These developments follow the 2015 passage of a "Trapped Buyers Law" to enable access to title deeds, a 2014 regulatory reform to ensure greater transparency, and measures to exempt buyers who buy during 2016 from all future capital gains taxes, and give them a 50% discount on Title Deeds transfer tax.
During 2015, the nationwide residential property price index dropped 1.8% but when adjusted for inflation, it actually increased slightly by 0.17%, based on figures released by the Central Bank of Cyprus. On a quarterly basis, residential property prices were unchanged in Q4 2015.
This was supported by figures released by the Royal Institution of Chartered Surveyors (RICS), which showed that house prices in Cyprus fell by 1.42% y-o-y in 2015, to an average of €372,714. Nationwide house prices also increased 0.56% during 2015 when adjusted for inflation. House prices fell 0.8% (-1.46% inflation-adjusted) q-o-q in Q4 2015.
- Nicosia, Cyprus’ capital, house prices declined by 1.42% (increased 0.56% inflation-adjusted) to an average price of €372,714 (US$414,065)
- Paphos house prices rose by 3.1% (5.7% inflation-adjusted) to an average price of €353,991 (US$393,265)
- In Farmagusta-Paralimni, house prices remained unchanged at €320,916 (US$356,520) (increased 2.1% inflation-adjusted)
- In Larnaca, house prices declined by 0.04% (increased 1.97% inflation-adjusted) to an average price of €277,222 (US$307,978)
- In Limassol, house prices declined by 3.18% (-1.23% inflation-adjusted) to an average price of €304,105 (US$337,844)
Unsurprisingly apartment prices have followed house price movements. Paphos was the only district that saw a meager price increase of 0.14% (2.14% inflation-adjusted) y-o-y in 2015, to an average price of €96,545 (US$107,256). In contrast, Nicosia saw the biggest drop of all Cyprus districts, with the average apartment price falling by 2.97% (-1.02% inflation-adjusted) during 2015, to €105,254 (US$116,931). It was followed by Famagusta-Paralimni, with apartment prices falling by 2.45% (-0.5% inflation-adjusted), Limassol -2.41% (-0.46% inflation-adjusted), and Larnaca -1.08% (0.9% inflation-adjusted).
This across-the-board housing market improvement is largely driven by Cyprus’ recovering economy. In 2015, the economy grew by 1.6%, after annual declines of 2.5% in 2014, 5.9% in 2013, and 2.4% in 2012, according to the International Monetary Fund (IMF). The economy is projected to expand by 1.6% this year, and by another 2% in 2017.
The Cyprus real estate market has historically been divided into the major urban centres of Nicosia, Limassol and Larnaca, primarily driven by local demand; and the seaside resort areas of Paphos and Famagusta, which are mostly driven by foreign demand. The economic decline of recent years affected both areas.
The housing market is expected to continue to improve in the coming months, amidst continued economic recovery, improvements in the banking system, and increasing investor confidence due to the passing of new laws that offer tax incentives and protect homebuyers from frauds.
Analysis of Cyprus Residential Property Market »
The average price per sq. m. of a 120 sq. m. apartment in the districts we cover is as follows:
- Limassol - EUR 1,891
- Nicosia - EUR 2,045
- Larnaca - EUR 1,356
- Paphos - EUR 1,297
If you are buying specifically with a view to renting out your property, Larnarca is the place. Gross rental yields are distinctly higher here, at around 4.02% to 5.81%. But generally, Cyprus is not a great location for gross rental yields, which are generally from just under 2% to just above 4%.
Capital Gains: Capital gains realized from the sale of immovable property are taxed at 20%, with a lifetime exemption of 85,430 if the property was owner-occupied for at least 5 years.
Inheritance: There are no inheritance taxes or estate duties in Cyprus.
Residents: Residents are taxed on their worldwide income at progressive rates, from 0% to 35%.
The transfer tax rate ranges from 3% to 8%, depending on the purchase price of the property. If the property is in joint names, the property value is halved, leading to lower transfer fees.
Foreigners are not covered by the provisions of the Rent Control Law, except the non-Citizen wife of a citizen of the Republic, and legal entities controlled by non-residents.
Tenant Eviction: Eviction of tenants is relatively difficult, especially in the case of ‘statutory tenants’ protected by the Rent Control Law. It takes an average of 360 days to evict a tenant.
In 2015, the economy finally recovered with a GDP growth rate of 1.6%, driven mainly by domestic demand. Economic growth is expected to be 1.6% this year and 2% next year, according to the IMF.
Despite this improvement, Cyprus continues to face enormous economic problems. Non-performing loans (NPL) remain a key issue. NPLs amounted to €26.69 billion (US$29.65 billion), equivalent to 153% of GDP in 2015. Many NPLs are in the construction sector, consisting of about 18.4% of all NPLs last year. In April 2016, NPLs dropped 8% to €25.53 billion (US$28.36 billion) from the same period last year.
The public budget deficit dropped sharply to just 1% of GDP in 2015, from 8.9% of GDP last year, according to the European Commission. The country’s deficit is expected to fall further to just 0.4% of GDP this year.
Public debt remains high at 108.9% of GDP in 2015, slightly down from 108.2% of GDP in a year earlier. Public debt is expected to remain unchanged this year.
The country is still stuck in deflation. Consumer prices dropped 2.1% in May 2016 from a year earlier, according to the Statistical Service of Cyprus. Prices fell by 0.27% in 2014 and by another 1.54% in 2015.
Unemployment dropped slightly to 15.1% in 2015, from 16.1% in 2014 and 15.9% in 2013, according to the European Commission. Jobless rate is expected to decline to 13.4% this year and to 12.4% in 2017.