Buying a Property in Cyprus

Why Buy Property in Cyprus?

Updated May 2011

Cyprus enjoys a warm climate throughout the year, and its people are well disposed towards the British, as a result of long-standing good relations between the two nations. Attractive taxation laws make it particularly appealing to retirees.

The island’s accession to the EU in 2004 has resulted in improved infrastructure, communications and facilities, particularly in the medical and educational sectors. Its joining of the euro, in January 2008, further underlined its position as a modern republic that welcomes people of all nationalities to its shores.

Property prices have risen by as much as 80 per cent during to boom years, but can still represent good value in comparison with other, more established markets, such as Portugal, Spain and Italy, particularly for new-build property, which represents the majority of the islands housing stock.

Please note that this document deals only with matters relating to property purchase in the Republic of Cyprus.

The Turkish-occupied part of the island (called by its government the Turkish Republic of Northern Cyprus - TRNC) is not internationally recognised as a legal territory. Because of this, we do not endorse purchasing property there. It is important to be aware that if you do so and the political situation changes, your home could be at risk.

Note: This document deals only with matters relating to property purchase in the Republic of Cyprus.

The Turkish-occupied part of the island (called by its government the Turkish Republic of Northern Cyprus - TRNC) is not internationally recognised as a legal territory. Because of this, we do not endorse purchasing property there. Note that if you do so and the political situation changes, your home could be at risk.

Popular property locations – an overview

Interest from overseas property purchasers has traditionally been divided between Paphos on the western end of the south coast, Limassol on the central south coast, and Larnaca on the eastern outpost of the south coast. In more recent years, the relative outposts of Polis in the far west and Agia Napa in the island’s far east have drawn widely differing crowds to their shores.

Polis and the surrounding area, owing to their rural location, appeal to the more environmentally-minded individual, while Agia Napa has earned itself a reputation for the rowdy behaviour of a small number of largely British summertime partygoers. Naturally, the truth lies somewhere between the reported extremes. Out of season, Agia Napa, for example, is a quiet fishing village.

This guide gives brief descriptions of the areas most popular with British second home purchasers, but it can only provide a place to start. There are many resources to help with further research, including television and radio programmes, magazines, the internet and property exhibitions, not forgetting estate agents in both the UK and Cyprus.

Paphos

Paphos is arguably the most popular town in Cyprus with British buyers of second homes. Thanks to the prevailing westerly winds, it tends to get the best and worst of the island’s weather, but fortunately conditions are hot and pleasant for nine months of the year.

Centred around a harbour with a pedestrianised area, Paphos is popular with families and a more retiring crowd than other parts of the island. Access is quick and easy at all times, as there is an international airport only 20 minutes’ drive from the town centre.

Paphos is an archaeological treasure trove, being home to several tombs of ancient kings and a number of important mosaics from Ancient Greek times. Contemporary life revolves around a bustling restaurant and beach scene, particularly in the popular Coral Bay area, ten minutes’ drive from the town centre.

Apartments in the area cost from £90,000, while a villa overlooking the sea could set you back £500,000 or more. Prices are on an upward curve, and have been so for several years. Plans for a new marina development opposite Coral Bay look set to see them rise higher yet.

Limassol

Cyprus’s largest city, though not its capital (Nicosia is the official and administrative heartbeat), Limassol is the pulse of the island and the measure by which all others are judged.

Cyprus is at its most urban in Limassol. The most fashionable shops, restaurants and bars are located there, especially in the old town area that lies behind a section of the several-mile-long drive and promenade that runs from downtown eastwards, hugging the shoreline.

Limassol is also home to Cyprus’s largest docks, a working area located to the west of the city centre. Nearby, work has begun on the new marina in a bid to entice wealthy yacht owners to moor locally. This scheme is part of a government initiative to position Cyprus as a more upmarket destination. Similar thinking is behind plans to develop several golf courses dotted around the island, including one on Limassol’s outskirts.

Naturally, property for sale will be a feature of the new golf course developments – modelled on the hugely successful and prestigious Aphrodite Hills Golf and Spa resort, located between Limassol and Paphos. This hilltop development, which has a wide range of apartments, townhouses and villas, is the island’s property benchmark.

Larnaca

Cyprus’s third town and the location of its main scheduled airline airport, Larnaca, on the southeast coast, is a waterfront town that has its supporters. It is somewhat slower in pace than Limassol, and less seasonally affected than Paphos, and proportionately fewer Britons live in this area than in the west of the island – probably because most people fly into Larnaca and drive straight out to the resort at which they are staying.

The nearby beaches are amongst the island’s best. Because the east coast is sheltered, the sea is calmer than elsewhere and picture-postcard blue, with golden sand beaches. Truly an area of great contrasts, the region is home to a national park, Cape Greco, as well as Ayia Napa.

Second homeowners in the area tend to be Cypriot – obviously keeping a secret to themselves. Property prices are a little higher than on the west coast, primarily because there is less land and new-build development taking place here than elsewhere on the island.

Protaras and Paralimni

Protaras is predominantly a tourist town on the eastern coast of the island, again in the region where the beaches tend to be the best and most sheltered. The area around Protaras, which includes the inland town of Paralimni and the resort areas of Frenaros, Pernera, Liopetri and Ayia Triada, tends to be a little less popular with holidaymakers and property buyers who are attracted to the major towns and tourist centres towards the west coast

However, Protaras is no shrinking violet in the property stakes. The area benefits from having less development than some of the more purpose-built resorts, and as such property prices are a little lower. It is still perfectly possible to buy a brand new apartment here for less than €100,000 (around £85,000), while a three-bedroom villa will cost from €230,000 (around £195,000).

