The investment opportunities of British expatriates in the residential market of Southern Cyprus
Structure of dissertation Title page Abstact Acknowledgements Contents Chaprter 2 Litereture review, baackground data, construction industry Analysis of the statistics of properties. Chapter 3 investment -tax braks. Are there any specialized propertie? Test the hypothesis that there is investments opportunities with greater returns. Chapter 4 British expatriates Chapter 5 :Summary & conclusions and recommendations Bibliography
Hi this is some research i have done,
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Guide to Cyprus property investment
Cyprus is becoming increasingly attractive to overseas property
speculators with the buy-to-let property investment market now
accounting for more than 25% of all sales.
However, the ‘traditional’ property investment market has concentrated
on the increasingly over-developed tourist sector – and short and
medium term returns on jet-to-let properties are beginning to fall.
In some areas it’s possible to get a gross income from your investment
in the region of 4%-6% of the property’s value. However, the value of
a property is not necessarily the same as its purchase price and you
will not achieve such a high return everywhere!
A large number of properties are grossly overpriced
A typical example of overpricing was the sale of a 75m² apartment at
Oroklini, a village near Larnaca. The apartment has two bedrooms, a
large veranda and has good views towards the beach some 2km distant.
It sold for CYP 160,000 although the guide price in the area for
similar two bedroom apartments is about CYP 75,000.
Buy-to-let holiday home investments
If you are making an investment in the Cyprus property market, you’re
unlikely to get a good return from short-term holiday lets (unless you
have an exceptional property in a good location). You only have to
look at the number of buy-to-let properties being advertised to see
the sort of competition you’ll be facing. Remember too that you’ll
need to advertise & promote your property, furnish it, get someone to
clean & look after it for you, make repairs, redecorations, replace
breakages and pay telephone, electricity and water bills & local
taxes.
If you’re buying an investment property in a tourist areas, do not
budget on renting it out for more than 18 weeks a year.
Figures released by the Statistical Service of the Republic of Cyprus
reveal that tourism has dropped by 12% since 2005. If this trend
continues, there will be even fewer holiday makers looking to rent
holiday homes.
Some developers offer guaranteed rental returns of 15% per annum for
the first two years and I’ve recently seen one developer giving away
cars to property buyers. Needless to say the cost of these
‘incentives’ has been factored into the selling price!
Buy-to-let residential property investments
A more sensible property investment strategy for Cyprus is to buy a
property in one of the residential suburbs of Nicosia or Limassol
where there’s a steady demand for long-term (one year and more)
rentals. Although the weekly rate you achieve will be lower, this will
be more than offset by the longer rental period. And your overheads
too will be considerably lower.
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Basic Characteristics
· The Cypriot economy is a small, robust and fairly flexible economy, and has shown itself able ton adapt to circumstances. Intertemporally the Cypriot economy Is characterised by a very satisfactory rate of growth (the average annual rate of growth of GDP amounted to 5.1% in real terms, over the period 1961 -2003 ),full employment conditions and internal and external macroeonomic stability. As a result,Cyprus has achieved an enviable level of real convergence with the advanced economies, with a per capita GDP in 2003, expressed in purchasing power standards, standing at 76,3 % of the EU 15 average, according to the latest Eurostat estimates of May 2004, and exceeds that of Greece and Portugal.
In brief, the basic characteristics of the Cyprus economy are the following:
· The dominant role of the private sector in the production process. The role of the state is a supportive one, and concentrates mainly in:
· Maintaining conditions of macroeconomics stability and favourable business climate by creating the necessary legal and institutional framework
· Securing contitions of fair competition
· Creating modern economic and social infrastructure, utilising, inter alia, the new instrument of pulic private partnership
· Ensuring conditions of social cohesion
· The small size of the domestic market. The population in the Government controlled area was 709.600 in 2002, out of wich 69,1 % live in urban areas and 30,9 % in rural areas. The small size of the domestic market constitutes an adverse factor in the realisation of economies of scale and in the development of satisfactory intersectoral relationships.
· The small size of enterprises. According to the Registration of Establishments of 2000, the size of enterprises remained very small, with 4,4 persons on average per unit in 2000, as compared to 4,3 persons in 1995. More than half of the total number of enterprises, 58% employed only one person. The “micro enterprises” , that is the enterprises employing less than 10 persons constituted 95% of the total , other “small-sized” enterprises with 10-49 employess constituted 4% and “medium –sized” enterprises with 50-249 employess constituted only 0,7% of the total. The large enterprises with a workforce exceeding 250 empoyees amounted to solely 67, representing 0,1% of the total number of enterprsises. The small size of the business units hinders the exploitation of economies of scale and the adoption of advanced technogies and modern methods of management, production design and marketing.
· The small size of the labour force, given the small population base and certain quantitative and qualitative imbalances in the labour market.The quantitave and qualitative imbalances are evident both at the sectoral and occupational level and have been partly ameliorated by the employment by the employment, to a large extent, of foreighn labour. At the sectoral and occupational level and have been partly sectors of hotels and restaurants, construction, agriculture and manufacturing, whereas at the occupational level, the shortages are observed in technical and low-skilled occupations.
· The openness of the economy, with total imprts and exports of goods and services accounting for around 102% of GDP in 2003 as compared to an EU average of 66,9%
· The predominance and increasing importance of the service sectors, which accounted for 75,7 % of GDp and 71,5% of total gainful employment in 2003. The development reflects the gradual restructuring of the Cypriot economy from an exporter of minerals and agricultural products, mainly copper,mainly copper asbestos and citrus fruits in the period 1961-73 and an exporter of manufactured goods,mainly clothing and footwear, in the latter part of the 1970s and the early part of the 80s, to an international tourist, business and services centre during the 1980s and 1990s.
· Partial dependenc on the tourism sector, whose total contribution, derived from the value added, either directly through the purchase of goods and services of tourists in various sectors of economic activity or indirectly, through the intersectoral linkages, amounted to 15-20% of GDP in the period 1990-2003.
Housing Finance Corporation (HFC)
The Housing Finance Corporation (HFC) is a state-owned organisation governed by a nine-member Board of Directors,appointed by the council of Ministers, normally for a three-year term.
The main aim of the HFC is to provide long-term housing loans, with a priority to lower and middle-income groups. To impement the purpose of its establishment the HFC provides a range of savings accounts to attract deposits from the public. It uses most of these funds to provide mortgage loans to families for the acquisition of their first home.
Besides providing its own housing loans, the Corporation is instrumental in the implementation of the Government’s social policies, especially in the area of housing. It provides several special housing and social loans, including schemes for:
a) Large families, with four children or more
b) Small and isolated rural and mountainous communities
c) Very low income families
d) Depressed urban and rural areas, along the Attila military zone
e) Various types of housing and other social loans for persons who were displaced during the 1974 turkish invasion and occupation of the northern part of Cyprus.
The terms of the HFC loans compare very favourably with the loans provided by other financial institutions. The repayment period varies from 20 to 25 years. Loans are normally secured by a mortgage on the property to be financed.
The corporation accounts for a very substantial part of the market for new housing loans in Cyprus. Its total market share in this respect is estimated to be in excess of 33%
What EU Membership Means for Cyprus and Europe
Eu accession is the most important challenge facing Cyprus in the 21st century. With a modernised economy Cyprus is ready to be part of a new peaceful and prosperous Europe in which Greek and Turkish Cypriots together will be ready to utilise the vast opportunities that membership offers. The challenge facing Cyprus is to ensure that both communities have a role to play in the country’s future.
Membership of the European Union provides the most suitable environment for a fair and lasting settlement in the island as it will give both Greek and Turkish Cypriots a sense of Security and safeguard their fundamental human rights within the framework of the acquis communautaire which each member-state must strictly adhere to.
Economic and social reforms as a result of harmonisation with EU legislation have and will futher improve the living standards of all Cypriot ciztizens. Social policy is in line with the social Charter and greater emphasis will be given to environmental issues and the improvement of safety and quality standards.
EU accession has opened up the world’s largest market to Cypriot goods and services and will enable the island to make a positive contribution to the formulation of EU policy.
