Empty housing can help alleviate supply shortages

While real estate and rental prices are rising due to lack of supply, about 33,000 homes across the island are idle. Cyprus' technical chamber ETEK is recommending that the government introduce incentives for these homes to enter the market.

The representatives of the government advisory body told Interior Minister Constantinos Ioannou that the presence of these 33,000 empty houses should be taken into account when formulating policies to encourage affordable housing. In a letter to Ioannou, ETEK chairman Konstantinos Konstanti said the state should introduce incentives or disincentives for owners of properties not used to enter the market. He noted that 33,000 houses, or 8% of residential units, are not on the market.

ETEK relied on data from the Cyprus Energy Authority, which shows that more than 8,000 units have no electricity and the consumption of most of the remaining properties is very low. Breaking down the data in detail, Constanti pointed out that there are 9,181 homes available in the capital alone, of which 2,176 are off the grid and another 7,005 have very low consumption. In Limassol, where rental prices are just off the charts, there are 8,324 vacant residential units, of which 1,662 have no electricity. In Larnaca, the total number of unoccupied houses is 5,440, of which 1,361 have no electricity. According to data collected by ETEK, there are 2,286 affordable housing units in Famagusta. Paphos has some 7,362 empty houses that could join the market.

ETEK argues that commercial buildings can be converted into residential units with the right incentives and urban planning tools. Regarding incentives for owners to place their property on the market, ETEK offered the following support measures. Owners receive a tax exemption on repair and maintenance costs up to €3,000. They benefit from a reduced VAT rate of 5% on repair work. If these properties are included in the housing market through rentals, rental payments for the first 24 months may be exempt from income tax.

Realtors confirm that the shortage of residential units has led to an unprecedented rise in rents and real estate prices. Pavlos Loizou, CEO of Ask WiRE, said in a commentary for the Financial Mirror: "Over the last ten years we have seen prices rise while supply has fallen." Loizou claims that only a handful of housing projects have been built in the last 15 years, excluding luxury properties. "These shortages have driven up prices, and the only way to reduce them is to increase supply. "This means not only increasing the construction of housing projects, but also creating affordable housing." He argues that government intervention will not solve the problem as it will only cater to hundreds of citizens whereas the need is for thousands of houses. "Radical measures are needed to attract new properties to the market, even by taxing unused properties and land." Loizou also noted that large plots of land are not being made available on the market, as shown by a recent Ask WiRE survey that identified 2,369 plots with a total area of 1,689,921 square meters in Nicosia. Assessors have recorded 9,240 residential units in these blocks with a total area of 1,131,791 square meters. According to the existing urban planning zones, a total area of 2,149,741 square meters can be built on them. Thus, the unused development ratio is 1,017,950 square meters. "Our research shows that in Acropolis (Nicosia), where demand is high, only 53% of the permitted development ratio has been utilized. "There is an opportunity to build another 10,180 apartments." Ask WiRE conducted a similar study near the center of Limassol and got similar results. According to assessors, there is room to build an additional 8,000 apartments in the area near downtown.