Cyprus’s housing affordability crisis has exposed a significant gap in government planning. The state acknowledges that policies designed to attract businesses, investment and skilled workers have generated additional demand for homes, both to buy and to rent. Yet it cannot determine how many additional properties are needed to address the current shortage.
Nor is there a published link between investment residence permits and the properties purchased under the scheme, or a coordinated system for assessing the objectives of these policies and the social distortions they create, let alone how to address them.
This is one of the central findings of an Economy Today investigation.
Cyprus measured the success of its investment policies through capital inflows, applications, permits, economic growth and GDP. It did not measure with the same precision how much pressure those policies placed on housing, which cities were affected or which segments of the market bore the greatest burden.
Three figures illustrate the scale of the imbalance. In the second quarter of 2026, residential property prices increased by 8.5% year on year. Property sale contracts involving foreign buyers rose by 22.7%, compared with an 11% increase among domestic buyers. Meanwhile, the number of residential units covered by building permits increased by 63.7% during the first five months of the year.
There is no simple explanation, particularly for a country that depends heavily on foreign investment.
Foreign demand did not create the housing problem on its own, nor does every foreign investment affect the market in the same way. Housing supply was slow to respond, construction costs increased, population growth and smaller households multiplied housing needs, and domestic demand and mortgage lending remained strong.
Government policies, however, brought additional buyers, employees and families into a small market. At critical moments, they also directed construction towards properties that were not intended for the average Cyprus resident.
The crisis is at the point of entry
The latest Central Bank of Cyprus report shows no sign of easing price pressures. The overall Residential Property Price Index increased by 2.4% compared with the previous quarter and by 8.5% year on year, accelerating from 7.5% in the first quarter.
Apartment prices rose by 8.9%, while house prices increased by 5.8%.
This acceleration follows a decade of rising prices. The Statistical Service’s House Price Index stood at 144.2 points in the fourth quarter of 2024, using 2015 as the base year of 100. The index for new homes had reached 165.5 points, compared with 125.3 for existing properties.
The difference becomes clearer when examining prices per square metre.
In Limassol, the median sale price increased from €1,749 per square metre in 2015 to €2,975 in 2024, a rise of approximately 70%. In Larnaca, it climbed from €1,232 to €1,933, an increase of almost 57%.
The Statistical Service and Central Bank indices use different methodologies and base periods, so they should not be treated as a single continuous series. Both, however, point in the same direction: housing has become substantially more expensive, and the pressure continues.
The problem is not limited to purchase prices.
Cyprus’s median gross monthly salary was €1,968 in 2025. Based on indicative figures from Total Valuations for a two-bedroom apartment, monthly rents ranged from €900 to €1,100 in Nicosia, stood at approximately €1,900 in Limassol, €1,000 in Paphos and €800 in Larnaca.
For someone earning the median salary, those amounts represent approximately 41% of gross income in Larnaca, 46% to 56% in Nicosia, 51% in Paphos and almost the entire salary in Limassol.
These comparisons use gross income rather than disposable income and exclude communal charges, electricity and other expenses. They also do not describe a two-income household. They do, however, demonstrate the obstacle facing someone trying to rent alone.
Homebuyers face similar difficulties.
In an interview with Economy Today, Thomas Dimopoulos, president of the Department of Real Estate Development and Valuation at Neapolis University Paphos, calculated that a median salary could support a mortgage of approximately €122,000, assuming a 3.15% interest rate, a 30-year repayment period and instalments of no more than 30% of net income.
With a 20% deposit, this would allow the purchase of a property worth approximately €152,000. Two median salaries would increase purchasing capacity to around €304,000.
“There does not appear to be a generalised price bubble in Cyprus. What does appear to exist is an affordability crisis, and specifically a crisis of entry,” he said.
For existing homeowners, rising prices increase the value of their property. For prospective buyers and tenants, they raise the barrier to entering the market.
Demand accelerated while supply lagged behind
Housing pressure has multiple causes.
The population has grown, while the average household size fell from 2.76 people in 2011 to 2.57 in 2021.
As Ask Wire chief executive Pavlos Loizou explained in an interview with Economy Today, more numerous and smaller households require more homes, even without a proportionate increase in population.
Foreign buyers, companies and their employees, students, investment-related purchases and short-term rentals have added to demand.
The Ministry of Interior acknowledged this connection in its response to Economy Today.
