Cypriots are facing a housing crisis as escalating rents, rising construction costs, and increased mortgage rates make property ownership unattainable for many. The influx of higher-paid foreign workers has further driven up rental prices in cities, squeezing out locals with more modest incomes.
Why are Cypriots being squeezed out of the property market?
Cypriots are struggling to afford homes due to escalating rents, rising construction costs, and increased mortgage interest rates. Economic uncertainties and inflation have made property ownership unattainable for many locals. Additionally, an influx of higher-paid foreign workers has driven up rental prices in cities, further diminishing affordable housing options for average Cypriot earners.
Current Challenges in the Housing Sector
The property market in Cyprus is becoming increasingly unattainable for local residents who are finding themselves edged out due to escalating rents. This troubling trend is largely the result of spiraling construction costs coupled with a rise in mortgage interest rates. As a consequence, owning a home on the island has become a distant dream for many Cypriots.
Recent global events, including the war in Ukraine and ongoing conflicts in the Middle East have contributed to economic uncertainties, and Cyprus has not escaped the impact. The result has been a significant increase in inflation which has hit the more vulnerable sectors of the population the hardest. This financial pressure has led to a visible decline in the number of Cypriots willing to take on the financial risk of a mortgage to purchase property.
The Rental Market’s Toll on Locals
The rental sector in Cyprus, particularly in the cities of Limassol and Nicosia, is no less daunting for Cypriots. An influx of tech and fintech companies to the island has brought with it a workforce that commands higher salaries and consequently can afford to pay more for housing. This has driven up rental prices and made it more difficult for locals with more modest incomes to find affordable housing.
The demand for property in Cyprus, especially in the bustling urban centers, continues to outstrip supply. This is evident in the fact that many residential projects sell out before construction is even completed. As for the rental market, affordable options are vanishing, creating a cutthroat environment for those seeking a place to live. One-bedroom flats in Limassol now cost at least €850 per month, and a family-sized flat can easily exceed €1,300. With the average gross monthly earnings sitting at €2,693 as of the fourth quarter of 2023, and half of the workforce earning around €1,500, the situation has become untenable for the average Cypriot earner.
Government Intervention and Strategies
In the face of such a demanding market, the call for government intervention has grown louder. The government has started to roll out new policies to address the housing shortage and affordability crisis. Earlier in the year, the council of ministers approved construction incentives proposed by the interior ministry with the aim of making approximately 800 residential units available at affordable prices for purchase and rental over the next three years.
Additionally, a pioneering housing policy has been introduced. It includes significant incentives for landowners to develop their properties into affordable housing units. For example, landowners with more than 1,000sqm of land and a building coefficient above 100% are now offered an additional 45% building factor. However, there are concerns regarding the liquidity challenges such plans may present for developers and real estate agents. The hesitancy of banks to provide loans has pushed developers to seek investors willing to wait for a return on their investments. This has resulted in most projects being self-financed, adding another layer of complexity to the government’s plans.
Kyriacos Kiliaris, the Chief Marketing Officer at Danos International Property Consultants and Valuers, echoes the concerns of many in the industry. The government’s initiatives, while a step in the right direction, must consider the practical challenges faced by developers and the need for quicker solutions to ease the current housing market pressures.
How are escalating rents impacting Cypriots in the property market?
Escalating rents in Cyprus are making it increasingly difficult for Cypriots to find affordable housing. The rise in rental prices, particularly in cities like Limassol and Nicosia, is squeezing out locals with more modest incomes, as foreign workers with higher salaries can afford to pay more for housing, further limiting affordable options for Cypriots.
What global events have contributed to the economic uncertainties impacting the housing sector in Cyprus?
Recent global events such as the war in Ukraine and conflicts in the Middle East have contributed to economic uncertainties in Cyprus. These uncertainties have led to a significant increase in inflation, making property ownership even more unattainable for many Cypriots, particularly those in more vulnerable sectors of the population.
What government interventions and strategies are being implemented to address the housing shortage and affordability crisis in Cyprus?
The government in Cyprus has begun to implement new policies to address the housing shortage and affordability crisis. Construction incentives have been approved to make approximately 800 residential units available at affordable prices for purchase and rental over the next three years. Additionally, a housing policy has been introduced to incentivize landowners to develop their properties into affordable housing units, though challenges such as liquidity issues for developers and real estate agents remain.
What concerns have been raised regarding the government’s housing policies and plans in Cyprus?
While the government’s initiatives to address the housing crisis are seen as a step in the right direction, there are concerns regarding the practical challenges faced by developers and the need for quicker solutions to alleviate the current pressures in the housing market. Issues such as the hesitancy of banks to provide loans, pushing developers to seek self-financing or investors, add complexity to the government’s plans and may impact their effectiveness in addressing the housing crisis.