With accession Cyprus has become the southeastern frontier of the newly-enlarged Europe. Cyprus geo-strategic position at the gateway to three continents and its close proximity to the important oil routes of the area can provide EU countries with access to the large Arab markets and place them at an advantage with respect to their trade and commercial interest. At the same time it provides the Union with a foothold in the Eastern Mediterranean from which to exercise greater economic and political influence and play a leading role in facilitating peace in the regior. Cyprus EU membership will in itselfbring greater stability and security to the region
The acquisition of the island mercantile fleet, which ranks sixth in the world in terms of gross tonnage, has made EU the world’s largest shiping power.
Because of the island geographical location,serious problems facing Europe such as illegal immigration, drug trafficking and money laundering can be more effective monitored and combated.
As a financial and business hub the island will also afford member-states attractive investment opportunities.
min of foreign affairs –property purchauses in the area of the republic under Turkish military occupation
Caution regarding property purchases in the occupied area
Foreighn citizens are warned against the purchase of greek Cypriot owned property, in the part of theRepublic of Cyprus which has been under Turkish military ocoupation since 1974
As a result of the Turkish invasion and subsequent occupation of 36.4% of the territory of Cyprus, 170,000 Greek Cypriots who constituted 2/3 of the inhabitants of the inhabitants of the occupied area , were forced to flee from their homes. According to the 1964 Land Registry office Records, Greek Cypriots owned approximately 78% of the privately owned land in the territory now under Turkish occupation,while persons belonging to the Turkish Cypriot community owned approximately 21%.
The displaced persons are to this day prevented by the Turkish armed forces from returning to their homes and peacefully enjoying their properties. However, under Human Rights Conventions, as well as international and national law, they retain their title to their property.
Under the laws of the Republic of Cyprus , the explotation of property registered in the name of another ,constitutes a criminal offence, for which a European arrest warrant, executable in any of the 25 EU countries, and an intrernational arrest could be issued.
As such the illegal secessionist entity in the occupied area of Cyprus does not have jurisdiction to perform valid transfers of property ownership.
Thus, foreign citizens interested in purchasing property in the area under Turkish military occupation are strongly advised to thoroughly examine the legal ownership status of the property concerned, through the lands and surveys Department of the Ministry of Interior of the Republic of Cyprus, in order to ascertain, at first , that no violation of the property rights of the legal owners will be affected through the transaction, and ,second, to safequard that purpoted seller is the true owner of the property and can transfer a valid title.
Foreign visitors are futher advised that, material advertising property offered for sale in the areas which are not under the effective control of the Government, Found in the possession of persons coming from the areas situated north of the buffer zone to the areas under the effective control of the government, can and may confiscated.
Top 10 reasons
Capitalizing on its strategic location, Cyprus has developed through the years into a reputable international services hub especially in the banking and chipping activities. Since Cyprus accession to the European Union, it’s role as a business bridge between Europe, Asia and Africa is futher being enhanced.
Cyprus offers a unique basket of advantages to foreighn investors utilising Cyprus as a base for conducting their business activities worldwide.
Cyprus competitive advantages derive from its strategic geographical location, favourable business climate, fiscal regime, stable macroeconomic environment, high educational level of the labour force in conjuction with the comparatively low level of graduates’ remuneration, modern legal, banking and financing systems, excellent infrastructure with advanced transport and telecommunications network, as well as the widespread knowledge of English.
Living and working on the island for all seasons
One of the major benefits of being a Mediterranean island is the plentiful sunshine throughout the year, and Cyprus is no exception. In fact, Cyprus epitomises the ideal weather of the region with sunny days and fine temperatures almost every day. Cyprus has something to offer every month of the year, whether it’s swimming in the crystal clear waters (from early May to late November) or enjoying cultural sites and festivals( all year long).
Mediterranean Climate
Cyprus has a pleasant climate with dry summers and mild winters, enjoying about 300 days of sunshine. The rainy season is confined to the period between November and March. In January, the coldest month, minimum and maximum mean temperatures are 60c and 130c respectively, while in August, the hottest month, the corresponding minimum and maximum mean temperatures are 21c and 36c
Top quality of life
Based one the worldwide Quallity-of-life Index 2005 conducted by the Economist Intelligence Unit, Cyprus marks favourably on the 2005 Quality of life index ; hence enjoying an exceptional lifestyle and top quality of life. The survey took inton account a variety of factors including income, health, freedom, unemployment, climate, political stability and security, gender equality, and family & community life.
In Cyprus English is widely spoken and extensively used in business as well as in every day life; for example, various road signs and restaurant menus are also available in the English language. Remarkably, a good number of media such as newaspapers, local radio stations, and television programmes are in English.
A variety of high-standard private schools operate in all towns, catering for the needs of foreign speaking pupils. English speaking private institutions of tertiaty education can be found in all towns.
Compared with many European countries, Cyprus enjoys an exceptional low crime rate. Indicatively, in 2004 the number of serios crimes was 1,033 per 100.000 popuation, far below the corresponding figure for the European Union, according to Interpol statistics.
Mission Eurozone
Upon the first anniversary of its accession to the European Union, Cyprus achieved an important goal when, on 2nd of May 2005, the Cyprus pound joined the European exchange rate mechanism , a prerequisite for joining the eurozone. Following the firm commitment to pursue sound fiscal policies essential for preserving macroeconomic stability and ensuring the sustainability of the convergence process, the Cypriot authorities have announced performance and reach the Eurozone targets.
On 10th of July 2007 the EU councilo of the Finance Ministers decided for the adoption of the euro on 1st January 2008 by Cyprus with the conversion rate at 0.585274 Cyprus pounds to the euro.
Q1 I have been told by my estate agent/ Lawyer/ developer that “Things are done differently inCyprus”, is that true?
The process of buying property is similar to that in the Uk and most developed counties, yet threre are many pitfalls for the unwary. Unlike the Uk, where property buyer’s solicitors carry out various plan out various plan and title searches automatically, no such ‘standard’ method of working are in common use in Cyprus. Some lawyers will guide yoy through the process, others will not. It is essential that you.
Ø Apoint an independent lawyer who is experienced in property conveyancing
Ø Ensure that he/she carries out the required tasks to safeguard your interests
Ø Do not sighn any papers or hand over any money until you have taken independent legal advice.
Q1. Q2 I have been told that it is now safe to buy property in the north of Cyprus. Is this true?
There are a number of practical, financial and legal issues associated with buying property in the north, most of which relate to the complex political situation. These include the non-recognition of the “Turkish Republic of Northern Cyprus”, the suspension of EU law in northern Cyprus, the possible consequences for property of a future settlement, and the many thousands of claims to ownership from people displaced in 1974. There is also a risk that, as a result of the disputed ownership of many of the properties, purchasers could face legal proceedings in the courts of the Republic of Cyprus, as well as attempts to enforce judgements from these courts elsewhere in the EU, including the UK.
In addition, purchasers should ensure that they are fully aware of the specific Turkish Cypriot rules on foreigners purchasing property in the north including the requirement to obtain consent to the transfer of property.
On 20 October 2006, an amendment to the Republic of Cyprus criminal code relating to property came into effect. Under the amendment, buying, selling, renting, promoting or mortgaging a property without the permission of the owner (the person whose ownership is registered with the Republic of Cyprus Land Registry, including Greek Cypriots displaced from northern Cyprus in 1974) is a criminal offence. The maximum prison sentence is 7 years. The amendment to the law also states that any attempt to undertake such a transaction is a criminal offence and could result in a prison sentence of up to 5 years. This law is not retrospective, so will not criminalise transactions that took place before 20 October 2006.
Furthermore, documents relating to the purchase of property in northern Cyprus will be presumed by the Cypriot authorities to relate to the illegal transfer of Greek Cypriot property and may be subject to confiscation when crossing the Green Line. Anyone in possession of these documents may be asked to make a statement to the Cypriot authorities and could face criminal proceedings under the 20 October 2006 amendment. The full implications of this legislation are not yet clear. Any enquiries about its scope should be made to the Republic of Cyprus High Commission in London
Investment property guide : Cyprus property market analysis
Some Cyprus property developers and agents will tell you that if you buy offplan and then sell it when finished, you will double your investment. Although this was true some years ago, the Cyprus property market has cooled down considerably in recent times.