Policies aimed at attracting businesses, investment and human capital contributed to the arrival of new employees and families in Cyprus, it said, and “this created additional demand for housing, both for purchase and rental”.
From 2022 onwards, thousands of displaced people from Ukraine also arrived under temporary protection arrangements.
Supply could not respond at the same pace. Building homes requires land, permits, financing, materials and workers, while the Construction Materials Price Index increased by 30.1% between 2021 and June 2023.
“In Cyprus, I believe the main reason is the very large increase in housing demand, mainly associated with the arrival of large numbers of high-income foreigners,” economics professor Sofronis Clerides told Economy Today.
He nevertheless distinguished the current situation from the credit-driven property bubble of 2008, as today’s price increases are not supported by a comparable excessive expansion in lending.
Domestic demand has also remained strong.
Net new mortgage lending reached €403.6 million in the second quarter of 2026, up 14.2% year on year, while the average mortgage interest rate stood at 3.23% in June.
Foreign demand has therefore not replaced domestic demand. It has been added to it.
On the supply side, Cyprus added 8.3 homes per 1,000 inhabitants in 2023, compared with a historical average of approximately 13, according to figures cited by Loizou.
The European Commission estimates the housing deficit at approximately 39,000 homes.
“We are not building enough homes, but often we are also not building the homes that the average household can afford,” Loizou noted.
That is the other half of the problem: not simply how much was built, but what was built, where and for which income groups.
Foreign buyers account for at least four in ten contracts
Statistical Service figures for residential property purchases in 2024 show that foreign nationals accounted for 16% of buyers in Nicosia and 41% in the government-controlled areas of Famagusta.
They represented the majority in the remaining coastal districts: 53% in Limassol, 59% in Larnaca and 66% in Paphos.
The same report recorded higher sale prices per square metre for properties purchased by foreigners, with a widening difference in apartment prices.
The true number of foreign buyers may be substantially higher because of legislative gaps identified by the Audit Office in a special report published in 2025.
According to the report, property acquired by a foreign-owned company registered in Cyprus or another EU member state is recorded in official statistics as a Cypriot purchase.
Consequently, the Audit Office described the actual extent of foreign participation in the property market as “underestimated”.
More recent Central Bank figures show that external demand remains strong.
During the second quarter of 2026, 5,298 sale contracts were deposited across all property categories, an annual increase of 15.4%.
Contracts associated with foreign buyers increased by 22.7%, from 1,717 to 2,107, while those involving domestic buyers rose by 11%, from 2,875 to 3,191.
Nationwide, foreign buyers accounted for approximately four in ten sale contracts.
The two sources do not measure precisely the same thing. The Statistical Service examines residential properties, while the Central Bank and Land Registry figures cover all property categories.
Nevertheless, they describe a similar picture: foreign participation is substantial, growing faster than domestic participation and concentrated mainly in coastal districts.
The proportion alone does not establish how much foreign buyers have increased prices.
Paphos has the highest share of foreign buyers, yet the strongest price increases over the past decade were recorded in Limassol and Larnaca.
What matters is the type of property purchased, its location and whether foreign and Cypriot buyers are competing for the same homes.
“The pressure does not depend on how many foreigners are buying, but on whether they are buying the same product as Cypriots,” Dimopoulos explained.
In Paphos, foreign buyers historically tended towards holiday homes. In Limassol, and increasingly in Larnaca, foreign employees and local residents are competing for the same apartments in the same neighbourhoods.
The figures demonstrate the scale of foreign demand, but they do not show how much of it would have existed without government programmes and incentives.
Answering that question requires examining the state’s role not only as a market regulator, but also as a creator of demand.
When the state linked citizenship to property
Following the 2013 financial crisis, attracting foreign capital became a central instrument for restarting the economy.
Construction activity was declining, unemployment was high and many developments lacked buyers. Foreign capital brought work to businesses and employees and supported the recovery.
However, the Cyprus Investment Programme did more than increase demand. It attached the additional value of a passport and citizenship to qualifying properties.
As Andros Kourtellos, professor and head of the Department of Economics at the University of Cyprus, explained in an interview with Economy Today, an investment was selected not only for its financial return but also for the state-granted right attached to it.
Developers consequently had an incentive to build properties aimed at those buyers.
According to Ministry of Finance estimates cited by Kourtellos, transactions under the programme accounted for 19.5% of the total value of property transactions in 2015 and 37.5% in 2019.
