The numbers do not lie, although they do not quite add up either. Not until you look closer.

For the Cyprus property market, 2025 was a record-breaking year. Total transaction value reached €6.5 billion, up 8 per cent, across 25,600 transactions, while building permits rose 9 per cent in number and 28 per cent in value.

At first glance, the picture seems clear. Cyprus is building more than ever.

And yet, the rental market is heading in the opposite direction.

The annual rental analysis from the department of lands and surveys, covering September 2024 to September 2025, shows that the average rent for a three-bedroom apartment in Nicosia jumped from €950 to €1,300 in a single year. A one-bedroom apartment in Engomi climbed from €625 to €725 over the same period.

At the same time, consultancy firm Perprice recorded rental increases in three of the four major cities between August and October 2025 alone, with Paphos rising 4.8 per cent in just two months.

Listings, meanwhile, are running out. Vacancy rates in Limassol now hover around 2 to 4 per cent, while properly priced rental units disappear in under three weeks.

So, Cyprus is seeing record construction alongside rising rents. This is not a contradiction. It is a signal. More specifically, it tells us something about what Cyprus is actually building.

The conclusion is straightforward. There is no shortage of homes. There is a shortage of right homes.

This becomes even clearer when looking at Eurostat data. Between 2010 and the end of 2024, EU house prices rose 55.4 per cent overall, while rents climbed 26.7 per cent.

Cyprus, however, moved in almost the opposite direction from much of Europe. House sale prices stayed essentially at their 2010 levels, while rents continued to climb year after year, rising 4.5 per cent in 2023 and 4.6 per cent in 2024, according to Eurostat’s analysis on house prices and rents in the fourth quarter of 2024.

Cyprus was one of only two EU countries, alongside Italy, where purchase prices did not rise over 14 years. Estonia saw growth of 228 per cent, Hungary 234 per cent and Luxembourg 105 per cent. Cyprus saw virtually none.

If the housing market were one single system of supply and demand, rents would be expected to follow sale prices. They do not. Instead, they are climbing on their own.

That divergence points to two different markets. On one side, there is a sales market aimed largely at investors and owner-occupiers. On the other, there is a rental market serving the people who actually live and work here.

When these two markets stop speaking to each other, the number of new homes being built becomes almost irrelevant to whether someone moving to Limassol for work can actually find a place to live.

Put simply, the supply exists. It is just designed wrong.

Cyprus is not facing a shortage of square metres. It is facing a shortage of the right kind of housing, available to the right people, under the right tenure model.

What we are seeing is large family homes occupied by small families, and seaside villas that host a guest for three weeks a year. What we do not have is what a young professional, or a family relocating to an urban centre for work, actually needs: a modern, professionally managed long-term rental at a reasonable price.

The homes are there. They are just not available in the form the market is asking for.

This is the uncomfortable truth buried inside PwC’s numbers. Almost every property that moved through the market in 2025 was built to be sold, not rented. Some of these units do end up in the rental market, but only by chance, on terms set by individual owners and often as expensive short-term lets.

By contrast, Germany, the only EU country where renters outnumber owners, with 52.8 per cent renting compared with 47.2 per cent owning in 2024, operates under a very different model.

The same applies, to varying degrees, in Austria, the Netherlands and Denmark, where a significant share of the rental market is delivered by institutional players, including pension funds, housing cooperatives and specialist rental developers.

These investors build entire buildings with one purpose in mind: long-term renting. They hold the property, manage it and their entire business depends on keeping tenants happy and buildings full over the long run.

This model is called Build-to-Rent, and it is something Cyprus would do well to look at more carefully.

Between 2014 and 2024, the share of Cypriot households that rent grew from 27.1 per cent to 30.6 per cent. That is a real structural shift in a single decade, and the trend does not appear to be reversing.

PwC’s 2025 figures show that apartment transactions are driving growth. Yet almost all those units end up with owner-occupiers or individual buy-to-let investors, not specialist institutional landlords. Only a small fraction makes it into the long-term rental pool.

Eurostat’s analysis of the past decade makes the point. Between 2010 and 2024, housing investment across Europe grew steadily and building permits rose. Yet EU rents climbed 25 per cent and house prices 53 per cent over the same period.

In other words, more construction, without attention to what kind of housing is being built and for whom, does not automatically translate into affordable rents.

This is exactly the problem in Cyprus.

At a land development conference in March 2025, Interior Minister Constantinos Ioannou acknowledged the housing problem and pointed to rising construction costs, interest rates and strong demand from foreign workers.

However, the policies proposed by the government, including reducing minimum unit sizes and increasing building coefficients, operate on the same logic: more small units for sale.

Build-to-Rent will not bring a magic solution. But it does three things that the current model cannot.

It improves rental supply. In a Build-to-Rent building, 100 per cent of the units enter the long-term rental pool from day one and stay there. They are not sold off to private owners who may convert them into short-term rentals the following summer.

It also professionalises the tenant experience, through standardised contracts, on-site maintenance and a single accountable manager. No more calls saying “the owner has decided to sell, you have 30 days to move out”.

For the workforce the Cypriot economy depends on, that matters more than any tax break.

Just as importantly, it aligns supply with demand. Cyprus has an oversupply of large homes and seaside villas, and a shortage of efficient, well-located rentals.

Cyprus has shown, year after year, that it can build. It has shown it can attract foreign capital. It has also shown that the property sector can contribute 16 per cent of national Gross Value Added and grow 6.9 per cent in a single year.

What Cyprus has not yet shown is that it can produce housing where demand actually meets supply. That means homes that genuinely reach the people who need them, in the tenure they need, at prices they can live with.

The €6.5 billion question therefore remains, and the market will probably break that figure again in 2026.

The question is not whether Cyprus will keep investing in property.

Of course it will.

The question is whether, in the years ahead, a meaningful share of that investment will finally flow into the one category it has so far chosen to ignore.