Factors affecting the Cyprus property market
There are a number of factors affecting Cyprus position I the international property market. Some of these are due to eternal influences, others are due to home grown issues.
Cyprus’ competitive position is adversely affected by the high cost of air fares. The free Skies Agreement could change this situation considerably, when low-cost point-to point are allowed to fly directly to the island.
External events, such as conflicts in the Middle East and terrorist attacks, reduce tourist numbers; this has a knock on effect on property sales
Upgrades to Paphos and Larnaca airports are in progress. Once completed, both airports should be able to handle more flights thereby increasing the number of visitors to the island.
Much of the property built for foreign buyers tends to be uninspiring in desighn with very basic fixtures, fittings and finishes.
In a recent article, a leading firm of charted surveyors bemoaned the fact that the quality of property bought by overseas investors was in decline and expressed concern over the long-term viability of the companies involved.
Cyprus adoption of the Euro will remove the annoying currency fluctuations that the dog the property market and reduce the costs associated with trasnsfering money to the island.
Many of the more popular areas of the island are littered with property development, much of which is owned by foreigners.As well as creating expatrtriate ghettos and denuding parts of the island of its natural beaty, the volume and pace of construction places heavy demands on the infastrure and resources of the island. In some places, over development results in frequent cuts in the supply of electricity and water.
Cyprus property market performance
, of (chartered surveyors, property valuers, project managers & estate agents), published a review of the property market’s performance in 2005.
Investment property guide: Cyprus property price index
Cyprus Real Estate, a real estate advertiser, publishes a monthly Home Price Index-the only one of its Kind in Cyprus.
The company started to produce the index in 2004. It shows the movement of the prices at which residential properties in Cyprus are sold and is based on an average of around 400 to 500 property sales/month.
When the price index started in January 2004, the average price of residential property in Cyprus was 133,117 euros. By the end of 2007, it had reached 185,117 –an increase of 39.06 over the 48 months since its introduction. This equates to an approximate annual growth of 9.77%.
During 2005, the index rose by 2.48%
During 2006, the index rose by 5.87%
During 2007,Index rose by 16.13 %
During 2006, the Index rose by 5.87%.
During 2007, Index rose by 16.13%
(The graph above has been produced using the figures published by ).
Cyprus is becoming increasingly attractive to overseas property investors with the buy-to let investment market now accounting for more than 25% of all property sales.
However, the traditional investment property investment market has concentrated on the increasingly overdeveloped tourist sector-and short and medium term returns are beginning to fall.
In some areas it’s possible to get a gross income from your investment in the region of 4%-6% of the property value. However, the value of a property is not necessarily the same as its purchase price and you will not achieve such a high return
A large number of properties are grossly overpriced
A typical example of overpricing was the sale of 75 m2 apartment at Oroklini a village near larnaca. The apartment has two bedrooms, a large veranda and has good views towards the beach some 2Km distant. It sold for 160,000 although the guide price in the area for similar two bedroom apartments is about CYP 75,000.
Buy –to-let holiday properties
If you are buying investment property in Cyprus, you’re unlikely to get a good return on your investment from short-term holiday lets (unless you have an exceptional property in a good location). You only have to look at the number of properties being advertised to see the sort of competition you’ll be facing. Remember too that you’ll need to advertise & promote your property, furnish it , get someone to clean & look after it for you, make repairs, redecorations, replace breakages and pay telephone, electricity and water bills & local taxes.
If you’re buying investment property in Cyprus Tourist areas, do not budget on renting it out for more than 18 weeks a year.
Figures released by the Statistical Service of the Republic of Cyprus reveal that tourism has dropped by 12 % since 2005. If this trend continues, there will be even fewer holiday makers looking to rent holiday homes.
Buy-to-let residential properties
A more sensible investment strategy is to buy a property in a residential business area in the suburbs of Nicosia or Limassol where there’s a steady demand for long term ( one year and more) rentals Although the weekly rate you achieve will be lower, this will be more than offset by the longer rental period. And your overheads too will be considerably lower.
Inspection visits
Overseas estate agents & marketing companies charge commission
Amounting to 12 %-14% (plus VAT). This, of course, is of course added to the purchase price of the property.
If you purchase a property at a price of CYP 180,000 the agents receive around CYP 27,000 of your investment.
How difficult is the property purchase process in Cyprus?
Foreigners can buy one home in Cyprus , and are intitled to hold lnd freehold, but there is a maximum limit on land donums (4,0114 sq m) A permit to register a property is needed from the government, but can easily be obtained through a lawyer. However since Cyprus’ accession into the EU on 01 May 2004, there have been plans to ‘de-restrict the housing/property sector. The plans target to allow unencumbered property acquisition by 2011.
Before the EU negotiations, no foreigners could rent out property. Even today, non-EU property owners cannot rent out property.
After the offer is accepted, a nominal deposit is made which can be as low as CY£ 2,000. This deposit is binding, so there is no gazumping. The contract is then drawn up, and on signing, the buyer has to pay 20% to 30% of the value of the property, the remainder being payable according to the contractual terms agreed. The contract must then be deposited at the land registry, within two months of signing.
A non-Cypriot buyer must then make an application to the Council of Ministers to acquire immovable property – largely a formality – including bank reference, criminal records, the size of the land, and a statement that this is the only home he will hold in Cyprus. Though the procedure can take up to one year, there is meanwhile no restriction on using the property, and in the unlikely event that approval is not granted, the buyer can re-apply, and anyway has 17 years in which to sell the property. Nor does lack of approval affect inheritance rights.
The case of Ayia Napa within the context of tourism in Cyprus
Prior to 1960, tourism on the island of Cyprus was limited, with the majority of the 25,700 tourists being attracted by the hill resorts. There were only 4000 tourist bed spaces, 30% of which were located along the coastline around the country (, 1992). Forty-five years later, tourism plays a major role in the economic prosperity of Cyprus .Nearly 2.4 million tourists visited Cyprus in 2004, contributing an estimated CYP982 million (.8 m) of gross receipts to the national economy.Revenue from the tourist sector accounted for 45.3% of the total foreighn exchange earnings. There are currently approximately 90,000 beds in licenced establishments throughtout the country.
This pattern of development has been particularly pronounced in the once sleepy fishing village of Ayia Napa, lcated in the South-eastern corner of the island, which together with the surrounding area, now accounts for almost half of the tourist arrivals to the country.
Conceptual and theoretiacl Issues. Aspects of Tourism
1.Find a property or investment deal that you want to purchase. Read the Cyprus buying Guide on how to research and find reputable developers/agents.
2. Permission to Own Property in Cyprus.Apply for permission to own a Cyprus Property from the Councils of Ministers. Either you can do it or your lawyer can do it for you. Its not necessary to obtain before you buy the property however you need to get it at some point. You will need the agreement in order to sell the property on.
Property Inspection. Many people buying in Cyprus pass over this step, which is fine if the property is relatively new. Yet the cost of a survey is quiet inexpensive. Just as it is in the Uk, if you neglect to get a survey and the house falls apart later, its your responsibility and your cost to pay. New properties have a lifetime quarantee for major structural problems; however you have to prove negligence. And anything minor has a 1 year quarantee. For the most part, the only time you really want to get a survey is when the property is old and may have structural issues. Your lawyer will be able to put you in touch with a good surveyor.
Survey & Valuation. To get these done, you can ask your solicitor of contact the Cyprus Civil Engineers and Architects Association (CCEAA) or the Association of valuers & Surveyors. They will be able to value the property that you’re interested in buying. If you’re going to rent your property, make sure that you get one that also knows about property management and how much properties are renting for. Note: mortgage lender valuations are not a substitute for an independent valuation.
Agreement on Price. This happens between the seller/developer and you and when reached a Sale Agreement is creted. Whether it’s a buyers or sellers market (high demand and low supply or low demand and high supply) dictates whether there’s room for negotiations.
