Other countries are taking action so why aren’t we?

Data for the years 2022 to 2024 and the first seven months of 2025 indicate that the purchases of Cyprus real estate by foreigners are rapidly increasing.

This frenzy in buying Cyprus properties by foreign individuals and companies in common with other Mediterranean countries has led to rising property prices and housing crises in particular localities for many domestic residents. And to arrest these untoward developments in the property market and to make housing accommodation more affordable for local residents, countries such as Spain and Portugal are taking remedial action.

However, at this stage the Cyprus authorities do not appear to be contemplating any measures to stem the surging ownership of the country’s real estate by foreigners. Moreover, the Cyprus government with its tax policies and other initiatives such as the golden visa programme is continuing to promote the largely preferential allocation of resources to the more up-market property sector that in turn is exacerbating wealth and intergenerational inequalities as well as diverting resources away from more economically and socially productive investments.

Developments 

The notorious “golden passport” (citizenship-by-investment) programme was terminated in late 2020 owing to the publication of scandals associated with the programme’s implementation. It was replaced by the so-called golden visa or Cyprus residency-by-investment programme that enables non-EU nationals to gain visas and permanent Cyprus residency in exchange for an investment of at least €300,000.

Following the slump in sales of Cyprus properties to foreigners in 2020 and 2021 the buying of such real estate by third party nationals under the golden visa programme has surged, and contributed importantly to total property sales reaching close to pre-2O12/13 financial crisis levels by the first semester of 2025.

Indeed, in a recent report the auditor-general indicated that an increasing and large part of the total sales of Cyprus properties have been to non-EU nationals including Lebanese, Israelis, Russians and Chinese. Notably, it was reported that 4,321 or a striking 27.4 per cent of the total sales of immovable property in 2024 were to non-EU buyers, with the number of title deeds transferred to such foreign nationals increasing from 873 in 2020 to 2,511 in 2024. However, the auditor-general, most pointedly, added that the percentage of non-EU nationals buying Cyprus immovable property “is fictitious and underestimated and does not include Cyprus or EU companies with foreign interests”. In this connection, a company controlled by non-EU beneficiaries incorporated in Cyprus or the EU is classified as a domestic entity.

Furthermore, in the first seven months of 2025 purchases of Cyprus real estate by foreigners continued to show large increases, rising by over 15 per cent compared to the same period of 2024, with the nationals of Lebanon, Israel and Russia being the most prominent of buyers according to sales contracts deposited at the Land Registries of Larnaca, Limassol and Paphos.

Consequences

With the demand for residential housing by domestic residents and particularly of foreigners for property in the coastal cities and owners of second houses renting out their properties to tourists, rents and purchase prices for houses have risen rapidly in recent years. But there has been a considerable divergence in the extent of housing price increases between the cities of Cyprus. While rents in Nicosia rose by 48 per cent between 2016 and 2024, in some areas of Limassol they doubled over this period. But, even in Nicosia housing prices have become unaffordable for many young persons and lower-income families. 

As a result, more of the younger generation live with their parents, and delay or even stop entering into relationships to produce and raise children because of high and mounting living costs, especially for housing and child care.

In consequence, with the younger generation mainly renting accommodation, and their parents primarily owning property including their living quarters, wide intergenerational wealth inequality is being perpetuated in Cyprus. Furthermore, with the offspring of wealthier parents being able to benefit disproportionately with finance for housing, childcare and business interests and increasingly inheriting assets from the richer “baby boomer” parents of the 1940s and 1950s, unequal wealth distribution within the younger generation of Cyprus is being exacerbated as well.

In addition, to meet the ever-increasing demand for accommodation by tourists, foreign professionals and of wealthier persons seeking refuge in Cyprus from military conflicts, property developers have concentrated their resources in building luxury apartment complexes such as the high-rise apartments in Limassol rather than in constructing cheaper social housing.

Such resource allocation has not only limited the supply of affordable housing for a considerable portion of the population but has significantly diverted capital and human resources away from investments in projects and activities that could be economically and socially more productive. Undeniably, engineers, architects, and technicians could be more usefully employed in constructing and upgrading energy and water infrastructure networks and also in expanding and renovating care facilities for children and the elderly. 

Remedial action

The above analysis indicates that discrepancies between supply and demand in different segments of the property market in Cyprus need to be brought into balance.

Presently, government taxation and investment policies fuel excessively the demand for up-market Cyprus properties. In contrast to 21 EU countries, there is no significant recurrent progressive tax on immovable property in Cyprus and an inheritance tax does not exist. Furthermore, stamp duties on property transfers are very low, and a mere five per cent VAT rate applies on purchases of smaller and middle-sized luxury units.

And with corporate income taxes at a modest 12.5 per cent, foreign entities are encouraged to incorporate companies in Cyprus and take advantage of being able to purchase property without complying with the conditions of the golden visa programme, including the need to make an investment of at least €300,000.

Furthermore, the golden visa programme by giving the right to eligible non-EU nationals to acquire permanent residency in Cyprus provides a strong incentive for such persons to purchase property in Cyprus, especially at times of military tensions and deteriorating economic conditions in their home countries.

And in order to attract skilled employees from abroad, foreign professionals domiciled in Cyprus need only pay 50 per cent of the personal income tax levied on domestic employees earning the same income.

Accordingly, a key part of the forthcoming tax reform should be the introduction of a recurrent progressive tax on the 2024 value of immovable property in order to reduce the demand for Cyprus properties, as well as to broaden the tax base and narrow wealth inequalities. Consideration should be given also to the introduction of an inheritance tax that is in force in many EU countries.

Most importantly, to further decrease the demand of foreigners for the purchase of Cyprus properties, taxes including the VAT and stamp duty on property transfers to foreigners should be raised substantially. It is noted that Spain intends to introduce a 100 per cent tax on property purchases by foreigners to help alleviate its housing crisis, while in Portugal Prime Minister Luis Montenegro is planning to increase the municipal property transfer tax on the purchase of property by non-residents “to form part of measures to tackle the housing crisis the country is experiencing”.

It is important as well that procedures for categorising a company or an individual as foreign and for instituting the sale of properties be fundamentally changed. Accordingly, the Cyprus authorities need to put the onus on the Registrar of Companies to identify who are the beneficial owners of companies incorporated in Cyprus that are applying to purchase property and to determine whether they are foreigners or representing foreign interests so as to prevent non-EU nationals from avoiding the conditions required for the purchases of property under golden visa programme. Furthermore, foreigners should be required to obtain a permit from the relevant municipal authorities for purchasing Cyprus real estate before entering into a sales contract and depositing it with a land registry. 

In addition, income from renting houses to tourists and foreign professionals should be taxed more heavily and strictly enforced along lines practised in Greece, where short-term rental income is taxed at rates from 15 to 45 per cent to elevate the availability of such houses for Cyprus permanent residents.

Also, consideration should be given to introducing a “vacancy tax” similar to that applied by some municipalities in France, whereby homes that have been unoccupied and unfurnished for a year or more are taxed at a rate of 17 per cent on their estimated rental value.

As a result, hopefully, of easing demand for Cyprus properties induced by strict enforcement of some of the above reforms and measures and the construction of social housing, that could be partly financed from the surpluses of the Social Security Fund, property prices would most likely be contained and the supply of affordable housing increased.