The cost of housing in Cyprus has become a major financial burden, with rent or mortgage payments often exceeding 40% of household income.
In response, the European Union has established a specialised task force to examine the issue and propose solutions to the housing crisis across Europe, including in Cyprus.
A growing housing affordability crisis
According to Polys Kourousides, President of the Association of Property Valuers, the formation of the EU task force is a positive step in recognising the severity of the issue.
Despite strong family support networks in Cyprus, the problem persists, particularly among young people and middle-income families. The costs of a home are not limited to mortgage payments or rent but also include expenses like utilities, communal fees, and internet charges.
One major concern is that house prices in Cyprus are roughly seven times the annual household income, far exceeding the affordability threshold of five times annual earnings. The average home costs approximately €270,000, while the typical family earns around €38,000 per year. This significant disparity makes homeownership increasingly difficult.
The need to increase housing supply
Mr Kourousides has stressed that the only viable solution is to increase the supply of residential properties to meet growing demand. However, despite high demand, supply remains limited, keeping prices elevated.
The inefficiencies of the Ippodamus system, which governs building permits, have contributed to delays in housing developments. Efforts to streamline approvals and introduce self-regulation have been proposed to accelerate construction and stabilise the market.
The role of the EU task force
The newly established EU task force aims to explore ways to lower housing costs across member states. One proposal under consideration is exempting newly built rental properties from VAT, though this would require changes to EU legislation. Another potential approach is incentivising rental markets through public and private sector collaboration, offering tax and planning incentives to encourage affordable housing projects.
The EU may also encourage member states to co-invest with private developers in new housing schemes. If successfully implemented, these measures could lead to a more sustainable housing market and improved affordability in Cyprus.
Regulatory reforms and prospects
Recent regulatory changes have attempted to address bottlenecks in the housing sector. The self-regulation approach for building permits is expected to improve efficiency, particularly for mid-sized developments of up to 20 apartments. Additionally, reinstating reduced VAT for certain applications could alleviate financial burdens on homebuyers.
While these initiatives offer hope for more affordable housing, experts stress that continued policy adjustments and increased housing supply remain crucial for long-term stability in the property market.