6.Stamp Duty is Payable. The tax is due within 30 days of signing the Sale Agreement. This is at the rate of 2.57 euros per 1,710 and thereafter at the rate of 3.42 euros per thousand thereafter (note: numbers are a bit odd due to the fact that when the Cypriot Pound was in Circulation, it was £1.50 per £1,000 and £2.00 thereafter. After the sale Agreement is filed with Land Registry your Lawyer will then apply for the transfer of the title of the property.
7. Transfer Fee. When the title deeds have been drafted you or your lawyer will meet the property owner at the District Land Registry Office to pay the transfer fee and transfer ownership
A. Up to 85,500 euros 3%
B. 85,501 to 171,00 euros 5%
C. Over 171,001 euros 8%
Very important note : If two people are buying the property(e.g Husband and Wife) these figures are for each person. Thus , with a couple purchasing a house for 171,000 euros the total piad would be 3% )or 85,500 euros for each peron).
Big No- No: Your solicitor may advice you to put the name of the property in one of your parents or other relatives names if you’re buying as a single person. By doing so, you could save a few bob, HOWEVER, this could cause a Huge issue with inheritance tax if you relative still lives in the Uk. If they die, their estate will comprise of the Cyprus property and will cause the value of their estate to increase under UK tax law. If it pushes their estate over the threshold, and you’re the beneficiary of their estate you might have to pay a very large bill that was totally unnecessary!
8.Take Possession of Property. When the terms of the Sale Agreement have been met you can take possession of the property. Once you agree to the sale agreement, provided your solicitor is happy ( and you better have a solicitor!) and you have the finance in order, you will be legally bound to it. Within the agreement will be an outline of staged payments. At signing of the Sale Agreement, you are usually required to pay an initial deposit, this can be 20% -30% value of the property).And then 3 to 4 more stages making up 100% of the payment.
In some cases there are finance options where you pay X% now and nothing until completion. Check with your developer/agent or mortgage lender to understand what your options are.
9. ‘Notice of Completion.’ When a stage is completed the developer will notify you or your solicitor that the payment is due. The ‘Notice of Completion,’ will be signed by the civil engineer or the architect. You will have a short period of grace to pay (see top tips on stages and mortgages in the Cyprus Buying Guide).
10. Final Completion. Once you pay your last payment you will have to pay Stamp Duty and the Transfer fee (from the developer to you) and then take possession of the property. As with new UK properties, you’ll need to walk around and create a snag list to help you check every possible corner before accepting the property.
Unbelievably the buying process in Cyprus can be very quick – many buyers fly down and purchase a property within a week! Cyprus property professionals provide property to many Brits, thus they’re completely geared to getting contracts in place and providing you with the property of your requirements.
HOWEVER, stating that, things can happen too fast. When you go to Cyprus you’ll notice that the competition is strong and there are many hard sales tactics used. An unethical salesperson knows that they only have a few days to get you to buy, so many use every trick in the book.
One common sales trick being used in Cyprus is the ‘Bait & Switch,’ method. What happens is the agent/developer will show you a very good priced unit. Let’s say a 1 bed flat for 80,000 euros.
You’ll agree to buy it, spend hours filling out contracts, visiting the solicitors and become emotionally drained. And then…just before you leave, the agent/developer will call you back to say, ‘You won’t believe this but as I was selling the flat to you, my business associated sold it before me…but don’t worry, we can provide you with the flat next door and it’s only 93,000 euros guaranteed…But of course, you must act fast to get it.”
By the time you hear that your sale has fallen through, you don’t want to expend any more time and energy so you seriously contemplate the 93,000 euros offer. This is s TRICK, so don’t let it happen to you.
In order to avoid dealing with tricksters and unethical developers, please let me help you find the best property professional for you. Since I work with Cyprus buyers and investors every day (along with the developers and agents), I know who is good and who is bad.
Please fill out my form on the Property ‘Matching Service’ page. Buying in Cyprus can be fun, but you really must do your homework and ensure that you’re dealing with good people
Reasons on WHY and WHY NOT to invest in Cyprus !
Ø The country is beautiful and so are the people. This wil attract future renters and dream home buyers so your property will be in demand as long as you buy in the right location.
Ø Cyprus is sunny and warm year round and attracts potentilal tenants throughout the year. Many Brits and other nationalities like to stay for several months so your option to let out for long periods is high.
Ø Cyprus ,now in the EU, was once a British colony and quite a bit of the British ways have stayed. This allows visitors to feel like they are home away from home making it an attractive place to rent and buy. Eighty percent of Cypriots speak English, their law system is based on English Comon Law and they drive on the same side of the road as us
Ø Due to discussions held about the “ Cyprus Problem”, there is the potential that Southern Cyprus and Nothern Cyprus will iron out their differences-this will have huge effects. The country will achieve an enormous boost to their economy which will in turn increase property values .
Ø Cyprus has Huge tax advantages especially for business(corporation tax is as low as 10% and retirees (foreign pensions are taxed only5%)Crime is extremely low-the lowest in Europe.It’s unlikely that your property will be broken into and visitors (tenants) like the low crime rate as they feel safer.
Ø Capital growth for the next two o three years has been forecasted to 40% and a long term forecast, over the next 10 years has been forecasted at an annualised rate of growth of 18% to 20% stated in the Cyprus Market and ForeCast Report provided by .
Ø Gross rental yields, since joining th EU have been averaging between 7%-10% (provided you buy at the right location)
Ø Excellent Mortgage Finance is available. You can get offers for 25 years at up to 80% loan to value if you buy off plan, you can defe mortgage payments until the build is complete and they pay interest only for up to tws
Ø You can still find properties for under £ 80,000 (GBP) that will make great investments
Ø Eeach area of Cyprus has numerous things going for it. Whether it’s new golf courses. More marinas, a larger airport or a better infastucture , the country is putting serious effort into increasing its appeal to tourists
Reasons Against Investing
Ø Not every area attracts tenants year round so you need to do your homework to find out the best location to get the least amount of vacancies as possible.
Ø The “ Cyprus Problem “ can deter some people from visiting and /or buying a property in Cyprus. Anywhere that there is a political unrest some people want to kep away.
Ø Since the island still has quite a bit of space to develop you may locate a wonderful property only to find that 2 years later the view is obstructed by new developments or a new road is being laid down.
Ø The flight is 4 hours away from England, which is a bit longer than mainland Europe hoewhowever the flight services are fantastic and the rewards of Sunny Cyprus are worth the trip. However, keep in mind that if there is a problem, it will take you a while to get there and get back.
Ø This information I provide is on Southern Cyprus (the Republic of Cyprus) only however just to ensure you know about Nothern Cyprus . Currrently it is occupied by Turkey, which invaded the country in 1974 and are illegally occupying the properties of many displaced Greek Cypriots. If you buy a property in North Cyprus you run the chance of buying from someone that does not legally own the property and thus cannot legally sell it to you. My suggestions is to stay away as the risks are too high NOTE: The UK government has a warning against investing or buying in the North. And although many developers in the North will offer your money back if you fail to get tittle deeds, what happens if that developer goes under? If you buy in the North and are taken to court the prosecutors can not only take away your property , but they can also go after your assets back in England if you purchase an illegally owned property
Ø Prices are rising and since they’ve entered the EU there’s very little chance of getting a 3 course meal for £5, however this increase in prces seems to be a reflection of many EU countries and is expected.
Ø There are well over 3,500 developers in Cyprus and it is rumoured that over half of them are operating illegally. Further, most Estate agents are not really eastate agents at all.
Ø In many areas there is an OVERSUPPLY of property and some developers are overpricing their properties so it is imperative that you compare between developers.
Financing your Property in Cyprus
How are you going to fund your purchase in Cyprus?
When you find the property that you want, reservation fee or small deposit will be required. The amount can very, but is usually around 2,000 to 3,000 euros. You’ll want to make sure the fee is refundable in the event that you cannot get a mortgage or have to pull out of the purchase.
