Cyprus is a prime destination for golden visa investors, since it is not favored by European investors, given the fresh memories of bank haircuts that has led to huge losses for non-suspecting folks. During Q1 of 2018, the national residential property index rose by 1.82% year-on year, in Cyprus, the biggest increase in its fifth consecutive quarter rise. This was the biggest annual increase after Q4 of 2008, after which the market saw house price decreases for eight years.
During the year of 2017, and up to Q1 of 2018, prices rose by 1.24% in Nicosia, the capital, 2.66% in Limassol, 1.11% in Larnaca, 1.99% in Paphos and 2.78% in Famagusta-Paralimni. Zyprus, a property portal in Cyprus have issued these predictions for 2019 residential price increase, based on market trends: Limassol apartments will increase by 6.63% and houses by 2.77%, Paphos apartments by 7.49% and houses by 1.9%, Larnaca will see bigger growth in houses at 4.73% and apartments will increase by 3.57%, Famagusta also seems to follow Larnaca’s trend with houses increasing by 4.99% and apartments at 2.57%, finally Nicosia will likely see an annual growth of 1.96% in apartment prices, while houses will be at 1.81%.
The increase in prices is spurred on by the sharp rise in demand, as official figures show that during the first three quarters of 2018, property sales rose by 21% with 6,706 units sold. Permits for new dwellings also soared 23.5% year-on -year for the first five months of 2018, to 2,333 units.
When Cyprus was forced to make its infamous raids on banking accounts in 2013, many remarked on how it had even been allowed to join the European Union. The government came under fire from all sides and was criticized for showing such fiscal irresponsibility.
The recovery for the county was slow and painful, but moved at a steady pace and within five years it has managed to make moves in the right direction, with a growing GDP and falling unemployment. The banking system was improved and strengthened.
This recovery is also reflected in its residential property sales, with locals and visitors looking to buy holiday homes.
The areas of Nicosia, Limassol and Larnaca have a high demand from local buyers, whereas, foreigners prefer to buy by at seaside resort towns and opt for Paphos and Famagusta.
The average price of residential property per square meter in Cyprus is around € 1,300 – 1,800, with smaller properties costing more than larger ones.
An average size apartment of 120 m2 in Larnaca and Nicosia will cost around € 700-800 to rent per month. Expect to pay a bit more in Limassol.
The highest yields seem to be in Nicosia, and usually from smaller apartments and gross rental yields have remained relatively steady in Cyprus for many years.
The low buying prices will attract more investors, as capital gains on property seem more likely here than in most places in Europe at the moment. However, there are many factors that buyers need to take into consideration before investing in property.
There are two broad categories of rental properties in Cyprus: free market and rent controlled properties which fall under the Rent Control Law of 1983.
Foreigners cannot fall under the provisions of the Rent Control Law, except for the non-citizen wife of a Cypriot male and legal entities controlled by non-residents.
It can take up to 360 days to evict a tenant in Cyprus, and it is very difficult to evict a ‘statutory tenant’ protected by the Rent Control Law.
Foreigners can buy one home in Cyprus, and are entitled to buy freehold land to a maximum of 4,014m2.
Purchasing costs for older properties are moderate, but new properties will have the addition of Value Added Tax (VAT) of 19%.
Purchasing costs range from 7.60% and 16% of the purchase price, of which the buyer pays 4.6% to 11% and the seller pays 3% to 5% for the agent commission.
Transfer taxes can range from 3% to 8%, depending on the purchase price and lower fees will be applicable if the property is bought in more than one person’s name, since the value per person decreases.
Rental income is taxed at a progressive rate for amounts exceeding € 19,500. There are certain standard expenses which are deductible from the gross income.
Capital gains tax is applicable to the sale of all immovable property at a rate of 20%. If the property has been owned for at least five years there is a lifetime exemption to the amount of €85,430.
Cyprus has no inheritance or estate duties.
Residents are taxed at a progressive rate, from 0% to 35%, on their worldwide incomes.
Official statistics, from the Statistical Service of Cyprus, show that strong domestic demand helped the economy grow by 4.2% in 2017, and by the second quarter of 2018, it had grown 3.9% from the previous year. Cyprus’s budget surplus reached 1.8% of GDP in 2017, a marked improvement from 2016, when the surplus was 0.3%.
The projected growth in the economy for 2019, as issued by the IMF, is expected to be 4.2%.
IMF figures show that gross public debt declined to 97.5% of GDP in 2017. However, it rose again in 2018 and is expected to fall slightly in 2019 to 105.1%.
According to the Statistical Service of Cyprus, inflation is projected at 2% for 2019. Unemployment levels have fallen to 7.5% according to Eurostat, a dramatic drop from 10.5% in 2017.
Cyprus, like the rest of the European Union, is closely watching how the outcome of Brexit will unfold. However, it is highly unlikely that it will impact the economy of the country in general.
People from the UK have always liked to holiday, buy homes and retire in Cyprus, and it is highly unlikely that this will change. However, the demand for property in Cyprus extends to people from other countries too and there has been an influx of foreigners buying up homes there in the past five years.