to grow?

Nigel Howarth
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1
Will property sales in Cyprus continue to grow?

Cyprus’ real estate market in February recorded a 7 per cent increase in property sales, compared to the same month last year, with Limassol, Larnaca and Nicosia all achieving sales of 300+ in the month.

Although sales in Famagusta and Paphos fell by 25% and 10% respectively, sales in Larnaca rose 36%, while sales in Nicosia rose 13% and sales in Limassol, despite recording the smallest rise, still saw a 5% increase in the number of property sales contracts deposited.

Total contracts of sale deposited – 2024/2025 Comparison (February)

Total contracts of sale deposited – 2024/2025 Year-to-Date Comparison

Despite a positive trend in property sales, concerns remain over foreign buyers driving up prices making it very difficult for young Cypriots to buy or rent a home of their own.

Cyprus is facing a housing crisis, with rent or mortgage payments exceeding 40% of household income, making homeownership difficult, especially for young people and middle-income families. With house prices at seven times the average household income (€270,000 vs. €38,000), affordability is a major issue, leading to delayed family planning, rejected university offers, and job refusals due to high housing costs.

To address these challenges, the Cyprus Real Estate Agents Registration Council has proposed banning daily accommodation rentals, while nearly one-third of Airbnb listings are unregistered and therefore illegal.

AKEL has also suggested scrapping the 5% reduced VAT rate for foreign buyers to prioritize lower and middle-income families.

However, the Attorney General’s office recently rejected a proposal to cap short-term rental properties, allowing investors to continue acquiring multiple units and competing with hotels without being subject to the same regulations.

Cyprus is building affordable housing, which should help young people get on the housing ladder, but this housing can also be bought by overseas investors and therein lies the problem to be resolved.

Cyprus property sales – market segment analysis

Property sales to the domestic (Cypriot) market

In February, sales to the domestic market rose 6% compared with February last year. Falls of 32% in Famagusta and 30% in Paphos were more than outweighed by increased sales in Larnaca (64%), Nicosia (8%), and Limassol (1%).

Domestic contracts of sale deposited – 2024/2025 Comparison (February)

Overall, domestic sales for the first two months of 2024 are up 15% compared to the same period last year. Although sales in Paphos and Famagusta fell by 18% and 15% respectively, they rose 43% in Larnaca, 23% in Limassol, and 13% in Nicosia

Domestic contracts of sale deposited – 2024/2025 Year-to-Date Comparison

Property sales to the overseas market

Sales to the overseas market (including both EU and non-EU citizens) in November rose 8% compared to February 2024. Although sales fell18% in Famagusta, they rose 38% in Nicosia, 9% in Paphos and Larnaca, and 6% in Limassol.

Overseas contracts of sale deposited – 2024/2025 Comparison (February)

In the first two months of 2024, overseas sales have risen by 10% compared to the same period last year, with all districts reporting gains.

Sales in Nicosia up 14%, Larnaca up 13%, Famagusta up 13% Limassol up 11%, and Paphos up 6%.

Overseas contracts of sale deposited – 2024/2025 Year-to-Date Comparison

Property sales to EU citizens

Sales to EU citizens increased by 31% in February compared to the same month last year, with all districts reporting increased sales.

Sales in Nicosia up 41%, Paphos up 32%, Limassol up 30%, Famagusta up 29%, and Larnaca up 25%.

Contracts deposited by EU Nationals – 2024/2025 Comparison (February)

In the first two months of 2024, sales to EU citizens have risen 37% compared to the same period last year with sales rising in all districts.

Sales in Famagusta up a remarkable 105%, Paphos up 52%, Nicosia up 32%, Limassol up 19%, and Larnaca up 11%.

Contracts deposited by EU Nationals – 2024/2025 Year-to-Date Comparison

Property sales to non-EU citizens

In February, property sales to non-EU citizens fell 1% compared to February last year.

Although sales in Nicosia, Larnaca and Limassol rose by 36%, 2% and 1% respectively, they fell by 57% in Famagusta and by 2% in Paphos.

Contracts deposited by non-EU Nationals – 2024/2025 Comparison (February)

In the first two months of 2024, property sales to non-EU citizens remained virtually unchanged compared to the same period last year.

Although sales in Famagusta and Paphos fell by 38% and 9% respectively, they rose by 13% in Larnaca, 8% in Limassol and 2% in Nicosia.

Contracts deposited by non-EU Nationals – 2024/2025 Year-to-Date Comparison

Market Segment Summary

The chart below illustrates the popularity of each district among different market segments. In Paphos, which is particularly attractive to those seeking holiday homes, property sales to non-EU nationals alone exceed those to the domestic market. The least favoured district for overseas investors is the island’s capital Nicosia.

Market Segment Summary Analysis Year-to-Date

Contracts Deposited 2008 to 2025 Year-to-Date Comparison

Many “Mortgage-to-Rent” homes lack Final Approval Certificates

Nigel Howarth
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0
Many “Mortgage-to-Rent” homes lack Final Approval Certificates

Around 60% of homes eligible for the “Mortgage-to-Rent” Scheme do not have final approval certificates, according to a report presented to the Parliamentary Finance Committee.

The committee discussed whether KEDIPES should be exempt from the requirement to obtain these certificates for properties acquired under the scheme, just as the government is exempt. A Ministry of Finance representative stated that this exemption would help increase the number of approved applications.