The reservation fee allows you to take the property of the market and freeze the price.
Some buyers use their debit or credit card to pay the fee is to pen an account with a currency company prior to your trip and placing a small amount of sterling with them-enough to cover 3,000 euros. If and when you choose to make a reservation an exchange and transfer can be sent to Cyprus very quickly. And if you decide not to place a reservation, the currency company can move the money back into your account in the UK.
Paying Cash
If you have the cash available then the whole payment process is quite straight-forward.You simply pay when the money is due.
Also note that local currency (Euros) can be reserved at today’s currency exchange rate for purchase in the future. This is a very simple way to ensure that you don’t unduly suffer from the adverse currency movements.
Local Cyprus Mortgages
This is a somewhat complicated thing to explain. Cyprus doesn’t really have mortgage brokers….well, they have a few, but I’m not sure what you would pay them for as you’re usually ‘forced ‘ to use the developer’s bank.
If you buy a new property off-plan (which most people do), you’ll need to get a mortgage from the bank that the developer has a mortgage for the land on.
The developer goes to the bank and gets a loan to build properties. The bank gives the developer money based on the security of the land.
When you go to buy a property on the land that the developer has mortgaged, you then have to:
1. Use the same bank the developer used as they’ve already deemed the developer worthy and will thus guarantee that they’ll either pay back the loan or they’ll take the land.
2. Use another bank with other mortgage offers. However you will have to get a bank guarantee. A bank guarantee will cost 1.5% to 1.8% of the value of the property annually (until you get the title deeds). If you choose to use a bank independent from the developer you will be required to get a guarantee.
3. If you’re buying a re-sale property and want to get a mortgage, the best thing you can is visit the main banks and see what their deals are. It’s very easy for you to get to each bank, compare the offers and make a decision. In the UK there are thousands of packages, thus the need for a mortgage boker..in Cyprus there is a limited choice
4. The Cypriot mortgage market is not as developed as the Uk market and the competition is not as stiff, but, the local banks are still keen to lend. Depending on your status, a loan can be obtain from 80% on your first property.
Mortgage periods can be up to 30 years. Repayment is interest and capital. Interest only mortgages have just started to come in,but thy’re interest-only for a set period of years rather than for the duration of the loan. Better options will most likely come in time.
The age limit for a mortgage is up to 65 although flexibility has been shown up to the age of 70 for individuals with suitable assets and /or private pensions.
The banks use a scoring system similar to the Uk. One key test is the ability to make the repayments(rember capital and interest). For this , the banks will require that the repayments on your mortgage and other credit agreements you have are less than 35% of net relevant earnings.
Net relevant earnings include income from all sources(e.g employment, rental income ,pensions ,etc). and from which you deduct certain costs such as tax and pension contributions. The banks are trying to establish a level of net income that will be more than enough to cover your onoing and regular payments.
The process is very quick if you are organized and able to provide the necessary documentation rapidly. If you are really on the ball you may be able to get a principal offer from a bank within a matter of weeks.
The foreign Investors Service Centre operates under the auspices of the ministry of Commerce, Industry and Tourism for Foreign-based companies interested in investigating opportunities in Cyprus . It constitutes the central agency of information, support, anf foreign investors relations. It plays a vital role in attracting FDI in targeted industries , especially focusing on the development of high technology products, the enchancement of R& D and technology transfer ; fields essential for the upgrading and the enrichment of production capacity and the productive fabric’s competitiveness.
The Centre’s activities include:
Ø Promotion of Cyprus as international business as well as an R &D centre.
Ø Organisation of promotional activities for the dissemination of Cyprus’ competitive advantages and encouragement of foreign investment
Ø Provision of information to investors regarding financial, legal and taxation matters in implementing a project in Cyprus.
Ø Provision of advice to potential investors regarding the most effective way of making use of the package of the various benefits offered (e.g Grant Schemes)
Ø Liasing with various governmental departments and facilitating the process of granting the necessary approvals, such as the work permits, required for implementing a project.
Ø Provision of aftercare service aimed at anchoring existing investors and encouraging them to upgrade their activities in Cyprus.
The Foreign Investors service Centre ia a member of ANIMA-the euro-Mediterranean Network ofInvestment Promotion Agencies, as well as WAIPA-the world Association of Investment Promotion Agencies.
Continued growth in Foreign Direct Investment Ιnflows
According to the ” 2007″ published by , Cyprus ranks among the front-runners, indicating both high FDI performance and high FDI potential.
The FDI inflows for 2006 were above 1.4 billion dollars continuing an upward trend for third consecutive year, showing an increase in the range of 23% from 2005;indicating the country’s attractiveness as an international investment and business centre.
The Statistical Service that it has published the annual report “ , 2003”. Thee report contains detailed data on the construction sector, pertainining, inter alia, to output, capital formation, inputs, new dwellings completed, building permits authorised, labour cost index and price indices of construction materials.
The main developments in the construction sector in 2003 were
a) The sector registered an upwards trend for the third consecutive year, recording a positive rate of growth in its value added in real terms of 7,0 % compared to 5,5% in 2002 and 3,7% in 2001. This is attributed mainly to the significant increase in the construction of residential buildings.
b) Gross output at current market prices rose by 10,5 and reached £929, 8million compared to £841,2 million in 2002. Dwellings accounted for 49,2% of the gross output, non –residentil buildings (shops, offices , factories, hotels , etc) for 20,4% civil engineering projects (roads,water supply and sewerage networks, telecommunications and electricity lines etc.) bfor 18,2% and repairs and maintenance for the remaining 12,2 %
c) Employment in the sector in the sector increased by 5,8% compared to 5,0% in 2002. The price index of contstuction materials recorded a rise of 4,6% compared to an increase of 2,4 in 2002
d) Labour cost in contruction increased by 5,8 compared to 5,0% in 2002. The price index of construction materials recorded a rise of 4,6% compared to an increase of 2,4% in 2002
e) The number of new dwellings completed rose by 44,1% to 8.734 dwelling units compared to 6.059 in the previous year. The average area per dwelling completed in 2003 was 202 square metres for houses and 111 suare metres for apartments , compared to 225 and 124 respectively in 2002
f) The cost of Construction per square metre (excluding the value of land ) rose from £353 in 2002 to £370 in 2003 for houses and from £336 to £345 for apartments.
Caution regarding property purchases in the occupied area of Cyprus
Foreign citizens are warned against the purchase of Greek owned property, in the part of the Republic of Cyprus which has been under Turkish military occupation since 1974
As a result of the Turkish invasion and subsequaent occupation of 36.4% of the territory of Cyprus, 170,000 Greek Cypriots ,who constituted 2/3 of the inhabitants of the occupied area, were forced to flee from their homes. According to the 1964 Land Registry Office Records, Greek Cypriots owned approximately 78% of the privately owned land in the territory now under Turkish occupation, while persons belonging to the Turkish Cypriot community owned approximately 21%
Cyprus has never experienced a downturn in it’s property market, but that is not to say that it is without isk, a purchaser must get independent professional advice and not just use the vendor’s/developers lwayer/solicitor.
“The Acquisition of Immovable Property” (Aliens Amended) law 54 (1) of 2003 which came into force on 1/5/2004 the date of the Cyprus accession to the EU brought about some significant changes to the old policy, lifting considerable restrictions in the case of European Union Nationals acquiring property.
Property Taxation in Cyprus
Whether you are intending spend long periods of your retirement in Cyprus ,or just use it as a stopp off point as you jet round the world, you may want to purhase property there. In order for a non –resident expatriate to do this, permission must be obtained from the Council of Ministers, although this is usually granted provided that the property or land is not intended for commercial development.
If you decide to rent out your Cyprus property when you are not staying in it, be prepared to pay tax on the income of between 20-25% if you purchased it through some form of company, or between 20-45% as an individual. Individual non-resident homeowners cannot claim all of the deductions that are available to companies, but can deduct a notional 20% on the rental income independent of whether any epenses are incurred in deriving the rental income.
