The housing crisis in Europe is intensifying, and Cyprus is no exception. According to a recent report by the European Commission, “Housing in the European Union: Market Trends, Key Drivers, and Policy”, published in October 2025, property prices across the EU have risen sharply, often outpacing citizens’ income growth. The most significant surge occurred after the European Central Bank raised interest rates in 2022.
According to the report, homes in Portugal, the Netherlands, and Luxembourg were identified as the most overvalued in Europe, with prices rising more than 20% compared to a decade ago. Conversely, Cyprus is among the few countries where housing prices relative to incomes have not increased, and in some cases have even declined slightly compared to 2014. Romania and Finland also fall into this category.
The Situation in Cyprus
Although Cyprus has a relatively balanced housing market, affordability remains a pressing issue. In recent years, demand for rental and purchased housing has increased due to the influx of foreign professionals, investors, and students. At the same time, a shortage of building permits slows down the development of new projects.
The European Commission notes that Cyprus, like Denmark, Slovakia, and Luxembourg, does not have a legally established deadline for issuing construction permits, making the development process unpredictable and lengthy. According to the Cypriot Ministry of Interior, the average waiting time for a construction permit can reach 9–12 months, significantly above the EU average.
The report also highlights tax policy. Cyprus is one of six EU countries where no annual property tax is levied, which experts say hinders efficient market management and contributes to the growing number of vacant properties.
Rising Interest Rates and Declining Purchasing Power
The European Commission notes that the 2022 interest rate hike sharply reduced households’ ability to take out mortgages. In Cyprus, as in France, Portugal, and Slovakia, household debt levels increased while creditworthiness decreased compared to 2019.
However, in Eastern European countries like Bulgaria, Romania, and Hungary, the opposite trend is observed: rising incomes have improved the accessibility of mortgage financing.
Vacant Homes — A Hidden Market Threat
The report also points to a significant issue with vacant residential properties. About 15% of housing across Europe is unoccupied, with even higher rates in some countries. Cyprus is among the states where the share of unused properties is particularly noticeable, along with Malta, Hungary, Bulgaria, and Portugal.
Many properties on the island remain unoccupied due to legal disputes, incomplete transactions, lack of titles, or high maintenance costs. Experts recommend expanding renovation programs and long-term rental subsidies to return these units to the market.
European Perspective and Solutions
The European Commission urges member states to implement reforms to increase housing affordability, including:
- Accelerating the issuance of building permits
- Developing social housing programs
- Digitizing urban planning procedures
In 2026, a Europe-wide platform for monitoring housing prices and affordability is planned. This platform will allow a realistic assessment of housing costs across EU countries, including Cyprus.