"Tax on unused land to combat supply shortage."

Housing and rental prices are rising due to a lack of supply, and real estate analysts are urging authorities to take decisive action to increase the availability of new properties on the market, including through the taxation of unused land plots.

Pavlos Loizou, the head of Ask WiRE, told Financial Mirror that a study conducted by his company revealed that during periods of high demand, land plots are being withheld from sale or not fully utilized. Ask WiRE found this situation in Limassol, which analysts believe is close to saturation, as well as in Nicosia, where the demand for housing is at historically high levels.

"Focusing on the Acropolis area in Nicosia, which is in high demand, Ask WiRE has identified the opportunity to build an additional 10,180 apartments. 'The reason these properties have not been built is that the land is held back or developers are not fully utilizing the allowable building coefficient,' said Loizou. He claims that this, along with population growth, is one of the reasons for inflated housing and rental prices. 'The population has increased by 85,000 people over the past ten years, according to the 2021 census, while another 30,000 to 50,000 people have arrived since then as refugees due to the war in Ukraine, or have been attracted by government incentives for high-tech companies and their employees. So, we currently have a supply problem, not a demand problem.'

According to the Ask WiRE real estate index for the fourth quarter of 2022, the annual average property prices in Cyprus increased by 9.9% for apartments, 1.0% for houses, and 0.3% for offices. Sale prices also rose by 4.7% for holiday apartments and 0.9% for holiday homes, but decreased by 1.4% for retail stores and 3.7% for warehouses. Nicosia stood out among other areas as the sale prices for apartments continued to rise last year (2.5% in the fourth quarter of 2022). Quarterly sale prices increased by 1.6% for apartments, 0.1% for houses, and 0.4% for offices, while remaining stable for retail stores and warehouses.

As for rental prices, unlike the fourth quarter of 2021, the story was different here. Apartment rental prices increased by 18.2%, houses by 11.6%, retail stores by 0.9%, offices by 6.3%, vacation rental apartments by 16.9%, and vacation homes by 12.8%, while warehouse rental rates decreased by 0.4%.

The latest research by Ask WiRE revealed 2,369 land plots with a total area of 1,689,921 square meters.

According to Loizu, it is clear that authorities need to address the issue of high rental prices and housing costs. The solution is simple and obvious. "As we have already mentioned, this can be achieved by taxing unused properties in high-demand areas," Loizu said. He believes this will compel landowners to either develop their land or sell it to third parties who can do so. "Our proposal is not for tax authorities to start taxing property owners with unused development potential, but for developers to fully utilize that potential. It is clear that housing prices and rents will continue to rise in the foreseeable future, and rental prices in the suburbs will also start to increase if no action is taken."