Other duties pursuant to the purchase and ownership of Cyprus property for non resident expats include:
Capital Gains Tax A gain n the disposal of property held by a non-resident(and acquired with the importation of foreign currency between August 1980-July 1990) is not subject to CGT. In the majority of other cases, CGT at a rate of 20% applies. There are certain lifetime allowances which apply to gains on the sale of Cyprus property, and in any combination ,they may not exceed CY £50,00
Immovable Property Tax Immovable property tax is calculated on the market value of the house as of January 1980, and is levied at varios rates
Tranfer fees The purchaser of a property is liable to pay these, at varying rates depending on the market value of the propert
Stamp Duty and Mortgage fees The purchaser is also liable to pay the stamp duty arising from the sale of the house.
Ten reasons to invest in Cyprus
1.The general price level of property in Cyprus has remained ery low in comparison to the UK, or even in comparison to spain.
A relatively low cost of living often accounts for a substantially iproved quality of life . Cyprus enjoys a high standard of living with good facilities.
The Cyprus economy is characterized by robustness and stability that is evidenced by the favourable evaluations of the European Commission and the international Monetary fund.
The achievement of the Cyprus economy have been recognized by the European Council, which predicted Cyprus entry into the Euro by 2008 is a futher vote of confidence.
Tourism is predicted to grow by 4.6% over the next 10 years, contributing about 13.9% to the country’s GDP by 2014. This is good news to property investors looking for a ready market.
Cyprus boasts a very efficient land registry system with straightforward and well administered procedures, making property purchase a safe option
Cyprus has a British –based legal sytem, where English-speaking lawyers abound. A British –based banking system in Cyprus makes mortgages and managing your money similar to the UK.
Taking advantage of Cyprus privileged and strategic geographical location at the crossroads of 3 continets, Cyprus cooperates with neighbouring countries such as Greece, Israel, Lebanon, Syria and Egypt.
Investors can take advantage of fiscal incentives and a relatively low level of taxation
Special tax incentives offered by the Government (e.g.The Double taxation Tready existing between the U.K and Cyprus, allows a U.K citizen to receive their pensions and investment income in Cyprus, with exemption from U.K taxes.)
East coast property in Cyprus is most popular amongst young Britons, largely due to the party town of Ayia Napa where many British package holiday companies arrange action –packed holidays for the young. These holidays are based on the beautiful beaches and nightlife. Property on the east coast of Cyprus is still reasonably priced with solid growth potential. Many new property developments are currently under construction and the entire east coast offers much potential in the holiday property rental market.
For potential buyers looking to relocate and looking for the best value for money it is important to consider property on the east coast of Cyprus as these homes are often a mere 30 minutes from the airport and offer the perfect balance of value for money and great investment potential. Added to this, increasing numbers of British based administrative systems are in place, thus avoiding the cultural shock a move to more “foreign” country often involves.
Short –Term letting v Long term Letting
The final decision to be made by the “Buy to let” investor is which letting strategy to use. Its obvious that the highest income is made by the property owner by letting out short term during the high season. However you can off-set this against the increased overheads in constantly finding short term rental clients and the maintenance costs between clients. Long term rentals typically pay less on a month basis but usually require far less input from the property owner and the rental income is fixed over the course of the year. Some property owners choose to rent long term during the low season and then short term to higher paying holiday clients during the high season. The decisions to be made on your letting strategy are usually answered in part by the property you purchase. Some properties lend themselves to short term holiday makers and others to long term locals as a permanent home
The “Buy to Let” Strategy is not ideal for every investor and it is essential that property for this strategy is chosen wisely as it needs to be rentable property in a popular location to allow the investor to maximize income from the investment.
The other benefit from this type of investment is that during the time this property is being rented and earning the investor an income and holiday home it is still appreciating in value at one of the fastest rates available. All in all the buy to let Investment model is sound investment decision in Cyprus is currently an ideal location to deploy this strategy.
Important Factors and Expectations for the South Cyprus Property Market
Cyprus has always been a popular destination for holiday makers and those seeking a quieter pace of life.Investment in Cyprus remains a good prospect with solid returns on investment of up to 20% per annum.
Cyprus has long been a popular holiday destination for British tourists, possibly because setting in is not as much of culture shock as on other Mediterranean islands. English is widely spoken on this former British colony. For property investors, the land registry is similar to back home. Famililarities such as these, set in the context of over 300 dys of sunshine a year and 648 km of costline, are clear enticements for the British to continue to flock to the island for both business and pleasure. Main property hotspots are in and around Paphos, Larnaca, Limassol and the ancient city of Nicosia.
Cyprus is considered to be high-income country and holds 16th place in the world in terms of per capita income, making it a strong and stable country in which to invest. It enjoys a standard of living that is higher than other European Union mmnber –states while economic performance compares very well to that of most other EU countries.
The downturn of the Cyprus Stock Exchange pushed most of the capital towards the property market, since the stock market could not rise up to investors expectations leaving the roperty market as the best major investment alternative in Cyprus.
The banking sector is the major financier for both investors and developers alike. Cyprus property is expected to benefit from the uncertainty and pessimistic expectations in the English property market, since many investors prefer to transfer their capital to more secure property markets with better future potential.
British investors have very strong buying power in Cyprus and they can use gearing from their investments in England to buy significantly more in Cyprus.
Interest rates in cyprus are set at 2.54% and unemployment is at 2.9%-both rates are encouragingly positive.
Cyprus has double taxation treaties with 26 countries, including the U.S.A and there are no restrictions on current interrnational transactions. Non-reidents and foreign investors may freely repatriate proceeds from their investment in Cyrus.
Offshore status allows many foreign companies (located in Cyprus conducting business aboad only) to benefit from high beneficial tax and duty-free concessions.
Cyprus Growth on Track for 2007/2008
By ,
29 June 2007
Despite falling from tourism, Cyprus is expected to notch up growth of 3.9% in the current year and 3.8% in 2008, according to an economic analysis published this week by PricewaterhouseCoopers.
, Senior Economist at PricewaterhouseCooprs, said that, “the economic outlook for the Cypriot economy remains positive and the goal of adopting the euro in 2008 is looking increasingly attainable. However, inflation deserves vigilance over the rest of the year, given the upside risks from robust domestic demand, excess credit and the possibility of futher oil prices rises.”
Cyprus Unveils New Policy to Attract Foreign Investment
By ,
16 September 2005
Announcing a major overhaul of government policy, Cypriot Minister of Commerce and Tourism has announced that Cyprus should seek to exploit its unique position as the trade bridge between Europe and the Middle East in order to entice more foreign investment to the country.
Our basic aim is to attract foreign funds for immediate investments in the fields like the production of high technology products and the transfer of technical knowledge, noted
The minister also stated that Cyprus will use the tools already at its disposal to attract investors, such as its geographical position, low corporate tax rate of 10%, membership of the European Union, network of double tax treties, it’s foreign income tax credit system, high standards of services, and favourable climate and quality of life.
All these advantages as well as the revolution mainly in the sectors of information and communications create the conditions to establish Cyprus as the main trade, finance and services centre in the Eastern Mediterranean, as the pipeline that will connect a market of 450 million Europeans with 300 million consuers of the Middle East, “ added.
Cyprus Legislates Against Property Owners in the North
By ,
23 March 2005
The Cypus parliament last week passed a crucial amendment to a law penalties for illegal possession and use of immovable property which may allow European arrest warrants to be issued against foreign owners of Greek Cypriot properties in the occupied north of the country.
The law already existed, but provided for imprisonment of 6months and a fine of CYP 450 the new law provides for up to 2 years imprisonment and a fine of CYP5,000 European arrest warrants can be issued only in cases where the crime commited is subject to at least 12 months imprisonment.
It is known that many hundreds or even thousands of British buyer have been taking advantage of lower property prices in the north, despite worries over title and possible compensation claims.
“Cyprus Housing Market stable” say Agents
By
20 January 2005
The Cyprus estate agents association says that although house prices have gone up by as much as 50% over the last four years, the market is now stable. On average the value
of property in Cyprus is now CYP85,533 (EUR147,271), less than in most other popular Mediterranean regions ,which have seen rises of 20% a year or more, compared with 15% a year in Cyprus between 2000 and 2004. Three years ago in Paphos a detached property on 600m plot with a pool would sell for CYP98,000, now that same house would sell for as much as CYP 190,000 depending on the location. In the Larnaca area the same house would sell for considerably less.
