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Last Updated: Jul 28, 2009

House prices in Cyprus slump, due to weak demand from UK

Cyprus’ remarkable three-year housing boom ended in 2008. The market’s peak was in November 2008, and after that, prices began to fall.

Average home prices fell by 2.17% (-3.22% in real terms) y-o-y, to € 187,053 in March 2009, according to MAP S. Platis, a leading Cyprus real estate agency.

The house price crunch was mainly due to lower demand from British buyers which comprises around 70% of foreign buyers. The economic recession in UK and the weakening of the British pound against the euro resulted in low demand for houses.

Based on the figures from Land Registry, property sales dropped in the first half of 2009 to 842 properties sold from more than 3,800 properties sold in H1 2008. It could take three to four years for the property market in Cyprus to return to its previous level according to Andreas Christidoulou of Cyprus Land Registry.

EU nationals who are residents in Cyprus may own as much property as they wish. Non-resident EU nationals may own as much land as they wish, but if they wish to buy any other sort of property, ownership is restricted to one house or one apartment for which approval from the ‘Council of Ministers’ is needed.

Regardless of their residency status, non-EU nationals must seek the approval of the Council of Ministers before they can own any type of immovable property. Furthermore, unless there are exceptional circumstances, their ownership will be limited to: an apartment, a house, a building plot or land up to approximately three donums (4,014 sq. m.).

Owners wishing to rent their property to the tourist market should seek a permit from the Cyprus Tourism Organisation.

Read Price History  »

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.

Read Rental Yields  »

TAXES AND COSTS

Last Updated: Sep 10, 2008

Effective rental income tax is
low to moderate in Cyprus

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.

Read Taxes and Costs  »

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.

Read Buying Guide  »

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.

Read Landlord and Tenant  »

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.



 

  • Moderate transaction costs
  • Rapid growth with EU membership
  • Moderate rental yields
  • Low effective rental income tax
  • Conflict divides island into 2
  • Pro-tenant rental market

RESIDENTIAL PROPERTY FACTS
Price (sq.m): €2,748 For a 120 sq. m. property, usually an apartment. Rental Yield: 3.21% For a 120 sq. m. property, usually an apartment.
Rent/month: €883 For a 120 sq. m. property. Income Tax: 0.0 Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 11.1% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 9.8% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord & Tenant Law: Pro-Tenant Rating is based on a detailed study of each country’s law and practice.

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