Over the past decade, housing prices in EU countries have risen about 10% faster than household incomes, making home ownership increasingly unattainable even for the middle class. The issue has moved into the political arena — housing is no longer just an economic challenge but also a social one, influencing elections, government policies, and public trust.
This trend is consistent across most EU countries despite differences in living standards and economic development. The main causes lie in the imbalance between supply and demand, population growth, lending policies, and construction restrictions.
Cyprus: An Island with European Prices and Global Demand
Cyprus faces some of the strongest pressures in the European real estate market. Property prices have surged dramatically in Limassol, Nicosia, and other coastal cities due to foreign investment, the influx of digital nomads, and demand from third-country nationals seeking residence permits or citizenship through investment programs.
Local incomes, however, have grown much more slowly than housing costs, while rental prices have nearly doubled over the past three years. Young people and families increasingly find it impossible to buy a home without government assistance or large loans. Meanwhile, new housing projects cannot keep up with demand, and the prices of land and construction materials continue to climb.
Why Supply Lags Behind Demand
The main reason is the shortage of new housing. In recent years, construction in Cyprus has slowed due to complex bureaucracy, a limited number of plots available for development, and stringent seismic and energy-efficiency standards, which delay project launches.
This situation mirrors the broader European pattern: demand is rising, but the number of new homes isn’t — only their prices are.
EU-level regulations and national laws often contradict one another. In many cases, measures intended to help citizens — such as low-interest mortgages and subsidies — end up pushing prices higher, as they stimulate demand without addressing the supply shortage.
Empty Homes: Hidden Resource or Growing Problem?
Cyprus ranks among the countries with a high percentage of vacant properties. This is partly due to second homes and investment properties purchased not for living but for capital preservation. According to European Commission estimates, up to 16% of housing in Europe stands unused. In cities like Nicosia and Limassol, there are numerous houses bought by foreigners that remain closed most of the year.
To address this issue, some countries — such as Vancouver and Melbourne — have introduced taxes on vacant homes, and similar measures are now being discussed in Cyprus, with the goal of bringing unused properties back onto the rental or sales market.
What Measures Are Being Taken — and Do They Work?
Most EU countries, including Cyprus, offer mortgage subsidies, tax incentives, and loan guarantees for young families and local buyers. However, such policies don’t always lower prices, especially when construction volume doesn’t increase. In the Netherlands, these policies have helped stabilize the rental market, while in Finland, they had almost no effect on rents.
In Cyprus, authorities are discussing the creation of an affordable housing fund, the construction of social housing, and restrictions on property sales to foreign investment funds. The government is also tightening oversight of residency-by-investment programs to ease pressure on the market.
What Lies Ahead: Forecasts for Cyprus and Europe
The situation remains tense. While rising interest rates in the EU have slowed the issuance of mortgages, demand in Cyprus remains strong due to migration, tourism, and limited housing supply. Increasing attention is being paid to sustainable and energy-efficient homes, which raises construction costs but sets a new market standard.
Experts believe the housing crisis can only be resolved through comprehensive measures — accelerating construction, reforming urban planning regulations, taxing vacant homes, and expanding the rental market.
For Cyprus, this is not just an economic challenge but also a matter of demographics, social stability, and the future of the younger generation.