Cyprus Housing Crisis: A Complex Reality

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The ongoing debate surrounding affordable housing in Cyprus reached a new peak this week as the government and the opposition party, Akel, exchanged barbs over recent findings from the Eurostat survey. While the government sought to highlight positive aspects, Akel focused on the alarming issues at hand. The truth lies somewhere in between; a housing problem exists, but its severity is up for discussion.

The Eurostat survey, which sparked this controversy, posed a crucial question to respondents about their housing experiences, particularly if they had ever faced a lack of permanent accommodation and had to rely on temporary housing.

Across the European Union, 4.9% of participants indicated they had encountered such issues. In contrast, Cyprus reported a significantly higher figure of 11.2% for the year 2023. Furthermore, while 8.5% of individuals in the EU at risk of poverty or social exclusion reported housing difficulties, Cyprus had an even more concerning 14.7%.

Akel quickly seized on this information, criticizing the government for its inadequate response over the past 19 months. They labeled the administration of Nikos Christodoulides as merely “talk without action,” pointing to a worsening “housing crisis.”

“Rising interest rates, escalating loan costs, and soaring rents are squeezing vulnerable populations and the middle class,” Akel stated.

In response, Finance Minister Makis Keravnos provided a different perspective on the Eurostat findings. He argued that a substantial portion—90%—of those reporting housing difficulties in Cyprus are affected by the long-term consequences of the Turkish invasion in 1974.

He highlighted that Cyprus performs favorably in comparison to other EU nations. For example, only 1.3% of respondents in Cyprus cited financial issues as the reason for their housing difficulties, compared to 25.9% across the EU. Moreover, almost no respondents reported challenges related to unemployment, while the EU average stood at 7.3%.

“Based on these figures,” Keravnos asserted, “it’s clear that the housing problem is not as severe in Cyprus as it is in other EU countries.”

Nonetheless, the minister stopped short of outright denying that Cyprus faces an affordable housing issue.

The housing crisis is twofold, encompassing both prices and available housing stock. Patrina Taramidou, the head of the Housing Policy Directorate at the interior ministry, acknowledged the challenges facing Cyprus in securing affordable housing, particularly in urban areas. She noted that demand outstrips available housing, leading to significant increases in both purchase and rental prices over the past three years. This has made it increasingly difficult for lower and middle-income groups to access housing.

When asked about government initiatives to provide affordable housing, the interior ministry mentioned plans to revise incentives for the construction industry, aiming to increase the availability of homes and apartments at affordable rates in the medium term.

One notable initiative is the “Build to Rent” scheme, which aims to add 800 housing units over the next three years. This program allows developers to expand their building areas in designated residential zones, provided they agree to offer these units at 30% below market rates for six years.

However, tangible results from these commitments are still awaited. The interior ministry stated that the scheme is expected to yield visible outcomes within two to three years, mentioning that over ten applications for the program have already been submitted by land development companies since the announcement.

In the meantime, the government has proposed additional measures to increase the available housing stock. The “Renovate and Rent” scheme, set to launch in November, will offer grants to owners of underused properties aged at least 15 years to renovate them, with a commitment to rent them out at affordable rates for four years. This initiative aims to quickly boost the supply and improve the quality of affordable rental properties.

With much of the construction in Limassol targeting wealthier clientele, the Cyprus Mail questioned whether the government’s focus on attracting foreign businesses has contributed to rising housing costs. The ministry acknowledged that “housing has become a major challenge globally,” with various factors, including the influx of foreign businesses, exacerbating the issue.

While the government claims awareness and intent to address the problem, the effects are yet to be seen.

The Eurostat survey certainly isn’t the final word on the issue. A previous study from Eurostat, titled Housing in Europe – 2023 edition, revealed that Cyprus generally performed well against EU standards in most housing metrics. For instance, while house prices surged by 47% across the EU from 2010 to 2022, they actually fell by 5% in Cyprus. Rents saw a modest increase of 0.2% in Cyprus during the same period, while the EU average rose by 18%.

However, on another key metric, Cyprus lagged, with a 31% drop in the number of new dwellings approved for construction between 2010 and 2022.

Pavlos Loizou, CEO of Ask Wire, a real estate data analytics firm, affirmed that Cyprus is indeed facing a housing issue—it’s not mere rhetoric. He noted that 70% of Cypriots own their homes, exceeding the EU average, but that doesn’t mitigate the problem for those who rent.

Loizou detailed the housing challenges: rising rents, difficulties in achieving homeownership, and the looming threat of losing homes due to non-performing loans (NPLs).

He highlighted a significant increase in the working population, roughly 10%, equating to about 40,000 individuals, many of whom are from Israel, Ukraine, and Russia. This surge in demand has led to higher rents, while construction has struggled to keep pace.

Currently, construction is robust in Nicosia and Limassol, with many high-end developments underway. Despite this, the pressure on rental prices persists, along with the burden of NPLs. Interest rates soared two years ago but have since declined somewhat.

Loizou pointed out the significant volume of NPLs tied to real estate, estimated to be around €20 billion, which are largely outside the banking system. This figure represents a major concern for the housing market.

Despite the average salary in Cyprus being around €2,200 to €2,300, he criticized the use of average income as an indicator of prosperity. “The reality is more complex,” he said, emphasizing the plight of those earning lower wages, such as cleaning staff, who struggle to afford escalating rents.

He described the finance minister’s optimistic comments about the housing situation as “embarrassing,” stating, “You can find countless complaints online from individuals struggling to make ends meet.”

Loizou concluded that while Cyprus does have a housing issue, labeling it a crisis might be overstating the situation. “The scenario isn’t catastrophic,” he remarked, “but the disparities are growing, with poorer communities concentrated in old towns and wealthier populations moving to areas like Engomi.”

In summary, the housing landscape in Cyprus presents a mixed picture: challenges are undeniable, but the overall narrative is nuanced and complex.

Source: Cyprus Mail

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