Cyprys house prices went up on average by 7.2% last year, but started to slow down towards the end of the year. In November and December prices dropped by 1.5%. There was a rise in January through to May when Cyprus joined the EU and it continued until August when it began to level out. The Association says it has no reason to expect any major change either upwards or downwards in the immediate future. It is forecasting a 5% to 7% rise in 2005.
There are many reasons for the increase in demand and prices, says the Association, particularly that Cyprus has become very popular and also that it is now much easier for foreigners to borrow. For the last two years lenders have been willing to offer facilities for the long-term loans for up to 30 years, which were not available before, and deposits have fallen to as low as 15% from30% to 40%. The rise in property prices was also due to a rush to buy beore My 1st because people supposed that once Cyprus joined the EU, prices would increase.
Cyprus Central Bank Governor warns over Property Boom
By
03 December 2003
The Governor of the Cypriot Cenrtal Bank, has issued a warning to banks and mortgage lenders to exercise caution in their lending policies for home loans and property deals, as the nation’s property prices continue to soar,
According o , house prices have risen by up to 50% in the last eightenn months, and told reporters recently that the situation was serious enough that “ as the monitoring body we have told the commercial banks to be extra cautious in reviewing loan applications.”
The central Bank chief argued that the press and media were partly to blame for the situation by playing up the impact that European /union membership will have on the property market, which he said has created a psychology of demand”
If the rumours continue that the English and the Germans want to buy a house in Cyprus then surely prices will continue to increase, “ explained.
In a bid to avert a potential economic cisis in the event of a crash in the real sector, it has emerged that a leaked Central Bank memo has advised banks to lend only up to 70% of a property’s value.
According to reports, around 64% off all new loans approved in 2003 were intended to fund a property transaction, compared to 24% in 2002.
Uk Real Estate Agent Highlights Tax Advantages of Cyprus
By ,
16 October 2003
The tax and cost of living advantages for expatriates living in Cyprus have been highlighted by leading UK international estate agency Parador Properties, which recently opened an office in the Gulf city of Dubai.
“Cyprus has always been a popular destination with Gulf epatriates and has an ever increasing intrernational appeal. Many people are now looking to purchase property for investment, for holiday homes or thinking futher ahead, to retire there, “Tim , Parador Properies General Manager –UAE commented in an AME report.
“Quite simply, your money goes further in Cyprus, observed, adding that the standard of living is high whilst the cost of living is relatively low compared to the rest of Europe.
Mr went on to explain the tax advantages the island has to offer, particularly to British expatriates: “The Cypriot economy enjoys a comparatively low level of taxation.Many investors will be keen to note that Cyprus has a unique tax system that includes, for example, a double taxation treaty with the Uk meaning that pensions can be received free of Uk taxation.”
He continued: “The total tax liability on many overseas residents of Cyprus can be as 3%. Foreign residents living in Cyprus pay income tax at a flat rateof only55 above the CY £2,000 tax free threshold. Other major benefits are that real estate is excluded from VAT in Cyprus and inheritance tax has been abolished on the island, tremendous news indeed for long term financial planning.”
Latest Figures :, Dec2007
On the basis of the results of the passenger Survey, revenue from tourism reached 51,4m euros (£30,1 milion) in December 2007 compared to 49, 1 mm euros (£28,8million) in the corresponding month of the previous year, recording an increased of 4,5%
For the period January-December 2007 revenue from tourism is estimated to 1.858,1million euros (1,087,5milion) ompared to 1.755,3 mm(£1.027,3mn) in the corresponding period of 2006, recording of 2006, recording an increase of 5,9%
Buying property in Cyprus –The Buying Process
In Cyprus the purchase of a property by a non-cypriot requires the approval of the council of ministers under the immovable property acquisition law.
The approval is in most cases a formality provided the buyers can prove the financial means to support themselves in Cyprus.
Non-cypriots are restricted to buying one apartment, house or building plot not to exceed 4013m2. Permission for larger property must be sought from the council of ministers-this may be considered favourably in the case of an area where the government wishes to promote tourism for instance.
An initial contract of sale is drawn up confirming the name and address of seller & purchaser and property details including the agreed sale price. Transfer of ownerhip will be registered at the land registry as soon as the title deed is issued by the relevant government authority and the account has been settled.
Cyprus Mortgage Fees
Most lenders charge a minimum of 1% arrangement fee, but this can be up to 1.5% if finance is required in a currency other than CYP£.
A transfer fee is payable at completion between 3% – 8% depending on property value.
Annual Tax is payable between 0% – 3.5% per £1,000 CYP depending on property value.
Stamp Duty is payable at c1.50 per £1,000 up to £100,000 property value or c£2 per £1,000 if property value exceeds £100,000.
Lender
Max Loan
Rate
Bank Fee
Max Term
Typical Cyprus Rates
70%
5.10%
1%
30 years
Bank of Cyprus
60%
5.50%
1% – 1.5%
15 years
Laiki Bank
70%
4.25%
1%
25 years
Hellenic Bank
70%
4.25%
1%
10 years
Getting Finance in Cyprus
Mortgages can be granted in a range of currencies including CYP£, US Dollars and Euros. All mortgages are full status and proof of income and outgoings will be required. Cypriot mortgages can be arranged for acquisition & construction purposes. A deposit of 30% of the purchase price is generally required and you will also be liable for solicitor’s fees. Cypriot mortgages are repayment loans (unless construction, when interest only is available during stage payment release) and the maximum term available is 15 years. All mortgages should be fully repaid by the age of 65 and life cover is required by the lenders.
Cypriot lenders assess eligibility for a mortgage on the applicant’s ability to service the loan and not potential rental income from the property. The general guideline is as a maximum of 40% of net available income. If you are self-employed income is assessed as the average of the last three years’ net income. A percentage of rental & investment income may also be considered.
Cypriot laws are pro-tenant
Rents: Can landlord and Tenant freely agree rents in Cyprus?
The rental market can be divided into two broad categories: Houses controlled by the Rent Control Law (1983) and the free market. The Rent Control law and its uptaded amendments apply to tenancies of residential or business premises which lie within what the law defines as controlled Areas i.e., towns, suburbs and rural centres, which were completed before 29 December 1995.However foreigners (except the non-Citizen wife of a citizen of the republic) and legal entities controlled by nonresidents, are not covered by the provision of the law, and do not benefit from Rent Control law protection.
After the first tenancy has expired or been terminated, the law allows for an agreed increase of maximum 14% of the existing rent, but not before the lapse of two years from the date of the last application, or the date of the last voluntary increase. In case of refusal by the tenant, the Rent Control Courts will determine a reasonable rent, taking into account the opinion of the official valuer, and factors such as age, dimensions, location and condition. A rent control tribunal is composed of a president (who is a judicial officer) and two lay members, representing the tenants and the landlords.
What rights do landlords and tenants have in Cyprus , especially as to duration of contract, and eviction?
Before the EU negotiations , no foreigners could rent out property. Even today, non –Eu property owners cannot rent out property.
Eviction of tenants is relatively difficult. The Rent Control law introduced the concept of the statutory tenant. This is the person who at the expiration of first tenancy, in case of a property within the ambit of the Rent Control law, remains in possession of the premises. A statutory tenant cannot be evicted except in three cases
· Where he failed to pay the rent
· Where the landlord needs a house for himself or for members of his family or his dependent parents
· Where the landlord intends to demolish and reconstruct the house, or to effect such substantial alteration or reconstruction as to render the recovery of possession of the premises absolutely necessary
Even in such cases, the rent Control Court may order the landlord to grant to the tenant in lieu of damages, the right to a new tenancy after the reconstruction.
