Filenews 3 March 2025 - by Angelos Angelodimou
In recent years, real estate prices have been following a steady upward trend, both in terms of rents and in the market, something that has been felt deep in their skin by all those seeking to rent or buy.
At government level, an effort has been launched to create the conditions that will lead in the first stage to the stabilization of prices and why not, at a later stage, to their reduction.
The key point in this effort is supply and demand. For years, demand has outstripped supply, and prices continue to rise. Therefore, the government's effort is focused on this very part. That is, the strengthening of supply, which will cover a large part of demand. In fact, this is intended to be done by channelling real estate into the market, which is accessible to all budgets and especially to people of the lower income class. Therefore, the bet here is called affordable housing. However, in order for this venture to succeed, the effort of the Government is required, but at the same time the cooperation of various bodies and, of course, the contribution of the private sector.
The new housing policy
More specifically, the comprehensive housing policy of the state was announced by the Minister of Interior on October 24, 2023. One of the measures included in it is urban incentives, which started to be implemented from December 2023.
The housing policy measures focus on two pillars: (1) The increase of supply, i.e. the enhancement of the available housing stock, either by producing new or by exploiting the existing idle stock, and (2) Enhancing the purchasing power of citizens to acquire private housing.
As part of the state's integrated housing policy, urban planning incentives have been revised and implemented as of December 2023, as the main measure to achieve the target of increasing the housing stock. The implementing arm of the measure is the Cyprus Land Development Agency, which also determines the beneficiaries for the affordable market based on the criteria it applies to its own plans.
It is planned to grant an additional building factor of up to 45% of the current development that will be implemented on a private plot, with the obligation to dispose of 20% of the additional units that will be produced at an affordable purchase price. The remaining 25% is available at free market prices from manufacturers. In addition, the option is given to acquire the building factor and pay the redemption amount to a special fund of the Cyprus Land Development Agency for the implementation of its programs.
Interest from individuals and revenues
By December 2024, 38 expressions of interest had emerged from land developers to take advantage of urban incentives for planned developments in all districts.
For the 38 cases, a positive assessment was given for the proposed plot of development. Of the 38 cases that expressed interest, a total of about 1,600 units are expected to be produced over the next three years, depending on the pace of development execution. These are deployments in all provinces.
In addition, from the right to purchase the building factor so far, it is estimated that €5.3 million will be paid to the special affordable housing fund of the KOAG, which will be used by the KOAG for the implementation of its ongoing projects or new ones planned in 2025.
High housing costs
The president of the Association of Real Estate Appraisers, Polys Kourousidis, had made statements on the issue of housing from time to time. As he had pointed out, housing in Cyprus has a cost that amounts to 40-45% of a household's income. When we say housing costs, we don't just mean rent or loan instalment, but that includes electricity costs and all utility bills in general. It is noted that in other countries this percentage is around 30%, which is more normal. Therefore, he noted, what could be done is either raise wages or reduce housing costs.
Integrated strategy
To ensure affordable housing, a comprehensive strategy is needed, notes real estate appraiser Charalambos Petrides.
Speaking to "Insider", Petrides points out that reducing taxes on individuals and legal entities can boost investments and boost the real estate market.
According to Petrides, there are two factors that are particularly important. The first concerns public-private cooperation in order to achieve the utilization of state land for new housing. Equally important is to proceed with the creation of a Housing Organization, which, among other things, will aim at the development of affordable real estate and mainly apartments. Mr. Petrides underlines that market balance is crucial so that growth does not lead to the exclusion of new buyers. Housing must remain affordable for all, he says.
Utilizing inventory
The President of ETEK, Konstantinos Konstantis, had also put on the table the issue of the utilization of the existing housing stock. In particular, as he had mentioned, the issue of affordable housing is of top importance, but it is complex and the solutions given today require coordination, which is difficult in the absence of a central and effective Agency. "For ETEK it continues to spearhead the utilization of the existing housing stock, which is in disuse and out of the market," he notes, adding that policies to provide only incentives for rapid increase in supply do not seem to be enough. "Disincentives are also needed," he notes.
Indicatively, he underlined: The package of measures prepared and published by ETEK in July 2023 included, among others, the proposal for market integration through disincentives mainly of unfinished residential units, the majority of which are currently held by Asset Management Funds, noting that their number is estimated at around several thousand.
He also notes that the prevailing view is that although the Funds have acquired the properties at a large discount, due to lack of pressure they do not put them on the market at affordable prices. "We believe that we should dare and include this tool in the effort to find solutions to this top issue of affordable housing that we face as a society. Apart from the symbolism served by the measure we are reintroducing, it is also appropriate, fair, satisfies the important sustainable principle of reuse and has the advantage of short results," he says.
The challenge and the big bet
Meanwhile, reflecting the efforts made by the public and private sectors to achieve the goal of affordable housing, Mersina Isidorou, General Manager of the Cyprus Real Estate Development Association notes, among other things, in her article that only through coordinated actions will it be possible to achieve the goal, namely that every citizen has access to a home that meets his needs. This, he adds, is the main objective of the housing policy of the Ministry of Interior. A policy of 77 million euros, with a social impact, which, through multifaceted measures and the involvement of various actors for their implementation, aims to address the problem that afflicts thousands of our fellow citizens.
Reducing the wide disparity between real estate supply and demand is currently the biggest challenge. That is why at the heart of the effort is the increase of supply and more specifically of affordable housing, so that the current scene can be reversed and real estate prices can be reduced.
The role that professionals in the real estate development industry have to play is crucial. Individuals operating in the sector have the know-how, experience and human resources to contribute to the implementation of projects. This has already begun to happen, through the participation of professionals in the two housing policy projects addressed to them. It is worth noting that, from the interest shown so far, more than 1500 affordable housing units are expected to be developed throughout Cyprus in the coming period.
"Key" is public/private cooperation
As the housing policy of the Ministry of Interior has begun to take shape, the Cyprus Real Estate Development Association is present in the effort to continuously evaluate and improve the measures.
It continues to support and strengthen the efforts made by the Ministry of Interior, the Cyprus Tourism Organisation and all relevant bodies. And it does so in the way it knows best: Through the submission of suggestions and proposals that can contribute to the wide utilization of measures and the achievement of the desired goal.
For the Association, addressing the housing problem is a priority. That is why we stand by the effort of the Ministry of Interior from the beginning. From the first call for contribution to the formulation of housing policy until today, when the measures are gradually being implemented. And because cooperation between the public and private sectors has been the key to formulating an integrated policy, we know that it remains necessary for the successful implementation of the measures.
From February Insider Magazine
