The Cyprus borrowers association (Syprodat) has warned that the resurgence of non-performing loans (NPLs) and the worsening housing crisis represent a “double challenge” for the Cypriot economy, threatening both its stability and social cohesion.

In a statement released this week, Syprodat said that the management of bad loans and the resolution of the housing problem “are not merely technical matters of economic policy” but rather “fundamental issues of social justice and equality of opportunity.”

The association said that the Cypriot economy continues to bear the burden of approximately €19 billion in bad loans, which, despite being transferred off bank balance sheets to credit-acquiring companies, still pose a significant risk to the financial system.

Syprodat noted that while liquidity and capital adequacy indicators have improved in recent years, international rating agencies including Moody’s, Fitch, and Standard & Poor’s have warned that the overreliance on temporary profitability and high operating costs could undermine long-term stability.

According to Syprodat, this financial vulnerability coincides with a severe housing affordability crisis, which has taken on what it described as alarming proportions.

The association said that rising rents and house prices have made housing inaccessible for a large segment of the population, particularly younger generations.

Citing Eurostat data, Syprodat said that between 2018 and 2024, rents in Cyprus rose by about 16 per cent, while 14.6 per cent of households with dependants reported difficulty paying their rent.

The association referred to this situation as a “silent threat” to the Cypriot economy and called on the Finance Ministry to urgently develop a cohesive national strategy addressing both the pressure from non-performing loans and the insecurity surrounding housing access.

It stressed that these two issues must be tackled together, as they are closely linked to the financial well-being and stability of Cypriot households.

Syprodat also advocated for reforms aimed at reducing the risks associated with bad loans, coupled with a comprehensive housing policy that includes social housing programmes, rental subsidies, and tax incentives for young buyers.

The association warned that failure to act swiftly could further deepen economic inequality and social division.

“The management of bad loans and the resolution of the housing problem are not merely technical matters of economic policy,” said Syprodat.

The association added that both of the above-mentioned concerns represent “fundamental issues of social justice and equality of opportunity”.

Meanwhile, in mid-October, the association said that Cypriot banks were being too cautious on lending, despite being able to implement looser criteria, on account of their high liquidity.

The association said at the time that “to strike a balance between stability and growth, Cyprus needs a more flexible and targeted lending policy that better supports businesses and households”.