Finally, the Court may award damages equal to 9-18 months rent, and /or damages for loss of goodwill of a business
EVICTION FOR NON-PAYMENT OF RENT
Duration until completion of service of process
60
Duration of trial
120
Duration of enforcement
180
Total Days to Evict Tenant
360
The Rent Control Law 1983. Agricultaral Land , furnished apartments for less than 6 months, hotels and petrol stations do not fall within the ambit of the Rent Control Law.
The present law rose under circumstances that tenants needed extensive protection. The Turkish military invasion of 1974 caused thousands of refugees to move to Southern Cyprus and created serious housing problems requiring immediate steps to prevent landlords evicting tenants.
Expartiate hot spots
A recent study found that foreign nationals from different countries prefer to live in different areas of the island:
Ø 60% of the British live in Paphos while another 20% live in limassol.
Ø Virtually all of the Serbians live in Limassol
Ø 70% of Russians live in Limassol, 10% in larnaca, 10% in Paralimni and 10% inPaphos
Ø The most popular place for business-based Germans is Limassol followed by Paphos
Ø Almost all of the nationals of the Nordic counries live in the Famagusta region
Regrettably, many of the more popular areas of the island with non-descript property development, much of which is owned by foreigners. As well as denuding parts of the island of its natural beauty, the volume and pace of construction places heavy demands on the infrastructure and resources of the island. In some places,over development results in frequent cuts in the supply of electricity and water.
Tips for Property Investors
At the turn of the Millenium, Cyprus experienced a property boom as its popularity increased with most notably, the British buying public. After Spain and France, Cyprus be came the most popular place for Britons seeking place in the sun; it’s been estimated that over 60,000 own property on the island.
But at the beginning of 2004, the property market started to cool. Cyprus’ entry into the ERM may encourage futher buyers to the island although at present time , the supply of property outstrips demand.
Changes resulting from EU accession
Prior to EU accession, most foreign buyers were relatively mature people seeking property for retirement or for short holidays as:
Ø The government placed restrictions on the amount of property they could legally acquire
Ø The regulations prohibited investment (other than lettings for periods exceeding 30 days) and excluded company residential purchases
Ø Work permits were usually granted to foreign nationals.
On its accession to the EU:
Ø Cyprus lifted many of the restrictions placed on the property investment by EU citizens. But to protect its sensitive property market, it agreed a five-year transitional period with EU preventing non-resident EU citizens acquiring secondary residences on the island. By the time this transitional period ends, it is envisaged that any remaining restrictions will be lifted.
Factors affecting the property market
There are a number of factors hat effect Cyprus position in the international property market. Some of these are due to external influences, others are due to external influences, others are due to home grown problems.
Ø Cyprus competitive position is adversely affected by the high cost of air fares. The Free Skies Agreement could change this situation considerably, if low-cost point –to-point airlines were allowed to fly directly to the island.
Ø External events, such as conflicts in the Middle East and terrorist attacks, reduce tourist numbers; this has a`knock-on effect on property sales
Ø Upgrades to Paphos and Larnaca airports are planned. Once completed, both airports should be able to handle more flights thereby increasing the number of visitors to the island.
Ø Much of the property built for foreign buyers tends to be uninspiring in design with very basic fixtures, fittings and finishes. In a recent article, a keading firm of charted surveyors bemoaned the fact that the quality of property bought by overseas investors was in decline and expressed concern over the long-term viability of the companies involved.
Ø Cyprus eventual adoption of the Euro will remove the annoying currency fluctuations that dog the property market and reduce the costs associated with transferring with transferring money to the island.
Ø Many of the more popular areas of the island are littered with property developments, much of which is owned by foreigners. As well as creating expatriate ghettos and denunding parts of the island of its natural beauty, the volume and pace of construction places heavy demands on the infrastrure and resources of the island . In some places , over-development results in frequent cuts in the supply of electricity and water.
Rental income prospects
There is a lot of competition for holiday accommodation anf finding people wanting to rent yours may prove difficult. Although the numbers of properties being built is at an-all time high, tourist arrivals have dropped by 12% since 2005.
If you manage to rent your property to the tourist market, expect a maximum return on your investment of between 4% and 5% gross per annum. Remember that you will be taxed on any rental income you receive and you’ll need to budget for advertising, insurance, repairs, maintenance, property management fees, etc.
A number of property developrs offer guaanteed rental income for the first one or two years; some even offer free cars. Needless to say , the cost f these incentives has factored into the selling price.
Capital growth prospects
In recent years the capital value of property has doubled. But since January 2004, the market has cooled considerably with values increasing by around 7% per annum.
Some pundits in the property industry predict property values will double when Cyprus adopts the Euro in 2008. Economists are less enthusiastic predictcting much lowr rates of growth, with values doubling by 20016.
Buying a`Home in Cyprus ( )
British tourism to Cyprus on the slide
Tourist arrivals to Cyprus for January hit their lowest levels in over a decade, with a drop of 21 per cent since the year 2001, Statistics Department fifures show.
While overall January 2008 figures declined 2.3 per cent , the British market, the island’s main source of tourism, fell a straggering 15 per cent over January 2007.
According to the figures released, only 50,658 tourists –less than half of them British-visited the island last month,compared to 51,848 in January 2007.
Although the fall is not significant in itself, whe compared to the previous seven years the decline in winter tourism since 2000 is evident.
In January 2000, 63,553 tourists visited the island. In 2001, which was the last peak year for Cyprus tourism, 64,213 visitors arrived.
A dramatic drop to 54,067 occurred in January 2002 in the aftermath of the 9/11 attacks.
By January 2003, despite the imminent US invasion of Iraq in March that year , numbers had recovered somewhat to 59,529 but have never reached that level since.
Tourism bosses said last week it was evident that visitor numbers to Cyprus were dropping , not due to external problems but to internal ones given that global tourism was up over six per cent for 2008
While the British market continues to slide, inceases from Greece and Russia have continued
And Germany , the islands second biggest market , which was briefly replaced by Russia last year, appears to be howing a turnaround.
According to the arrival figures , tourism from Germany seems to be rebounding with a hike of 24.3 per cent
Overall, arrivals in 2007 barely broke even, showing a marginal .6 per cent rise over the 2.4 million tourists who vsited in 2006.
The British market dropped 5.7 per cent in 2007 to 1.28 million arrivals from 1.3 million in 2006.
After years of Cyprus attracting only a certain brand of Brit who spends little and moans a lot (juddjing by last weekends encounters ), Cyprus has finally entered the pmarket leagues , with an appearance in the financial Times House & Home supplement
The “ FT” which is standard reading for highly paid bankers , lawyers , accountants and other executives across Europe, hosts a regular holiday home supplement for those with plenty of income to spare.
But although Cyprus has the best weather in Europe and is just a hop away for execs who spend half their working life on aerolanes , Cyprus hs been conspicuous by its absence.
That is now beginning to change . The Sunday Times had a big spread a few weeks ago and last weekend, the FT’s ‘Southern Europe Special” had a full page on someone who splits his time between “ afarmhouse in rural france and a two-bedroom cottage in a quiet corner of coastal Cyprus (Polis)
22/03/2006
An expected rise in second –home property market follwing changes to the uk pensions system has prompted the establishment of a new company in Cyprus.
The Group will be one of the first on the island to provide professional advice and investment management services to the UK taxpayers who will, for the first time, be able to purchase residential property within a private penion fund.
Proposed changes to self –invested personal pensions (SIPPs) in effect from 2006 will mean that UK taxpayers will be able to conrol their own pension investment and will be able to use it to purchase residential property . The changes come into effect on Aprill 6, 2006 but the new rules can be taken advantage of immediately.
The Group is a family –owned professional services company with the principal offices located in limassol , Cyprus.
The company aims to guide individuals easily and securely through the processes involved in realizing their dream of owning a second home in the sun , and is already involved with numerous clients wishing to purchase holiday homes in Cyprus as result of the relaxation of the rules regarding self-invested personal pensions (SIPPS).
The changes to Uk pensions law are expected to fuel a new property boom in Cyprus with private pension holders keen to take advantage of generous tax breaks from both the UK and Cypriot governments.
Credit:ivythesis.typepad.com
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