Strong demand has helped increase the value of property in Cyprus
The Cyprus property sector has grown rapidly since the country joined the European Union in May 2004.
Cyprus property is popular among Brits due to the island's intense Mediterranean climate, including over 300 days of sunshine a year, making it a prime holiday destination, as well as a trendy place to retire. Cyprus offers a relaxed way of life, low levels of crime and relatively low cost of living compared with other western European countries.
The country's economy has really strengthened in recent years, while Cypriot residents continue to enjoy one of the lowest levels of income tax in Europe.
Cyprus is considered a tax efficient destination and has a double tax treaty agreement with over 30 countries, including Britain. It means that residents can extract profits from property investments in Britain at a reduced rate or with no tax payable at all. However, Cyprus property is liable to capital gains tax, while corporation tax is also charged.
Buoyed by a strong economy and an influx of low budget flights, Cyprus developed into a property hotspot between 2004 and 2007, attracting property buyers from around the world, particularly Britain and Russia. Strong international, as well as domestic demand for property in Cyprus, helped to drive prices upwards.
"Over the last five years, property prices have more than doubled," says Sacha Appleton of Cypriot property developer Pafilia.
However, given the current global economic turmoil, the market for Cyprus property has slowed considerably.
Gloria Aubury of Paphos Properties says: "The Cyprus Property market is very similar to Britain at the moment, there is very little activity with official figures showing property sales down by 51 per cent in some areas."
Part of the reason for the fall in demand, particularly from British, was Cyprus' decision to give up its national currency 'the Cypriot pound' and adopt the euro last year. This has hiked up the cost of buying property in Cyprus for many Britons, due to sterling's weakness against the European single currency.
Aubury comments: "The poor exchange rate has made Cyprus more expensive for British tourists and permanent residents who find once their pensions are converted their income is greatly reduced."
Nevertheless, the greatest international demand continues to come from Britain, along with Scandinavia and Russia, according to Jonathan Salsbury of Cybarco UK.
The fall in sterling's value could prove to be something of a 'silver lining', for Brits selling up in Cyprus, as they would make "a tidy profit of 20 per cent as a direct result of the exchange rate fluctuation," says Mark Bolsom of currency exchange firm Travelex, or at least offset any potential fall in property price.
Aubury comments: "There is an oversupply of properties now, mainly with two bedroom apartments in the Paphos and Larnaca areas. It is possible for a non-Cypriot to borrow in Cyprus but it is more difficult than it was."
Looking forward, the medium to long term prospects for the property market seem positive, and could receive a much-needed boost from the Cypriot government's attempts to establish the country as a prime golfing destination. Cyprus already has a number of golf resorts in the Paphos district and planning permission for more has been granted.
Golf ultimately attracts a different segment of the tourist market (higher expenditure per capita) and helps to extend the rental season. This should have a long term regeneration effect, which would appeal to property investors looking to cash in on the sport's popularity, and the vast disposable incomes of those who play it.
"With more international standard golf courses there will be higher demand for property in Cyprus - both holiday homes and rental investments. Such demand will naturally impact on prices," says Salsbury.
A golfing holiday home in Cyprus remains considerably cheaper than established golfing locations such as Spain and Portugal, whose seemingly unending obsession with golf resort developments has attracted more tourists, retirees and investors over the years.
Property investors wishing to speculate by buying into future golfing projects in Cyprus will be keen to learn that the new courses are expected to be built in the Limassol district of at Ayios Ambrosios, at Paramali and Fassouri, at Polis Chrysochous in Paphos and Ammochostos-Larnaca.
It includes the construction of tourist village and a five star hotel set in 500,000 sq m of land.
Salsbury comments: "The proposed Disneyland style resort will be a major tourist attraction which will impact on local property prices, primarily from a rental perspective."
Other major infrastructure projects taking place on the island include, new marinas, yacht clubs, sports clubs and new dual highways. Larnaca and Paphos airports have also been expanded.
Where to invest in Cyprus property
Some of the best returns can be achieved from Paphos property due to the long tourist season, but this is reflected in high property prices. Popular regions of Paphos include, Kato Pafos, Tombs of the Kings, Coral Bay, Sea Caves, Tala, Peyia and anywhere on or near the golf courses.
Property in Nicosia
There are many international companies in Nicosia, with workers that require long term accommodation (rental periods in excess of 12 months). The majority of Cyprus' government and large educational institutions are also based in Nicosia.
Many offshore companies are based in Limassol whose workers need long term accommodation. The area has the added attraction of being a coastal resort.
Located to the south east of the island, prices of property in Larnaca are cheaper than Paphos, Limassol and Nicosia, although the construction of a new yacht marina, and port for cruise ships, could drive property prices higher in the long term.
Property in Latchi and Polis
North Cyprus property
Cyprus is divided into two areas (Greek Cypriot and Turkish Cypriot), following the 1974 Turkish invasion. There is a high element of risk attached to buying property in Northern Cyprus. Much of the land and property is, in the eye of the international community, still owned by Greek Cypriots, which can create legal issues for anyone who buys property or land in the occupied areas of Cyprus.
Title deed debacle
One major concern with buying property in Cyprus is people's difficulty in obtaining title deeds - the most important evidence of property ownership.
The issue is so serious, that top politicians in Britain are discussing the matter of protecting the rights of property buyers in Cyprus.
The Cypriot authorities insist that they are trying to resolve the matter.
Wherever you choose to buy property in Cyprus, you can rest assured that the country's legal system and land registry are based on British law.
The fact that property prices have slowed could prove necessary for the long term sustainability of the Cypriot market.
The property slowdown may be bad news for people who purchased a home at the peak of the last property boom, but it does present a fabulous opportunity to negotiate a significant price reduction on any Cyprus property purchased now.
Some information contained within this article may have changed since it was first published. HomesOverseas strongly advises you to seek current legal and financial advise from a qualified professional.