Government reduces apartment size minimum to boost housing supply

The Cypriot government on Thursday announced new measures aimed at increasing housing availability and stabilising property prices.

Specifically, Interior Minister Konstantinos Ioannou outlined a series of policy changes during this year’s edition of the Property Development & Construction conference.

These policy changes focus on facilitating residential developments and easing housing market pressures.

Ioannou stated that the government will introduce a measure to reduce the minimum allowable apartment size by 15 per cent across all types of residential units in zones designated for housing development.

This move is intended to increase the number of apartments that can be built within the same plot, contributing to a higher supply of housing units and addressing citizens’ housing needs.

The minister also announced that the government will propose the abolition of mandatory apartment type quotas in tourist zones.

The proposal is in its final stages and is expected to be submitted to the Cabinet for approval in the coming weeks.

This policy change aims to provide greater flexibility in housing developments and cater to market demand more effectively.

Ioannou also mentioned that a new housing plan, closely aligned with the “Build to Rent” model, will soon be introduced for commercial zones, allowing for mixed-use developments.

Ioannou stressed that this initiative seeks to address the housing needs of employees working in these areas, thereby reducing demand for housing in urban centres.

This, in turn, is expected to help stabilise rental and property purchase prices.

He also said that the government has prioritised the implementation of targeted measures to alleviate the housing crisis.

According to Ioannou, the issuance of building permits for residential units increased by 44.4 per cent in the first half of 2024.

Additionally, a slight decline in construction material costs is helping to ease the downturn in new housing supply observed in recent years.

He explained that the government’s housing strategy is built on two main pillars. The first focuses on increasing overall housing stock to relieve price pressures, while the second targets affordable housing and enhancing citizens’ purchasing power, particularly for young people and families.

Under the ‘Stegazo to Mellon Mou’ (Housing my Future) policy, efforts are being made to expand the availability of affordable housing and improve accessibility for lower-income groups.

Ioannou said that the rise in property prices and rents appears to be gradually reversing, as indicated by the Housing Price Index recently published by the Central Bank of Cyprus (CBC) for the third quarter of 2024.

While property prices continue to increase, the rate of growth has slowed, signalling a shift towards a more balanced housing market.

He also stated that to further encourage housing construction, the government has implemented the Urban Planning Incentives Scheme and expanded the Build to Rent model.

These initiatives allow for additional building coefficient allocations of 25 to 45 per cent for developers. In return, developers must allocate part or all of the additional units at affordable prices or rents.

Under the Build to Rent scheme, all additional residential units created with the extra building coefficient must be rented at affordable rates.

The urban planning incentives scheme requires 20 per cent of additional units to be sold at affordable prices, while the remaining 25 per cent can be sold at market rates.

Ioannou expressed satisfaction with the response from real estate developers, highlighting strong interest in the schemes.

Based on current agreements and commitments, over 1,900 new housing units are expected to be built in the coming years, with nearly 300 designated as affordable housing.

Additionally, approximately €8.7 million is expected to flow into the Cyprus Land Development Corporation’s (Koag) special affordable housing fund through the purchase of building coefficients.

The minister also addressed local government reform, particularly concerning the regional self-governing bodies responsible for development permits.

While progress has been made in processing applications, Ioannou acknowledged that there is still room for improvement.

Recognising past bureaucratic delays, the government has revised the submission, review, and approval processes for urban planning and building permits.

The primary goal, he said, is to reduce processing times for low- and medium-risk developments, which account for nearly 50 per cent of all applications.

Meanwhile, during his address, Ioannou highlighted the real estate sector’s critical role in the Cypriot economy.

He said that “the real estate sector in Cyprus has consistently formed the backbone of the Cypriot economy in recent years”.

Ioannou acknowledged that factors such as rising prices, increasing construction costs, international crises, and shifting demographic trends have made strategic state intervention necessary.

As part of the government’s broader housing strategy, additional initiatives have been introduced to further support affordability and housing availability.

One such initiative is the ‘renovate-rent’ scheme, which provides grants ranging from €15,000 to €35,000 for the renovation of idle residential units to be rented at affordable rates.

Ioannou revealed that approximately 50 applications have already been submitted, while over 400 registrations have been made on the Koag electronic platform, which is expected to be operational for tenants in March.

Another measure under consideration is a land allocation scheme aimed at assisting low- and middle-income families, which is currently undergoing legislative review.

Ioannou also said that the government is actively seeking additional funding to expand these housing programmes by the end of November, reflecting the strong public interest in such initiatives.

On the regulatory front, the minister detailed efforts to streamline the urban planning and building permit process.

A set of 22 measures has been introduced to simplify licensing, with new timelines established to ensure permits for single-family and duplex houses are processed within 20 working days, while larger developments are approved within 40 working days.

Ioannou also underlined the importance of collaboration with the private sector, commending its role in delivering long-term solutions for Cyprus’ housing needs.

“We are investing in our synergy with the private sector,” he stated.