The issue of the cost of buying houses or apartments in Cyprus is well known and has become a big issue, especially in recent years.
There is certainly a particular problem in the level of residential rents, because rents and values have increased in the last 2 years around 20% (in cities) and because of the inadequate construction of new units, as well as because of the shortage caused by Airbnb-type short-term rentals with very high rents.
The increased number of students has added to the demand in the areas close to the various colleges and all these with private sector salaries remaining at the same levels (especially for the lower paid, such as ordinary office staff ,etc.) are facing a problem.
Focusing on the issue of rents in particular, the problem will be growing. If we summarise the various proposals to alleviate the problem (the most serious ones) we have the following:
- Increase of area ratio
In cases within or in the periphery of cities for residential development increase by 30-40% (increase of Building Coefficient) on land beyond 2,000 sq.m. [to limit the negative impact of neighbours] and for projects that will be let out for a period of at least 10 years with relevant evidence. These units can be made available through purchase to third parties, provided that these buyers have the same obligation to rent.
- The nonsense of minimum areas
From the first day that some wise people of Urban Planning proposed this strange measure (1990) and depending on the number of bedrooms, the cost of construction and rent or sale price increased. The abolition of this restriction and/or reduction (or elimination) of minimum areas will lead to both an increase in units and a reduction in costs (see our previous article with particular reference to Ireland’s example for Affordable Housing). At the same time, apartments for rent for a decade, not to require parking space per apartment, but one space per two. This proposal will reduce construction costs and consequently rents (this measure will be
suitable for rentals to students).
- Low Cost Units
What is this? Will we import prefabricated wooden units or will the Land Development Agency take them over and participate? That is, to increase the number of new settlements, the result of which we observe today from the post-war settlements, which add to the ghettos and the social classification of citizens.
- Runtime
Regardless of the above, it will take 2-3 years (permits-execution, etc.) for the issue to begin to be resolved, at a time when rents are expected to increase. Therefore, and as a temporary measure for a period of 5 years and for areas within cities, apartments for rent should be entitled to a tax reduction, to encourage existing owners to rent.
- Rent
A large percentage of landlords withdraw their units for rent, due to renting where defaulters are encouraged by lengthy court proceedings not to pay, thus increasing the problem. It is difficult to overcome this problem and perhaps, as a starting point for a discussion, is the partial adoption of a proposal for immediate eviction with summary procedures in Court, with a waiting / eviction period of no more than 3 months (currently it is around 6-12 months minimum).
- Subsidies
There is also the proposal for subsidies, but this measure will burden the state with additional funds of millions (and be subject to various tricks that usually accompany them). That is not the solution proposal.
- Airbnb
Immediate implementation of the proposal for their taxation and the preparation of a directory of such units. The implementation of this measure also needs the contribution of local authorities (see our previous article on the subject with monitoring and appropriate collection procedure getting a charge of a percentage for the supervisors).
- Colleges and Universities
Renting from these institutions directly from the owners and renting them to students. An investor will require a lower rent if he rents a number of units and as a secure rent rather than chasing each student for his inconsistency. Although these institutions will be burdened at their own cost (they can outsource their management to private offices), at the same time they will help solve the housing issue of their own students.
- Housing Finance Corporation & Land Development Agency
These organisations, being state-owned, cannot cope with this measure and neither do they have the appropriate land to construct the developments. The construction of 50-100 units p.a. throughout Cyprus does not solve the problem, neither immediately nor in the future (in addition to the reactions from developers for unfair competition).
We need immediate discussion with the Minister of the Interior, with the immediate abolition or reduction of the minimum areas and the increase of the building coefficient, and then adopt the other measures we propose subject to your decision.
Everything else is theory in order to keep the public happy, especially in an election year.
Antonis Loizou F.R.I.C.S. – Antonis Loizou & Associates EPE – Real Estate Appraisers & Development Project Managers
