Philenews

Shrinkflation: Smaller Apartments, Same Bedrooms, Same Price

Published February 27, 2026, 12:15
Shrinkflation: Smaller Apartments, Same Bedrooms, Same Price

Developers have been increasing pressure on the government in recent months to relax building regulations, seeking to reduce the minimum allowable apartment sizes and eliminate the mandatory requirement for parking spaces. Their aim is to reduce construction costs and offer more affordable prices. However, an analyst challenges the assumption that these changes will lead to lower prices. International experience, such as that of Canada, shows that housing shrinkage leads to a "shrinkflation" phenomenon, where apartments become smaller (15-25%) without a corresponding decrease in prices. The savings from reducing parking spaces are absorbed by increases in land prices and developer profit margins. This model works well during periods of low interest rates and investment demand, but creates problems when interest rates rise and supply exceeds demand. Cyprus risks following the same pattern, as demand for housing comes largely from investors and foreign buyers who focus less on size and more on location and returns. Therefore, reducing the size of apartments will not necessarily lead to lower prices, but to a reduction in available space and potentially to dissatisfaction of residents.