Our View: The Cyprus housing problem: Crisis or hyperbole?

Cyprus is the “champion in the housing crisis”, reported Akel mouthpiece Haravghi last Monday. The party has been very critical of the government’s housing policy because it has been moving at a rather slow pace, which the party believes is inadequate. Is there a “housing crisis” considering we rarely hear about, let alone see, homeless people on our streets, or is the party engaging in a little alarmist hyperbole to make a political point?

There is some statistical evidence to support its contention. According to a Eurostat report, Cyprus has the biggest percentage of people facing “housing difficulty”. The Eurostat report defines “housing difficulty” as the situation in which a person does not have their own residence (either through ownership or rent) and is forced to stay with friends, family, at a place of temporary shelter or outdoors.

The number of people who have encountered “housing difficulty” is 11.2 per cent, more than double the EU average, which stands at 4.9 per cent. The report is based on research conducted in 2023 and also found that 7.7 per cent of people had difficulty renting a place to stay because they are not in a position to cover the cost with their own income and need to borrow money from somewhere.

Statistics indicate trends, but they are not detailed enough to give a full picture. For example, some people may face “housing difficulty” because they cannot find housing in a desired neighbourhood in which the rents may indeed be too high, or because they have just started work on a low salary. Regardless of this, there is little doubt that people are currently having difficulty finding affordable housing.

Buying a new flat or house has become much more difficult because building costs have risen by 20 per cent since the pandemic and interest rates have shot up, making loan instalments too high for many people, especially as wages have not increased at the same rate over this period – except in the public sector. Inevitably, with demand for home ownership falling – house mortgages were down by about 30 per cent in 2023 compared to 2022 – demand for rented accommodation has increased, thus pushing up prices.

This, however, is not the only reason for rising rents. The influx of foreign companies and their workers, who have moved to Cyprus thanks to a range of attractive incentives offered by the government, has also had an impact on house rental prices. In Limassol, where most foreign businesses are now based, housing has become unaffordable for people on Cyprus wages, and many have moved to surrounding villages. It is ironic that the construction boom in the town, powered by the golden passports industry, has led to even less affordable housing for locals.

The high rents, especially in Limassol, are also affecting foreign businesses. At the recent Cyprus Forum, bosses of tech firms complained about the shortage of office space for expanding companies in the town. One CEO of a tech group said that “the cost of offices is actually higher than what we pay in London and The Netherlands in some cases.” At the same meeting, Akel deputy Aristos Damianou described rental prices in Limassol as “outrageous.”

In a way, Cyprus is suffering the consequences of its success. Attracting businesses and their staff to the island, which has been a big boost to the economy and one of the contributing factors for its very good performance after the pandemic, was bound to push up prices both for housing and office space. And Limassol, which has been far ahead of the other towns in attracting foreign business, gradually turning into a mini-Dubai, is suffering the negative effects of this new-found prosperity, at least in terms of unaffordable property prices, to a higher degree.

While Limassol is an extreme example, the “housing difficulty” highlighted by Eurostat is also appearing in the other towns because of the other factors mentioned above. But how long will it be before newly arriving businesses set up operations in other towns causing similar issues for locals like those faced in Limassol? Larnaca currently seems to be at the start of this trend.

Government needs to address this matter. There is no doubt that the arrival of foreign businesses is very good for the economy as it not only gives a big boost to expenditure it also creates jobs. At the same time, however, it is increasing the cost of living for low-income earners who have seen little direct benefit from the influx of foreign business. It is a complicated matter that requires careful study by the authorities which need to look at ways of countering the negative impact of attracting foreign businesses.

Unfortunately, there are no easy answers. The government cannot decree the increase of private sector wages to help local workers, nor can it regulate rents to protect people, but some kind of balance must be found. And this must be done urgently because the problem, which might not be on the scale Akel claims it is at present, will become much more difficult to manage as time goes by.