Could taxing idle properties be the answer to the market’s inability to meet demand?
The city of Limassol could have an additional 8,000 apartments, with many swathes of land currently being undeveloped, according to a report by Cypriot fintech Ask WiRE, which also raised the question of whether these vacant plots should be taxed.
The report was released on account of the fact that the demand for real estate in city centres has been steadily increasing in recent years, prompting questions about how this demand can eventually be met.
“Ask Wire research has determined that there are many plots of land in the central areas of Cypriot cities that either remain unused, or their rate is only partially exploited,” the company said.
“As a result of the land retention or building factor, there is a significant rise in both property sale prices and rents for residential units, primarily apartments,” it added.
Ask Wire, a company that combines know-how in the real estate sector with the use of technology and analytics, crunched the data pertaining to one of the most sought-after areas in Limassol, commonly referred to as Papas, after a local, longstanding supermarket.
The area generally refers to the area south of Kolonakiou avenue, near the Kean beverage factory, all the way down to Limassol’s coastal road.
The company identified the buildable land in the area, excluding roads and parks, calculated the building factor and removed the existing and under-construction buildings.
In addition, for greater clarity, the company also removed any commercial zones and uses so that the figures refer to purely residential zones.
In the Papa area, 1,515 plots were identified, with a total area of 1,571,729 square metres.
In these blocks, there are 3,624 residential units, with a total area of 450,249 square metres.
The company explained that based on the existing urban planning zones, a total of 1,253,413 square metres can be built, in other words, an additional 803,164 square metres.
“As the analysis shows, in this particular area, only 36 per cent of the allowed rate is utilised,” the company said.
According to the analysis, based on an average area of apartments of the order of 100 square metres, excluding terraces and storage areas, an additional 8,000 residential units could be created.
In other words, the existing number of apartments could be increased by 121 per cent.
“Although in Cyprus we tend to demonise any form of taxation, with the market being in the state that it currently is, taxing idle properties in areas with high demand is the only way to convince their owners to either develop or dispose of them,” Ask Wire CEO Pavlos Loizou said.
“Since the incentives for granting an additional rate already exist, disincentives should also be applied that will push the owners to develop them, in order to stabilise housing prices, as well as make them more affordable,” he added.
Otherwise, Loizou explained, this situation of limited supply will persist and prices will continue to rise, not only in the city centres but also in the suburbs, since demand will now move there, with negative effects on the environment, resulting in lost time and increased inconvenience due to the traffic, creating the need to develop government services and provisions in new areas.
“It goes without saying that the purpose is not to tax people’s primary residence or small owners, but the inexhaustible building factor,” Loizou concluded.
Finally, the company said that similar data has been identified for the Acropolis area in Nicosia, with specific research analysis due to be released in the near future.