Investing in Cyprus Property
More than ever, Brits are seeking more than just a holiday home in the sun. They want their property to be a lucrative investment - and buying Cyprus property is just the ticket. Offering the investor a wealth of choice locations at very competitive prices, property prices have risen by as much as 25 per cent a year recently. In addition, attractive taxation laws make the island particularly appealing to relaxation-seeking retirees. With a plethora of Cyprus property around 30 per cent cheaper than in Spain, there are already over 60,000 official expat Brits on the island and the numbers investing in Cyprus property is growing at around seven per cent a year.
With monasteries, museums, antiquities and Roman ruins, culture vultures won't be disappointed. Cyprus successfully mixes European culture with ancient enchantment, shimmering with a unique mystique encompassing everything from beautiful beaches and mountain peaks to vineyards dotted with olive trees. Known as the Island of Venus, after the Roman goddess of love and beauty, traditional villages provide a contrast to modern, cosmopolitan towns bursting with luxurious hotels, smart restaurants and chic shops.
Androulla White and her husband Tony made the move from London to Larnaca in summer 2006. They bought a three-bedroom apartment near the seafront in the Mackenzie district for CY£95,000 (£111,000): "We began house-hunting in March and had moved in by June. We already feel like locals. I've made more friends here than I ever had in the UK. We sold our London home, paid off the mortgage and all our debts and bought the apartment for cash. So now we don't owe anyone anything - life here is heaven."
Situated at the crossroads of Europe and Asia, Cyprus has been divided since 1974, when Turkey invaded the north in response to a military coup on the island. Nowadays, the island is at peace, although the Turkish Cypriots in the north and Greek in the south maintain their own distinct identity based on language and religion.
But demand for land, housing and holiday lets, particularly in the fast-growing residential and recreational resorts on the south-east coast, has been at an unprecedented high over the past four years, with wise investors waking up to the prospects for strong investment.
The current wave of success shows no signs of slowing down - this well-established holiday destination has massive projects on the horizon including the redevelopment of both Larnaca and Paphos airports (due for completion in 2010 and 2008 respectively) and the £1 billion project Neapolis near Paphos bringing a state-of-the-art hospital, university and new housing to western Cyprus. Add to that the plans for roads in inaccessible areas and a prestigious marina to boot, and a growth in tourism is guaranteed.
Cyprus already boasts excellent internal and international transport links with easy access to the UK and Rachel Constanta from property developers The Quality Group says the new airports will triple the amount of people flying in and out of the country to over 15 million. "We'll be able to host some of the larger budget airlines like easyJet and Ryanair, reducing the cost of and offering more frequent flights from the UK. We also expect direct flights to the US, Far East, Africa, etc, making Cyprus not only a tourist destination but a business centre in the heart of the Mediterranean."
The island's accession to the EU in 2004 has resulted in improved infrastructure, communications and facilities, particularly in the medical and educational sectors. Healthcare is available to those from other EU member states on the same basis as Cypriot nationals and there's an excellent, state-funded school system as well as many private and international schools. Four-lane motorways connect towns and there are efficient banking services based on British practices. There are sports clubs a gogo and with three international-standard golf courses and ten new courses in development, golf lovers will soon find themselves a short putt away from the fairway.
Local planning laws are strict (nothing over two storeys), meaning building is limited, restricting supply and pushing prices upwards. Buy-to-let investors are seeing average returns of between five and ten per cent while capital growth is predicted as high as 25 per cent, depending on purchase price, area and property type.
And things can only get better - a full member of the EU since 2004, Cyprus adopts the euro in January 2008. On average, property prices in other EU countries have increased by 16 per cent in the year prior to changing currency, so we could see a property explosion.
"Joining the Eurozone means capital growth in 2007 will be high and interest rates will fall, resulting in an increase in demand," says Ioakim Ioakim, managing director of Cyprus4Properties. "In addition, 15 per cent VAT will be introduced on land, resulting in an increase in prices."
Around 70 to 80 per cent of foreign purchasers in Cyprus are from the UK and it is not hard to see the appeal to British buyers. Blessed with 340 days sunshine a year, a beautiful coastline, low cost of living and low taxation, there's a large, established expat community enjoying a safe, laid-back lifestyle (crime is virtually non-existent). And to top it all, English is widely spoken and they even drive on same side of road as us.
"There's no traffic congestion and air pollution is negligible," says Christiana Alexandrou from Cyprus Dream Homes. "The telecommunication systems are among the best in the world and medical care is advanced and inexpensive." As a result of long-standing good relations between the two nations, Brits receive a warm welcome. "Cypriots are well-known for their friendliness, generosity and hospitality - going out of their way to help people is a way of life for them."
From apartments, townhouses and bungalows to prestigious golf properties and luxury beachfront villas, there is a wide range of properties on the market, including both resale (which sell quickly) and new-build, which account for the majority. According to Ioakim, "Foreigners buy mainly properties by the sea and mostly off-plan for investment."
So which are the most desirable areas and where can you bag a bargain? "Larnaca. It has the main airport, nice beaches and is very central. Nearby villages like Livadhia, Meneou, Pervolia, Aradippou are also popular," says Alexandrou.
"Prices are still considerably lower than the rest of the island and with massive investment planned for the area, it offers a sound financial move," advises Constanta. "Villages further west, like Mazotos, Alaminos, Alethriko, Zygi and Kalavasos offer a more serene environment for those seeking peace and quiet and nature, but still close to modern amenities." Her tip? "Off-plan projects purchased at today's prices, completed up to three years in the future. Once construction commences, prices automatically increase by around 15 per cent."
