Property Investment in Cyprus
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by Brian Turner
Overview of the Cyprus Property Market
The property market has been on the rise in Cyprus over the last few couple of years. After a very slight decline in 2005, price increases have been going up. The increase reached an impressive 12% in 2007 and it is predicted that prices will continue to rise for the foreseeable future although not as much as they did in 2007. Current estimates put 2008 increases around 8%.
The geographical location of Cyprus along with its well educated, population, moderate costs, good airline connections and the wide availability of telecommunications makes this a strong investment market. In addition, companies have been investing in the infrastructure of the region – increasing tourism and investment opportunities along the way. Accession to full membership in the European Union has helped to spur things on.
There are restrictions for foreigners in Cyprus. EU nationals that are current residents in Cyprus have the freedom to purchase as much property as they wish. EU nationals that are NOT residents are restricted to one house or apartment that has received approval from the ‘Council of Ministers.’ Non EU nationals must seek approval from the ‘Council of Ministers’ to acquire any property. Even then, ownership will be strictly limited. There are plans for the Cyprus market to be de-restricted which will open up investment opportunities.
Rental yields are not very high in Cyprus. On average, you will receive less than 5% from your investment.
Transaction costs are split fairly evenly between the buyer and the seller. The Transfer Tax (paid by the buyer) can be the most expensive portion of the costs. It typically runs between 3% and 8% of the closing costs. There is no requirement to retain a lawyer for the property transaction, but it is highly recommended. Legal fees are an additional cost to the transactions costs, but the fee is usually negotiable.
Terms to Understand
Permission to Purchase â€“ it the form that is filled out and submitted to the Cyprus Council of Ministers in order to be able to purchase property.
Value Added Tax â€“ is the amount that is added to the purchase of new property based on a percentage of the purchase price. (Cyprus VAT will be increasing in 2008).
Transfer Tax – is based on the open market value of the property (as determined by the Land Registry department and NOT the purchase price) and payable when the title deeds are issued.
Title Deed – transfer ownership from one party to the next and can take 3 – 5 years to be issued after the purchase transaction has been completed.
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