The key to order, taking into account the vacant land plot, to address the shortage of supply.

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 number of new properties on the market, including taxing unused land plots.

The CEO of Ask WiRE, Pavlos Loizou, told Financial Mirror that a study conducted by his company showed that during periods of high demand, land plots are held back from sale or not fully utilized. Ask WiRE found a similar situation in Limassol, which analysts claim is close to saturation, and in Nicosia, where the demand for housing is at a historical high.

Detection of opportunities

"Focusing on the Acropolis area in Nicosia, which is in high demand, Ask WiRE discovered the opportunity to build an additional 10,180 apartments. 'The reason these properties have not been built is that the land plots are being held or developers are not utilizing the maximum allowed building coefficient,' said Loizou."

He believes that, combined with population growth, this is one of the reasons for the inflated prices of housing and rent. "The population has increased by 85,000 people over the past ten years according to the 2021 census, and since then, another 30,000 to 50,000 people have arrived, either as refugees from the war in Ukraine or attracted by government incentives for high-tech companies and their employees. "Thus, we are facing a supply issue, not a demand issue."

Rise in real estate prices

According to the Ask WiRE real estate index for the 4th quarter of 2022, 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 apartments in resort areas and by 0.9% for houses in resorts, but decreased by 1.4% for retail and by 3.7% for warehouses. Nicosia stands out among other regions as apartment sale prices continued to rise last year (2.5% in the 4th 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 and warehouses.

Change in rental rates

As for rental rates, the situation changed in the fourth quarter of 2021. The cost of renting apartments increased by 18.2%, houses by 11.6%, retail spaces by 0.9%, offices by 6.3%, resort apartments by 16.9%, and resort houses by 12.8%, while rental payments for warehouses decreased by 0.4%.

Unused building coefficient

The latest Ask WiRE study identified 2,369 plots covering a total area of 1,689,921 square meters.

"Our research shows that only 53% of the allowed building coefficient has been used in the Acropolis. If we calculate that the average apartment occupies 100 square meters, we can build an additional 10,180 apartments." Ask WiRE conducted a similar study in an area close to the center of Limassol and obtained similar results.

Solution to the problem

According to Loizu, authorities need to address the issue of high rental rates and housing prices. The solution to the problem is simple and obvious. "As we have already mentioned, this can be implemented through the taxation of unused properties in high-demand areas," Loizu said. He believes this will compel landowners to either develop their plots or sell them to third parties who have the capacity to do so. "We propose that authorities tax developers who are not fully utilizing their development rights, rather than taxing property owners with unused development coefficients. It is clear that housing prices and rents will continue to rise in the foreseeable future, and rental rates in the suburbs will also start to increase if no action is taken."