Short-term rentals in Cyprus: economic boon or scapegoat?

Yiannis Kotzias, general manager of operations of residential rental platform Phaedrus Living, has come to the defence of short-term rental properties, amidst a wave of criticism aimed at the sector.

Short-term rental properties, a market dominated by online platform Airbnb, have been lambasted by both the Cyprus Real Estate Agents Registration Council and the Association of Cyprus Tourist Enterprises (Stek), among other entities.

In terms of the former, Cyprus Real Estate Agents Registration Council president Marinos Kineyirou said in June that “the way short-term rentals currently operate causes multiple problems in key economic sectors like tourism and real estate”, citing lost tax revenue for the state, as well as negative effects for locals.

Kineyirou said that short-term rentals, especially apartments, drive up rental prices by reducing the supply of long-term rental properties.

“This is one of the reasons for the steep rise in rental prices, as a significant number of properties are removed from the market at a time of increased demand due to high interest rates and inflation, making home buying difficult,” he explained.

The council followed those comments with yet another announcement earlier this month, saying that “this phenomenon is taking on alarming proportions and is largely responsible for the skyrocketing rental prices of houses and apartments, keeping them at high levels”.

“In a difficult period for Cypriot society, with inflation and high interest rates making home ownership difficult or even impossible, more and more of our fellow citizens are turning to renting,” it added.

Moreover, the council said that “while the demand for rental housing is increasing, the supply of properties is not keeping pace, resulting in rental prices reaching exceptionally high levels”.

Regarding Stek, the association last week also highlighted concerns about short-term rentals, noting that 37 per cent of beds in Cyprus come from such properties.

Moreover, the association cited its own data, showing that there are about 15,000 properties advertised for short-term rental compared to the 7,200 that are officially registered.

In this context, the association suggested limiting rentals to 90 days per year, implementing fees, and adopting safety regulations to address housing shortages and the impact on local communities.

Responding to this criticism, Kotzias said that “short-term rentals cater to the modern tourist who increasingly seeks this type of accommodation”.

He argued that these rentals are not in direct competition with hotels and should not be seen as such, advocating for a common regulatory framework that ensures fair competition without stifling the market.

Moreover, Kotzias highlighted the significant economic contributions of short-term rentals, saying that “short-term rentals create new jobs, generate direct and indirect revenue for the state, attract international investors, and provide local investors with a safe and profitable investment option”.

Additionally, he stressed that this sector offers good returns and security, especially when managed by specialised service providers.

Addressing the root causes of rising rental prices, Kotzias dismissed the notion that short-term rentals are to blame.

“Market conditions, such as limited housing stock, soaring property prices in specific areas, and rising costs, have driven many to rent,” he said.

He also pointed to historical issues, such as properties tied up in non-performing loans, as factors exacerbating the problem.

Kotzias further stated that short-term rentals are less prevalent in urban centres where rental issues are most acute.

“In urban centres, short-term rentals are neither as prevalent nor as lucrative as in tourist areas,” he said.

“Property owners often prefer short-term rentals to avoid problems associated with long-term tenants,” Kotzias added.

He also questioned the feasibility of restricting short-term rentals in tourist hotspots like Famagusta and Paphos.

“If short-term rentals are banned, can the remaining accommodations meet the quantitative and qualitative demands of tourists,” he asked. “Will tourists not turn to other destinations or even the occupied areas in greater numbers?”

Furthermore, Kotzias warned against undermining investor confidence, both local and international.

“What message will the government send to those who invested to make their properties competitive in the demanding tourist market,” he said.

He then said that prohibiting short-term rentals would “not bring about progress or solve any of the underlying issues”.

Kotzias also raised practical concerns about the proposed restrictions, questioning “how sure are those proposing the ban that property owners will opt for long-term rentals at lower prices?”

“Why risk further losses from potentially bad long-term tenants,” he also said.

Kotzias then advocated for proper regulation and a unified operational environment for short-term rentals.

“The right regulation and unified operational environment are the solutions, not extreme, unsubstantiated, and groundless views,” he said.

“Solutions that go against market forces are doomed to fail,” he concluded.