Cypriot Property Market Strains Under Rising Costs

Challenges in the Cypriot Property Market

The property landscape in Cyprus is undergoing a significant transformation, with Cypriots facing difficulties in affording homes due to rising rents and construction costs. The real estate sector’s recovery is overshadowed by the struggles of locals as they grapple with a 30% increase in construction costs and higher mortgage rates, which are inflating prices beyond reach.

The economic repercussions of global conflicts have not spared the Cypriot economy, leading to soaring inflation that hits vulnerable groups the hardest. This has led to a decrease in mortgage demand, as Cypriot households are hesitant to borrow for purchasing property. The situation is exacerbated in cities like Limassol and Nicosia, where locals are being outpriced by foreign employees from high-tech and fintech firms settling in the area.

Limassol, in particular, has become a challenging district for locals to rent in. According to Danos International Property Consultants and Valuers, the cost of renting a one-bedroom flat starts at €850, while a two-bedroom is at least €1,300. With the average gross monthly earnings in Cyprus at €2,693, and more than half of the island’s employees earning around €1,500, these prices are steep for many Cypriots.

In contrast, Nicosia offers slightly more affordable options, though residents seeking lower rents must consider moving to suburbs like Lakatamia. The coastal towns of Larnaca and Paphos currently have lower rents, but interest from foreign investors and companies is increasing, potentially driving up prices there as well.

The government is under pressure to expedite its housing strategy to counter these challenges. New construction incentives approved by the council of ministers aim to introduce approximately 800 affordable residential units to the market over the next three years. A notable policy includes offering a 45% additional building coefficient for landowners with large plots to encourage affordable housing development.

However, developers express concerns over liquidity issues under the current plan. With banks cautious about lending and developers relying on self-financing or finding investors, the path forward is complex. Kyriacos Kiliaris, Chief Marketing Officer at Danos International Property Consultants and Valuers, emphasizes the need for a balanced approach to address both demand and supply in the property market.

The Cypriot government’s initiatives are a step towards alleviating the housing affordability crisis, but it is clear that collaboration between the government, developers, and investors is crucial for these measures to succeed and for Cypriots to find their place in the property market once again.