Although the real estate market is still on an upward trajectory, with prices continuing to rise in 2025, there are signs of a gradual de-escalation with the adoption of more active measures aimed at increasing the supply of housing.
Speaking to InBusinessNews, Ioanna Charalambous, Director, Real Estate Advisory, PwC Cyprus, emphasises that urban planning incentives and build-to-rent programmes can create the conditions for better quality and flexible housing and contribute to increasing the supply of residential units.
She also underlines that these plans are still in the initial stage of implementation and their full utilisation will be felt over time, as the market adapts and matures, explaining, however, that in order for them to be effective, the implementation of complementary measures is required.
Asked whether acquiring a home of their own remains a key priority for most buyers, Ioanna Charalambous points out that the new generation prefers the flexibility of renting, choosing limited commitment and greater flexibility.
According to the Director of PwC Cyprus' Real Estate Advisory, the aim of build-to-rent programmes is to offer access to quality homes without an immediate commitment, making renting a more attractive option.
She explains that in the long term, renting is expected to develop into a sustainable and balanced solution for those seeking flexibility or who do not wish to invest directly in home ownership.
What are the prospects for the real estate market and how is this year expected to end? What is the contribution of foreign buyers?
The Cypriot property market remains resilient and dynamic, despite geopolitical and economic challenges. Transaction volumes are increasing, while average property values are rising, indicating higher-value units. Limassol remains the leader in terms of transaction value, however, its growth is slowing down due to market maturation and limited housing availability. Nicosia is expected to catch up with Limassol in transaction volume, as the urban sector expands. Larnaca is recording the largest increase in transaction value, supported by new infrastructure, quality holiday properties and strong investment interest, while Paphos is growing dynamically, thanks to holiday demand and the development of high-quality homes in the countryside.
Foreign buyers are playing a catalytic role in the development of the market, with a focus on coastal areas. Paphos continues to lead due to tourist demand and quality of life, followed by Limassol, with an emphasis on high-quality properties, as well as Larnaca, which stands out for its relatively competitive prices and growing investment potential due to the regeneration of the coastal zone.
Despite the positive contribution of foreign investors to the development of the sector, increased demand is intensifying pressures for more affordable housing. However, with targeted measures and flexible policies, there is the potential for sustainable development that benefits both investors and local communities.
Nicosia is expected to approach Limassol in transaction volume as the urban sector expands
What will lead to a price reduction
Despite the impressive performance, however, the reduced supply of real estate and the increased demand keep purchase and rental prices at high levels, especially in cities such as Limassol. Do you see any prospects for de-escalation and in what ways can this be achieved?
Despite the impressive performance of the real estate market in recent years, limited supply combined with ever-increasing demand continues to keep purchase and rental prices at high levels, particularly in Limassol. According to the Property Price Index, the market remains on an upward trajectory, with prices set to continue to increase in 2025, underscoring the ongoing pressure on the market.
However, there are signs of a gradual de-escalation, especially if more active measures are adopted to increase housing supply. Urban planning incentives and build-to-rent programmes can create the conditions for better quality and flexible housing and contribute to increasing the supply of housing units.
To achieve meaningful results, these measures should be accompanied by improvements and changes in policies and procedures, such as simplifying and accelerating licensing and issuing property titles. Delays increase costs for investors and limit their access to finance, leading to project delays and increased costs for the consumer. In addition, reforming the rental housing institution can encourage the reuse of old buildings and contribute to increasing the supply of housing.
The de-escalation of prices will depend largely on the increase in supply and the effective utilisation of the provided incentives and other relevant measures, which can create additional solutions in the supply and demand relationship.
Build - to - rent and urban planning incentives with complementary measures
Have the schemes announced in the context of housing policy (build-to-rent, urban planning incentives, etc.) begun to pay off? Can they contribute to addressing the housing problem?
In Cyprus, build-to-rent schemes and urban development incentives are still in the early stages of implementation and their full potential will only be realised over time, as the market adapts and matures. Although it is generally accepted that these schemes can make a significant contribution to addressing the housing problem, in order for them to be truly effective, additional measures are required. Among these, the introduction of tax incentives, and more specifically non-recoverable VAT on build-to-rent construction, is an important factor, as its proper management can improve the viability of such projects and significantly stimulate investment interest.
International experience shows that such initiatives perform best when they are part of a coordinated ecosystem, with clear policy, where the public and private sectors work together. In a market with constant housing pressure, the targeted implementation of these plans can act as a catalyst for change, linking economic growth with social well-being.
Renting as a sustainable and balanced solution
Residential real estate continues to be a driving force in the market. Is home ownership still a top priority for most buyers or are you seeing a trend/shift towards renting?
Residential property remains the driving force of the Cypriot market, with home ownership being a key priority for many buyers. Cyprus maintains a relatively high home ownership rate compared to the European Union average, although it has been gradually decreasing in recent years.
The new generation prefers the flexibility of renting, opting for limited commitment and greater flexibility. Increased demand is being recorded in specific market segments, such as foreign professionals and the families of technology workers. In this context, build-to-rent programmes aim to offer access to quality homes without immediate commitment, making renting a more attractive option.
In the long term, renting is expected to become a sustainable and balanced solution for those seeking flexibility or who do not wish to invest directly in home ownership. With the right policy support and strategic planning, the real estate market can better meet the needs of residents, while contributing to more stable economic growth and an improved quality of life.
(Source: InBusinessNews)
