On the one hand, the high prices of construction costs and lending rates and on the other hand, the restrictions on reduced VAT during the construction or purchase of a main residence/apartment have led Cypriots, and not only, to turn to properties with a smaller area.
Characteristic is the fact that, according to data obtained by "F", after the change in the law in 2023, the average area of the main houses/apartments that secured a planning permit and benefited from 5% VAT was 100 square meters (sq.m.).
The new legislation on reduced VAT, implemented in 2023, includes strict restrictions due to suggestions from the European Commission, which found that for several years in Cyprus owners of villas worth millions benefited from reduced taxation, which conflicts with the European directive, which provides that the measure should be applied for social purposes.
The before and after
The 2023 law provides that 5% VAT is imposed only on the first 130 sq.m. of a house/apartment, with a value of up to €350,000. At the same time, a graduated imposition of reduced VAT is also applied. For houses and apartments with an area of 131 sq.m. to 190 sq.m. and with a value of up to €475,000, 19% VAT is imposed.
Under the previous legislation of 2016, 5% VAT was imposed on the first 200 sq.m. of the property, regardless of the total area.
In fact, in order to affect the market as little as possible, the Parliament also included transitional provisions in the 2023 law, which have been extended until the end of 2026, so that both laws apply in parallel.
It is recalled that, according to the transitional provisions, those who had applied for a planning permit from the beginning of June 2023 until October 31 of the same year, regardless of when the construction of the building will be completed, continue to save thousands of euros, as they will benefit from the 5% VAT with the previous regime.
More than 4,500 taxpayers benefited from the previous law
Last year, as well as in the first four months of 2026, a total of 4,555 taxpayers paid reduced taxation when buying or building a main residence/apartment under the previous, more relaxed law. That is, they paid 5% VAT for the first 200 sq.m. of the property.
At the same time, during the same period, a total of 3,902 taxpayers were taxed under the new legal framework. That is, they paid 5% VAT on the first 130 sq.m. of a house/apartment, with a value of up to €350,000.
As "F" is informed, due to the implementation of the transitional provisions of the legislation, from June 2023 until May last year, a total of 9.000 taxpayers benefited from the previous, more relaxed law, i.e. they paid 5% VAT on the first 200 sq.m. of the property.
In fact, if the state imposed a standard VAT rate of 19%, it would collect €360 million.
It is noted that out of the 9,000 applications, 650 concern houses up to 200 sq.m. and worth more than €500,000.
In addition, another 300 cases of properties had an area of more than 200 sq.m., while their value far exceeded €500,000.
Construction costs are rising
In addition to VAT, from 2023 the cost of building a house has increased significantly. According to official data, in 2023 the average cost was €1,145 per sq.m., with houses at €1,214 per sq.m. and apartments at €1,075 per sq.m.
In 2024, the corresponding cost increased to €1,204 per sq.m., with houses at €1,328 per sq.m. and apartments at €1,082 per sq.m.
Also, in 2025, according to market professionals, the cost of building a house/apartment was €1,700 per sq.m. and can reach €2,500 per sq.m., depending on the materials.
In 2024, the corresponding cost increased to €1,204 per sq.m., with houses at €1,328 per sq.m. and apartments at €1,082 per sq.m.
Also, in 2025, according to market professionals, the cost of building a house/apartment was €1,700 per sq.m. and can reach €2,500 per sq.m., depending on the materials.