Litsa Chrysostomou from BuySell Real Estate agrees: "In comparison to Paphos, Limassol and the capital Nicosia, prices of Larnaca property are on average 15 per cent cheaper but have shown a steady increase every four months. Hotspots here include Tersefanou village, where the proposed PGA golf course development will include a helipad, five-star hotel, fine dining and horse stables. Investors can purchase options on premier properties on the development site or consider properties nearby."
Although Paphos property can prove expensive, Chrysostomou says the areas of Anarita and Mandria are very popular with good capital gain and increasing rental returns. She also recommends Polis property and property in Coral Bay in Peyia, north of Paphos, where there are plans for a new marina, Aglantzia, close to the new university where the number of students is expected to rise rapidly, bringing high demand for rental apartments, along with the capital: "The economic benefits in Nicosia are numerous. The government is offering incentives with subsidies of up to 40 per cent of the renovation costs to those wishing to purchase properties in need of extensive renovation in Nicosia's 'Old Town', deductible from the owner's taxable income over a long-term period. Rental income generated from these properties is also tax-free and transfer fees are waived."
"The Larnaca and Famagusta districts are the best places to invest," according to Frazer Fearnhead, director of The Armchair Property Investor, who predicts rises of between 15 and 20 per cent per year. "A two-bedroom apartment in the lovely village of Pervolia costs around CY£70,000 (£83,000) and a two-bedroom villa with pool in the upcoming area of Mazotos, still very rural and representing the best area for capital growth, is approximately CY£175,000 (£208,000). One- and two-bedroom apartments generally produce higher yields than villas."
Dave Roberts from Cheshire took Armchair's advice and recently invested in Oroklini, popular with Brits, for CY£70,500 (£84,000). Buying off-plan, his one-bedroom property is due for completion in autumn 2008, but has already risen in value by almost CY£5,000 (£6,000). He cites 'making money' as one of his favourite things to do here, and his one regret is not buying sooner. "One of the keys to investing wisely is making the most use of your available funds. I can invest in property the same way as you would invest in shares or a pension, without putting up large lump sums of money," he explains.
From sunbathing to skiing, the year-round sunshine allows for a varied outdoor lifestyle. Louise Brown and husband Gary from Yorkshire purchased a four-bedroom detached villa with private pool in Pyla village. She wanted a healthy, outdoor lifestyle for their two children and found it in family-oriented Cyprus: "It's away from the tourists and large, English communities. With lots of open space, it's a safe place to bring up children."
With a wide variety of restaurants catering for all tastes, these gastronomes are in their element: "There are so many restaurants that you never need to cook," says David Brown from London, who purchased a three-bedroom apartment in Larnaca three years ago, after renting in Nicosia. "All socialising is done with food here, which is fantastic and very reasonably priced," says Mariana Antonescu from London, who bought a two-bedroom apartment in Larnaca.
Buyers do not pay agents' fees but sellers pay around three to five per cent. It's generally easy to rent out your property and there are plenty of management companies who'll let properties on your behalf, arranging cleaning, delivery of keys and so on, for a fee. "With a desirable property in a desirable area you should be able to cover your mortgage with 13 weeks' rental in high season," says Fearnhead.
"On selling, capital gains tax is payable at 20 per cent with the first CY£10,000 (£12,000) being exempt for each person. There is also an indexation allowance. On top of this, the seller is entitled to a further allowance regarding the transfer fees paid, inflation rate per year and cost of any additions made to the house," says Alexandrou.
Cyprus' property law system is based on English law and the Land Registry here is one of the most advanced and reliable systems in the world. All contracts and other paperwork are in English, most of which are completed in person. Applying for residency is fairly simple and reasonably quick, providing you have the correct documentation. However, getting the title deeds can be a very drawn-out process involving a lot of paperwork.
Estate duty was abolished in 2000 and rental income, resales and land are currently excluded from VAT. Local authority taxes and rates for refuse collection, street lighting, sewage and so on are low at approximately CY£100 (£120) a year. And the tax advantages don't end there. "If you're a resident, your pension is taxed here, not in the UK, and maximum tax is just five per cent," says Chrysostomou. "Cyprus has a wide network of treaties for the avoidance of double taxation with the UK, enabling you to receive your pensions and investments income in Cyprus free of UK withholding tax," says Alexandrou.
Keith Fraser from Surrey bought a four-bedroom house in Larnaca Bay in 2004: "As I approached retirement, I knew I didn't want to spend the rest of my life in the UK. Cyprus offered a much better deal as far as tax on my BA pension, than Spain, for instance," he says.
However, he does have some words of warning. "If you're buying off-plan, don't just assume that everything you've asked for will happen in your absence. A few visits to Cyprus while the house is being built are a good investment."
"Choose a reputable real estate agent and make sure they're licensed. Local companies know the market better," Alexandrou advises. "If you're buying off-plan, visit the developer's completed properties and avoid companies who bring you out on short inspection trips and put the pressure on. They call themselves estate agents but they're not licensed and they make sure you have no time to compare their prices with those of other companies."
"Do your homework thoroughly and shop around for the best mortgage deals...thirty-year mortgages with low deposit requirements and interest-only periods make available funds go further," Frazer advises. "Use an English-speaking lawyer - the High Commission in Nicosia can recommend one; and a good currency broker to fix the exchange rate to your advantage - it could save you thousands!"
"I feel much more part of the local society here than I ever did in England. I'm enjoying my retirement in an almost stress-free, very sunny environment," David enthuses. "I couldn't feel happier or luckier!"
First published in February 2007.
Some information contained within this article may have changed since it was first published. Homes Overseas strongly advises you to seek current legal and financial advise from a qualified professional.