When adjusted for inflation, nationwide house prices dropped by 6.9%. On a quarterly basis, house prices in Cyprus fell by 1.1% (-2.2% inflation-adjusted) in the latest quarter for which statistics are available, Q4 2012.
- Limassol saw the biggest annual house price falls of 10.7% (-11.9% inflation-adjusted), to an average price of €363,277
- In Nicosia, the capital, house prices fell by 4% (-5.3% inflation-adjusted), to an average of €475,409.
- In Larnaca, the average house price also dropped by 7.9% (-9.1% inflation-adjusted) to €331,695
- In Paphos, house prices dropped 4.6% (-5.9% inflation-adjusted) to an average of €390,513
- In Famagusta-Paralimni, the average price of houses fell 1.2% (-2.6% inflation-adjusted) to €360,686
Limassol had the biggest drop in apartment prices among Cyprus districts, falling by 15.5% (-16.6% inflation-adjusted), followed by Famagusta-Paralimni (-10.5%), Nicosia (-5.1%), Larnaca (-4.9%) and Paphos (-3.2%).
After robust year-on-year house price increases increases of by 21.09% (17.03% inflation-adjusted) in 2007 and 9.26% (5.48% inflation-adjusted) in 2008, Cyprus’ housing market started to decline in 2009, mainly due to the global financial meltdown.
- In 2009, the residential property price index fell by 2.19% (-3.03% inflation-adjusted) from a year earlier, according to the Central Bank of Cyprus.
- In 2010, the residential property price index dropped by another 3.89% (-5.83% inflation-adjusted) from the previous year.
- In 2011, the residential property price index fell 5.67% (-8.93% inflation-adjusted) from 2010.
Property demand is falling. In April 2013, the total number of property sales in the country plunged 38%. to 285 contracts, compared to the same period last year, according to the Department of Lands and Surveys. Of the total, 59% were domestic buyers while the remaining 41% were overseas buyers. Domestic sales fell in all districts.
During the first four months of 2013, the total number of tourist arrivals in Cyprus fell by 12.2% compared to the same period last year, according to the Central Bank of Cyprus.
Total housing loans dropped by 5.8% to about €14.2 billion in May 2013 from the same period last year, according to the Central Bank of Cyprus.
The housing market slump is likely to continue. The economy is projected to suffer a double-digit contraction this year.
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 2,345
- Nicosia - EUR 1,748
- Larnaca - EUR 1,490
- Paphos - EUR 1,428
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 4.51% to 5.63%. But generally, Cyprus is not a great location for gross rental yields, which are generally from just under 3% 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%.
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.
To secure a €10 billion EU-IMF rescue package, Cyprus has cut public sector spending, hiked taxes, and cut its bloated banking sector. Also included in the agreement was a write-down of bank deposits of more than €100,000 at the country’s two largest banks—Bank of Cyprus Plc and Cyprus Popular Bank.
In May 2013, unemployment reached 16.3%, an amazing increase on the 4% average unemployment rate from 2000 to 2009. Unemployment was up 30% in May 2013 from the same period last year, to 44,424, one of the highest year-on-year increases in the EU.
The University of Cyprus-Economic Research Centre expects the economy to decline by between 9% to 12% in 2013, while the European Commission projects it to contract by 8.9%, as a result of tough austerity measures. In 2012, real GDP contracted by 2.4% from a year earlier, after annual growth rates of 0.5% in 2011 and 1.3% in 2010, and an annual contraction of 1.9% in 2009.
Because of the country’s banking crisis, credit rating agencies recently downgraded Cyprus.
- Standard & Poor’s downgraded the country’s credit rating to SD (selective default) from CCC.
- Fitch downgraded Cyprus’ local-currency issuer rating to CCC from B.
- Moody’s retained its credit rating of Caa3 with a negative outlook for Cyprus, noting that the country risks another default in the coming years.
“Cyprus has no flexibility to deal with domestic or external shocks and there is a high risk of the program going off track, with financing buffers potentially insufficient to absorb material fiscal and economic slippage,” Fitch said.