Under current law, property owners must obtain an Approval Certificate, or they may face administrative and even criminal consequences. Since KEDIPES will own these properties, it could be held legally responsible unless it is exempt. The Ministry of Finance representative argued that, as the scheme is a government initiative assigned to KEDIPES, the company should not be responsible for missing Certificates.

KEDIPES also assured that tenants would not be affected by the exemption. It promised to cover the cost of restoring the residences, which is estimated at 15% of their value. For example, a €200,000 property could receive up to €30,000 in repairs.

However, MPs raised concerns about the proposal. AKEL MP Aristos Damianou warned that although the bill is signed by the Attorney General, it may not be legally strong and could be challenged in court. He also questioned who would be responsible if issues arose due to the exemption granted to KEDIPES.

DIKO MP Chrysis Pantelides pointed out that the amendment exempts KEDIPES from legal obligations but does not exempt the properties themselves. Committee Chair Christiana Erotokritou noted that many state entities receive different treatment compared to private citizens. She warned that if any damage occurs to a property due to this exemption, the government will bear responsibility, as KEDIPES is fully state-owned.

What are Final Approval Certificates?

Final approval certificates are issued by the planning authorities after they have inspected properties once they’ve been built. The Certificate confirms that the properties in question have been built according to the permissions and permits authorised for their construction.

Once Certificates have been issued, the planning authorities passes the approved permissions, permits, plans, and the final approval certificates to the Land Registry, where Title Deeds for the property(ies) will be issued.

Urban Planning Amnesty Scheme receives 699 applications

Nigel Howarth
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Urban Planning Amnesty Scheme receives 699 applications

A total of 699 applications have been submitted so far under the Urban Planning Amnesty Scheme, which aims to legalize minor planning infringements in approved developments.

The scheme, which launched on September 23, 2024, runs for six months and is set to close on March 23, 2025.

According to Elikkos Elia, Permanent Secretary at the Ministry of the Interior, 616 of the amnesty applications relate to residential developments. Speaking to the Cyprus News Agency (CNA), Elia provided a breakdown of applications submitted to Local Government Organisations (LGO):

  • Nicosia: 219 applications
  • Limassol: 215 applications
  • Larnaca: 78 applications
  • Paphos: 150 applications
  • Famagusta: 37 applications

The applications cover a range of developments, including:

  • 616 residential developments
  • 36 commercial developments
  • 8 office developments
  • 6 industrial and storage developments
  • 3 tourism developments
  • 3 health developments
  • 2 sports developments
  • 1 welfare development
  • 13 leisure and entertainment developments
  • 4 agricultural/livestock developments
  • 7 other developments

Elia encouraged eligible property buyers to take advantage of the amnesty scheme before it closes, allowing them to secure final approval and the property’s title deeds.

He emphasized that the scheme is designed to legalize small-scale urban planning infringements, such as exceeding the building coefficient and minor regulatory deviations (e.g., covered verandas, pergolas, or reduced boundary distances).

The application process is simplified and can be completed with assistance from private consultants.

The application fee is paid to the Special Fund of the Cyprus Land Development Corporation, supporting affordable housing initiatives. Elia highlighted that the amnesty scheme aligns with the government’s broader housing policy, aiming to address housing challenges and promote affordability.

EIB commits €10 billion to tackle Europe’s housing crisis

Nigel Howarth
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EIB commits €10 billion to tackle Europe’s housing crisis

The European Investment Bank (EIB) is taking steps to address Europe’s housing crisis, which affects millions across the continent.

The lack of affordable and adequate housing is a widespread issue, expected to impact future generations unless decisive action is taken.

To tackle this, the EIB has launched a new pan-European investment platform aimed at supporting affordable and sustainable housing.

The initiative, announced at the EIB conference “Investing in a More Sustainable and Secure Europe”, includes a €10 billion investment over the next two years.

A key part of the plan is the creation of a one-stop-shop online portal, which will provide financial support and advice for construction innovation, affordable housing development, and energy-efficient renovations.

EIB President Nadia Calviño highlighted the scale of the issue, stating that Europe requires an additional one million new homes annually to meet demand, while five million homes need renovation each year to reduce environmental impact.

By 2026, the EIB aims to double its housing-related funding to €6 billion, with total investments reaching €10 billion in 2025 and 2026. Collaboration with key stakeholders, including national banks, the private sector, and the European Commission, will be essential.

The housing crisis has led to significant financial burdens for Europeans. Over the past 15 years, rents have risen by 25% on average, while house prices have surged by 50%. In 2024, 17% of Europeans lived in overcrowded homes, and one in ten spent over 40% of their income on housing.

The crisis is causing young people to delay starting families, students to reject university offers, and workers to turn down jobs due to high accommodation costs, affecting Europe’s productivity and quality of life.

Cyprus seeking EIB funding to tackle its housing crisis

In Cyprus, the government is closely monitoring developments. The Ministry of the Interior plans to engage in discussions with the EIB to explore funding opportunities.

Potential options include subsidised interest rates for housing construction, direct funding for affordable housing projects, and state-led development initiatives through the Cyprus Land Development Corporation.

The government aims to secure a portion of the €10 billion fund to address its own housing challenges.

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