The contribution of related construction investment to economic growth was estimated at approximately 1.7 percentage points in total between 2016 and 2019.
Kourtellos emphasised that this estimate was based on correlations and assumptions and did not isolate the programme’s causal impact.
He also referred to a cross-country study by Clerides, Coelho, Klemm and Kotsogiannis, published in 2025 as an International Monetary Fund working paper.
The study found evidence that residence- and citizenship-by-investment programmes increase real house price growth, particularly when property investment is permitted, without equally clear evidence of an increase in total investment as a share of GDP.
This finding does not, by itself, prove inefficient resource allocation in Cyprus.
It does, however, reinforce the question of whether linking state-granted rights to property attracts productive investment or mainly becomes reflected in property prices.
Limassol’s towers and a market built for different buyers
The most visible legacy of this connection can be found in Limassol.
“The citizenship programme created the ‘Limassol tower’ product, a category of supply that is not aimed at residents,” Dimopoulos said.
In an interview with Economy Today, economist Tasos Yasemides described how the schemes affected supply.
“The investment residence schemes were linked to the purchase of a specific product: a new property above a certain value. This did not increase demand for housing as much as it directed supply. Developers naturally turned towards a market where there was a guaranteed buyer at a predetermined price,” he explained.
Land, labour, financing and permits were directed towards properties that were often not intended for permanent occupation.
According to Ask Wire figures cited by Loizou, the average apartment transaction value in the first half of 2026 was approximately €363,000 in Limassol, compared with €183,000 in Nicosia and €171,000 in Larnaca.
These are not prices per square metre, and they are influenced by the types of properties sold. They nevertheless illustrate the differences between the markets.
Statistically, a luxury apartment counts as one additional home. For a household relying on a Cypriot salary and a mortgage, however, that property may represent no additional housing option at all.
The towers and coastal developments transformed the skyline and inspired descriptions of Limassol as the “Dubai of the Mediterranean”.
That description may be exaggerated when applied to the entire city, but it captures the development model that emerged in part of it.
The transformation was not exclusively the result of the Cyprus Investment Programme. Shipping, professional services, the arrival of foreign businesses and, later, corporate headquartering also contributed.
Nevertheless, the programme’s scale and influence on the type of properties being developed mean it cannot be regarded as a marginal factor.
The Cyprus Investment Programme stopped accepting new applications on 1 November 2020.
Yet the connection between state-granted rights and property did not disappear.
The parallel “golden visa” scheme, which remains in operation, requires a minimum investment of €300,000 in one of several designated categories, including the purchase of a new house or apartment.
Since January 2022, Cyprus has also implemented a strategy to attract businesses and talent.
This operates differently. Headquartering and tax incentives do not require property purchases, but they bring companies, employees and families who need accommodation.
As Yasemides pointed out, investment residence schemes directed construction towards properties of a particular value, while corporate relocation created direct demand for housing, particularly rentals.
“On the one hand, the economy is clearly more outward-looking and resilient. On the other, there is a housing market where accommodation costs have absorbed a disproportionate share of household income, particularly among young people and lower-income groups. The benefit was national; the cost was borne by specific groups,” he said.
11,184 applications but no complete picture
Economy Today requested data from the Deputy Ministry of Migration on investment residence applications, decisions, valid permits and the countries of origin of principal investors.
Between 2016 and 31 August 2026, authorities received 11,184 applications from principal investors and 33,701 applications concerning dependants.
A total of 9,444 permits were issued to principal investors and 24,452 to dependants.
As of 30 June 2026, permits remained valid for 7,833 principal investors and 18,073 dependants, representing 25,906 people in total.
Among principal investors, 3,190 came from China and 2,043 from Russia. Together, the two countries accounted for 66.8% of principal investors holding valid permits.
These figures illustrate the scale of the scheme, but not how many homes were purchased.
One investment may support a principal investor and several dependants, while the framework also permits investment options outside residential property.
The Statistical Service and Central Bank record transactions without identifying which are linked to the scheme. The Deputy Ministry records permits, but not properties.
The totals cannot simply be added together, nor do they establish causation.
This is where the information gap lies.
The Deputy Ministry knows how many permits are issued and the nationalities of their holders. The Land Registry knows which properties are sold and at what prices. The Statistical Service records the nationalities of residential property buyers.
Yet there is no published connection showing how many purchases were made for investment residence purposes, where they occurred, whether they involved new or existing properties and what proportion of local supply they represented.
