Buying property in Cyprus
While mainland Greece and Turkey have long coveted this small Mediterranean island, pundits of property are realising its attractions, too.
Property in Cyprus
Whether you know it as the country that entered the EU only as a half or, as it’s touted in tourist brochures, ‘the island of Aphrodite’, Cyprus both confirms and confounds the stereotype. Parts of the small island have been overrun by keen developers who (depending on who you’re talking to) have either ‘sold the country’s soul’ or ‘are bringing great wealth to the island’. Whatever the truth, Cyprus is a kaleidoscopic blend of Western European cultural influences and more than a hint of the East, thanks to its geographic proximity to both Asia and Africa.
Property buying and selling is akin to a national sport on the island. Prices grew steadily between 2000 and 2009 thanks to rising numbers of Europeans (Brits in particular) awakening to the Cypriot charms. However, the market has struggled since Cyprus was forced to take a €10 billion bailout from the EU and IMF in March 2013 as a result of the banking crisis in the country. Between July and September 2013, prices fell by 11% (for homes) and 14,6% for apartments, and the Cypriot economy is expected to contract by a further 4,8% this year.
Of course, what this means is that there are bargains galore for house hunters keen on a slice of Mediterranean-island pie where 300 days of sunshine a year is the norm, English is widely spoken and both the crime rate and the cost of living are comfortingly low. What’s more, there are government incentives for foreign property buyers (significantly lower tax rates on the purchasing price of new homes, for instance), as well as residency schemes attached to developments aimed specifically at international buyers (such as the 578-acre, five-star golf resort Aphrodite Hills, or the 236-residence development at the new Limassol Marina, part of the waterfront property’s €350 million upgrade).
‘There are government incentives for foreign property buyers (significantly lower tax rates on the purchasing price of new homes, for instance), as well as residency schemes attached to developments aimed at international buyers.’
How Residency in Cyprus Works
Cyprus is the only English-speaking country in Europe offering permanent residency without requiring that you physically live there, nor that you have to be domiciled there for tax purposes. In other words, you can acquire your permanent residency permit, carry on with life as it is and then, when you’re ready to move across to Cyprus as permanent resident, you have the legal right to live there. Non-EU nationals wanting to acquire permanent residency but who are not looking to work in the country can apply for an Immigration Permit on the basis of their having at their disposal a secure and regular annual income which is high enough to provide a decent living in Cyprus without them having to engage in any business or trade. This process can then be significantly expedited if the applicant is willing to invest in Cyprus by purchasing one or two new real-estate properties with a total purchase cost of at least €300 000 (around R4,4 million), excluding VAT. At least €200 000 (nearly R3 million) of the purchase cost must be settled upfront, though.
While Cyprus has not signed the Schengen border agreement yet, it is considered imminent. This means that a permanent residency permit currently gives its holder a long-term, multiple-entry Cypriot visa. Visa holders are required only to be in the country for one day every two years in order to retain their permanent residency permit and, because the permit is for life, it does not require renewing. Also attractive is the fact that securing a long-term multiple-entry Schengen visa is a lot easier since Cypriot visa holders are vetted as permanent residents of the EU.
The Buying Process
In recent years, Cyprus has been plagued by property scams, including the fraudulent transfers of property and the deliberate withholding of title deeds. It goes without saying, then, that buying through a registered estate agent – one who is a certified member of the Cyprus Real Estate Agents Association (CREAA) – is highly advisable.
Once a buyer has had his offer accepted, he or she is required to pay a reservation fee (a deposit of around 20 to 30% of the selling price), and the seller must provide all necessary paperwork for the property (title deed, etc.). If either the buyer or seller is non-Cypriot, the contract must be in English and, once prepared, must be signed by both parties. At this point a completion date is set and the buyer pays stamp duty for the contract (usually 0,15% of the purchase price), which officially commits both parties to the transaction.
Predictably in light of the banking crisis, Cypriot banks are cautious about lending and loans are only granted with a title deed or bank guarantee from the developer of a property. Permanent residents (those who’ve been a resident for five or more years) can obtain a loan of up to 80%, with a 20% deposit, while non-permanent residents and buyers of holiday homes can obtain a loan of up to 70%, with a 30% deposit.
Property transfer fees in Cyprus depend on the purchase price:
- €0 – €85 000 (up to R1,2 million*) = 3%
- €85 000 – €171 000 (up to R2,5 million*) = 5%
- €171 000+ (R2,5 million* upwards) = 8%
*Property in Cyprus is subject to capital gains tax of 20%.
Buying Property in Cyprus to Let
Cyprus’s holiday-destination status makes buying property here for tourism rental a worthwhile investment. Of course, in these cases, location is key to ensuring a good return. Limassol, the second largest town on Cyprus, is a lively metropolis and business hub, with top-class shopping and cosmopolitan restaurants, and is proving itself popular with Russian holidaymakers. There are long, sandy shores, celebrations and carnivals liberally spread throughout the year, and the Troodos Mountains are within easy reach. It even offers skiing in winter, while the weather is still warm by the beach. Apartments start at €70 000 (just over R1 million) and villas from €250 000 (approximately R3,6 million).
The British ‘playground in the sun’ is Paphos, an attractive harbour, resort and Unesco World Heritage site on the southwestern coast of the island. It is home to many of the island’s cultural highlights – including a medieval fortress, frescoed tombs and mosaics – along with amenities for every need, such as its own airport with year-round Easyjet flights to the UK.
Prospective buy-to-let buyers should secure a reputable property management company that will manage the rentals in the owner’s absence.
- High Commission of the Republic of Cyprus in South Africa: Hill Street, Pretoria, 012 342 5270; mfa.gov.cy
- The Cyprus Real Estate Agents Association (CREAA): The legal national real-estate association in Cyprus and provides full legal professional services for all real-estate transactions; all the members have Buyers Professional Indemnity Insurance to protect their buyers; skekcyprus.net
- Cypriot Realty (South Africa’s marketing agent for Leptos Estates in Cyprus): cypriotrealty.com
- Leptos Estates: leptosestates.com
- Prestige Property Group: prestigeproperty.co.uk
- Unique Living: uniqueliving.com
Text: Jocelyn Warrington