Cyprus: Overview

RENTAL YIELDS

Last Updated: Aug 27, 2009

Yields in Cyprus stable

Property prices in Cyprus have risen fast over the past few years - 2007 was a spectacular year. Since the beginning of 2008 the market has stalled, largely due to the withdrawal of British buyers, who have suffered from the fall of the pound sterling against the Cypriot pound, which is pegged to the euro.

However rents have risen along with buying prices over the past 4 years years. So with the exception of Paphos, which has suffered a decline in larger apartment yields, rental yields on apartments in Cyprus’ major cities have been stable.

Present yields levels mirror those of 4 years ago:

Average gross rental yields in Cyprus:

     • Nicosia apartments: 4.81%
     • Larnaca apartments: 4.22%
     • Paphos apartments: 3.86%
     • Limassol apartments: 3.79%

Readers of the Global Property Guide will know that we prefer not to buy property at this kind of yield, and would rather rent. But given Cyprus’ rather stable price/rent ratios, it doesn’t seem that Cyprus property is very risky.

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TAXES AND COSTS

Last Updated: Sep 10, 2008

Effective rental income tax is
low to moderate in Cyprus

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	nil	6.70%	19.5%
Click here to see a worked example
Source: Disclaimer

Rental Income: Rental income exceeding CYP10,750 (€18,368) is taxed at progressive rates. Standard deductions for income-generating expenses are deductible from the gross income.

Capital Gains: Capital gains realized from the sale of immovable property is taxed at 20%, with a lifetime exemption of CYP50,000 (€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.

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BUYING GUIDE

Last Updated: Apr 11, 2007

Total transaction costs are moderate

Total roundtrip transaction costs range from 8% to 14% of the purchase price. The buyer pays around of 3% to 9%, whereas the seller pays the remaining 5% for the agent’s commission. 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.

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LANDLORD AND TENANT

Last Updated: Jul 17, 2006

Cypriot laws are pro-tenant

Rent Control: The rental market can be divided into two broad categories: Houses controlled by the Rent Control Law (1983), and the free market.

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.

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ECONOMIC GROWTH

Last Updated: Jul 28, 2009

Slow economic growth

The Mediterranean island of Cyprus, known as the birthplace of Aphrodite — the goddess of love and beauty, lies off the southern coast of Turkey and the western shore of Syria.

Cyprus has been divided between the two-thirds government-controlled area and the remaining one-third is administered by the Turkish Cypriots. Despite the political conflict existing, Cyprus is one of the most popular vacation spots and retirement location as it is blessed with natural beauty that ranges from golden beaches and coastlines to rolling hills and forest clad mountains. It also has over three hundred days of brilliant sunshine each year.

Cyprus acceded into the European Union in May 2004 and started to adopt Euro as their official currency in January 2008. Since its accession to EU, GDP growth remained high at an average of 4.2% in 2004-2007.

Service sector including tourism contributes significantly to GDP at 79% and employs 71% of the labour force.

Amidst the economic crisis in the EU and other developed countries, Cyprus has been relatively shielded from it, because of lesser reliance on exports, prudent fiscal policies in the past, euro adoption, resilient financial sector and limited exposure to subprime mortgages.

Due to economic linkages with the recession-inflicted countries, GDP growth in Cyprus slowed to 3.66% in 2008, and is expected to slow further to 0.3% in 2009. Unemployment rose to 4.6% in Q1 2009 from 3.65% in 2008.