The Ministry of Interior also stated that “it is not currently possible to provide a reliable figure for how many additional homes need to be produced” to address the shortage.
Forecasting housing needs is genuinely difficult. However, the ministry’s response did not refer to published scenarios, monitoring indicators or a previous assessment of additional demand by district and income group.
Kourtellos noted that the Ministry of Finance assessed the economic effects of the Cyprus Investment Programme in 2019 and 2020.
Assessing economic contribution, however, is different from conducting a housing impact study before implementing a policy.
“I am not aware of a comprehensive housing impact study that preceded implementation,” Yasemides said.
Dimopoulos and Loizou also said they were unaware of any such published assessment.
The absence of data does not prove that the policies were entirely misguided or that they alone created the housing crisis.
It demonstrates something more specific: their impact on housing was not measured with the same consistency as capital inflows, applications and permits.
8,978 permitted homes are not yet completed properties
The government’s response to the housing problem focuses primarily on increasing supply.
The Ministry of Interior expects more than 4,000 residential units to be delivered over the next two years through Town Planning Incentive Schemes and Build to Rent.
Approximately 1,400 are expected to be affordable, while the purchase of additional development rights is expected to generate more than €22 million for the Cyprus Land Development Corporation’s Special Affordable Housing Fund.
Construction activity is indeed increasing.
In 2025, authorities issued 8,159 building permits, up 19.5%, while the number of planned residential units increased by 42.7%.
Between January and May 2026, 3,650 permits were issued, an increase of 32.1%, covering 8,978 residential units compared with 5,484 a year earlier.
But building permits are not completed homes.
Financing, construction and marketing must still follow. It is not known how many of those 8,978 units will be completed, when, where or at what price.
The same applies to the more than 4,000 homes expected under government schemes. They represent anticipated production over the next two years, not housing already available.
Even if all are delivered, affordability will depend on more than their number.
Approximately 1,400 units under the two schemes, almost 35%, are classified as affordable.
The outcome will depend on final sale prices or rents, how long affordability is maintained, income eligibility criteria, location and delivery dates.
The ministry itself identifies two conditions for gradual market rebalancing: stable demand and a continuous increase in supply.
If demand rises again, or new construction is concentrated mainly in expensive properties, additional permits will not automatically translate into affordable housing.
Existing housing stock must also be considered.
The 2021 census recorded 491,545 conventional dwellings, of which 353,432 were “usually occupied”.
The remaining approximately 138,100 included vacant properties, holiday homes and dwellings used occasionally.
“An empty home is not necessarily an available home,” Loizou explained.
A holiday property in Paphos does not solve the problem of an employee who needs an apartment in Limassol.
Other properties require expensive renovation, have multiple owners, face title deed complications or are simply not offered for rent.
According to European Commission figures cited by Loizou, registered short-term rental units almost doubled between 2023 and 2026, exceeding 9,000 and approaching 40,000 beds.
The impact varies by area, but in tourist destinations and city centres, visitors, students and workers compete for the same smaller apartments.
Increasing supply is necessary, but it is not a complete solution.
The crucial measure is not how many units appear on building permits, but how many are completed, where they are located, what they cost and how long they remain affordable.
Schengen membership could bring new housing demand
Before new housing supply becomes available, Cyprus may face another source of demand.
In its response to Economy Today, the Ministry of Interior acknowledged that full accession to the Schengen Area “could increase demand” through greater mobility among employees, businesses and investors.
However, the ministry said a reliable quantitative estimate was not possible because there was no comparable country with similar characteristics.
Schengen membership would not automatically cause property prices to surge.
Kourtellos pointed out that Cyprus is an island, meaning travel would continue to depend on flights and their cost, unlike countries that removed controls at land borders.
Nevertheless, accession could increase the value of a Cypriot residence permit, particularly the country’s golden visa.
Yasemides explained that a permit would change from granting residence on an island to offering mobility across a continent.
If the permit remains linked to the purchase of a new property worth at least €300,000, some of that additional value could be reflected in demand and prices around the qualifying threshold.
Portugal’s experience with the €500,000 threshold
Portugal offers a useful, although not identical, comparison.
João Pereira dos Santos, assistant professor at ISEG – Lisbon School of Economics and Management at the University of Lisbon, told Economy Today that after the introduction of Portugal’s Golden Visa, the excess concentration of transactions at exactly €500,000 increased by approximately 60%.
His research also identified transaction prices approximately €38,000 higher than tax-assessed property values around that threshold.
This does not mean that all Portuguese homes became €38,000 more expensive or that the Golden Visa alone caused the housing crisis.
It does, however, show that when a government links a valuable residence right to a specific property value, the threshold can influence prices, sellers’ expectations and market behaviour.
Portugal initially introduced geographical restrictions on residential property purchases and, from October 2023, stopped accepting new Golden Visa applications based on real estate investment.
It did not abolish investment residence. Instead, it redirected the scheme towards job creation, research, culture, non-property investment funds and businesses.
According to Pereira dos Santos, if the objective is to prevent the value of residence rights from being reflected in housing prices, separating those rights from the purchase of existing homes is a clearer policy instrument than changing the investment threshold or moving it to another area.
Regional restrictions may simply transfer pressure to smaller markets with even less flexible housing supply.
Similarly, any abrupt monetary threshold can create a new concentration of prices at that level.
This is the central lesson for Cyprus.
The choice is not between attracting investment and rejecting it. It is between using property as a convenient investment vehicle and directing capital towards activities with productive economic benefits, without attaching the value of a state-granted right to an essential social good.
Pereira dos Santos suggested examining not only how many transactions occur around €300,000, but whether a policy change produces an additional concentration of transactions at precisely that threshold.
For a small country, he considers it more useful to compare those purchases with new housing supply in the relevant district or neighbourhood rather than relying solely on nationwide totals.
That requires linking residence permit records with Land Registry data, including property values and locations, investment categories, purchase dates, whether properties are new or existing, and local supply.
These indicators should be established before another policy change or Schengen accession, not after prices have adjusted and construction decisions have already been made.
“I believe we should separate permanent residence from property purchases,” Kourtellos told Economy Today.
Clerides offered a broader warning: “The country’s capacity to absorb investment is not unlimited.”
Property investment boosted growth, but productivity is another matter
Real estate development contributed significantly to Cyprus’s recovery after 2013, reviving construction, creating jobs, attracting capital and increasing public revenue.
But the assessment cannot end with GDP or transaction values.
It must also consider how sustainable those benefits are, who bears the costs and what productive capacity the investment leaves behind.
The available evidence does not allow a specific change in productivity to be attributed to property investment.
It does, however, allow distinctions between activities often grouped together under the term “foreign investment”.
Kourtellos distinguished the purchase of an existing home, which primarily transfers ownership of an asset, from financing new development, which adds buildings and construction activity, and from establishing a business, which can introduce technology, exports, skills and lasting employment.
“Investments for purely residential purposes are not particularly beneficial,” Clerides noted.
He argued that investments creating quality jobs, increasing productive capacity and introducing technology and modern practices have a broader economic impact.
Rising land and property values generate wealth for owners, but do not necessarily increase productivity.
When land, capital and labour are directed towards property because of government-granted rights or incentives, fewer resources may be available for other activities.
As Kourtellos explained, what was beneficial when unemployment was high and resources were underused may become less efficient when the economy and construction sector approach their capacity limits.
High housing costs also feed back into the wider economy.
They can restrict labour mobility, intensify wage pressures and make it harder for employers to attract staff to expensive cities.
They also widen the divide between those who have inherited family property and those who must buy or rent at today’s prices.
Housing policy needs evidence and action
The findings point to a severe and unevenly distributed housing affordability crisis.
Slow supply growth, construction costs, population increases, smaller households, short-term rentals and domestic demand have combined with corporate relocation and policies that used property to attract foreign capital.
Foreign demand is a significant factor, particularly in coastal districts. It is not the only cause, and its precise contribution cannot be measured using today’s fragmented data.
The conclusion is not that Cyprus should stop attracting investment, businesses or skilled workers.
It is that the country cannot continue designing these policies without adequate information about their housing consequences.
Every new incentive needs an advance assessment of its economic and social effects, scenarios by city and income group, linked administrative databases and a mechanism for correcting policy when demand exceeds the capacity of housing supply.
The question surrounding the next investment policy, and any additional demand generated by possible Schengen membership, is not simply how much capital or how many people Cyprus might attract.
It is where that capital will go, what it will produce and where those people will live, at what cost.
Those questions cannot continue to be answered only after the consequences have become apparent, leaving policymakers to explain problems in hindsight.
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