Buying a property in Cyprus

The purchase process in Cyprus

The process of buying a property in Cyprus is similar to that in the UK, with a few differences of which to be mindful. Therefore it is imperative that, as you would in the UK when buying a property, you engage the services of a reputable, independent solicitor.

Permission to buy a property must be obtained from the Council of Ministers by written application. This permission is granted more or less as a matter of course for British citizens. Should you be buying a new property from a developer, they will generally apply for permission on your behalf if requested.

On finding a property you wish to purchase, it is usual to pay a deposit (of up to around £2,500) to reserve it. A contract is then drawn up. On signing it, the buyer pays a further deposit of ten per cent of the agreed price, or 20 to 30 per cent in the case of a new-build home.

Transfer of ownership should be accomplished by your legal representative on your behalf. In order for new properties to be legally allowed for habitation, an independent inspection must be carried out by the authorities, upon which a Final Completion Certificate is issued. Only when this is in place can the title deeds for the property be issued, and it is strongly recommended that you insist on holding the title deeds for the property yourself.

Property Costs, Fees and Taxes

Several fees and taxes are payable when buying property in Cyprus. These generally amount to between six and seven per cent of the purchase price and include:

• Transfer fees on the purchase of a new or resale property, at three per cent on the first €85,430 (£72,500), five per cent between €85,431 and €170,860 (£72,500 and £145,000), and eight per cent on amounts above that
• Stamp duty at 0.15 per cent of the purchase price up to the value of €170,860 (£145,000), and everything thereafter at 0.2 per cent
• VAT (at 15 per cent) on new-build properties only. First-time buyers only have to pay five per-cent
• Legal fees (including the fee for the application to the Council of Ministers) – Allow one per cent of the purchase price
• Surveyor’s fee (optional)
• Mortgage fees (if applicable)
• Foreign exchange costs (if applicable)

Important Notes

Even though the process of buying a property in Cyprus is similar to that in England and Wales, it would be wrong to assume that the same checks and balances are in place to regulate the industry. According to the website of the Foreign and Commonwealth Office: “Unlike the UK, where property buyers’ solicitors carry out various plan and title searches automatically, no such ‘standard’ methods of working are in common use in Cyprus. Some lawyers will guide you through the process, others will not.”

It is therefore essential that you engage a lawyer who is not only experienced in property conveyancing, but also who is completely independent of anyone else involved in the transaction and is therefore acting in your interest alone.

There have been stories in the past about buyers being unable to obtain title deeds to their property, as well as developers borrowing against the land on which sold properties are built. However, since EU accession, the legal process has tightened up – but that is not to say that a good, independent solicitor still isn’t absolutely essential.

For further information as it is released, along with a useful frequently asked questions page, visit the Foreign & Commonwealth Office website for Cyprus at: http://ukincyprus.fco.gov.uk/en/help-for-british-nationals/living-in-cyprus/buying-property-cyprus/

Mortgages & Financing property in Cyprus

Purchasers requiring finance have the choice of remortgaging their UK home, thus releasing equity built up in it, or arranging a mortgage on the Cyprus property. Remortgaging is often the preferable route for buyers, as releasing equity in a UK property means that the second home can be purchased for cash, effectively, without the need for another mortgage. However, rising property prices in Cyprus may mean remortgaging is not an affordable or viable option for everyone.

Mortgage rates through a Cypriot lender or a UK-based one are currently around six per cent. In most cases, the maximum loan (known as LTV) will be 80 per cent of the property’s value, leaving the buyer to put down a deposit of 20 per cent. The majority of lenders offer repayment-only mortgages over periods of no more than 15 years, but shop around, because more and more attractive financial packages and mortgages are being introduced to the market on an almost daily basis. There are mortgage products now available which have elements of interest-only status and span a period of up to 35 years.

Taxation

Cyprus’s taxation system is similar to that of the UK. There is a double taxation agreement between the two countries, meaning that tax is paid in one or other country, not both, and usually in the country where the higher rate is levied.

Personal taxation: non-residents

Non-residents are subject to income tax only on income earned in Cyprus. This includes income from letting property, which is taxed at progressive rates of up to 30 per cent, depending on the amount.

Non-residents may also be liable for capital gains tax (CGT) on the profit from the sale of a property, according to individual circumstances. Property sales are subject to CGT at a rate of 20 per cent on the gain, although the first €17,086 (£14,500 sterling) of the gain is exempt.

In Cyprus, for non-residents and residents alike, there is no gift tax or inheritance tax.

Personal taxation: residents

For tax purposes, a foreign national staying in Cyprus for more than 183 days during a tax year (1 January to 31 December) is considered a resident. The 183 days need not be consecutive.

Residents of Cyprus are subject to progressive taxation on worldwide income. They are also subject to other taxes, including a contribution for ‘passive’ income, for example rental income. VAT at a rate of 15 per cent is levied on most goods; a reduced rate of VAT of five per cent is charged on some products, mainly food and agricultural products.

Local taxes

The annual Immovable Property Ownership Tax amounts to approximately £60–£180 sterling, depending on the value of the property. An annual tax of £24–£36 may also be levied by the municipal authorities, as may a sewage tax of £24–£48

Tax privileges

Immigrant retirees are permitted to import personal effects, including household goods and furniture that are for personal use and that have been used (i.e. are not brand new). Additionally, no duty is charged on the importation of a car, and retirement age immigrants are granted the concession of not being charged duty on two cars.

Money matters

Cyprus’s official currency is the euro. The current exchange rate is €1= £0.85

Banks, bureaux de change and ATMs are available in larger towns and tourist resorts. Usual banking hours are 8:30 am to 12:30 pm, Monday to Friday, and also from 3:15 pm till 4:45 pm on Mondays.

Major credit cards are widely accepted, as are travellers’ cheques. It is advisable to carry the latter in pounds sterling or US dollars, to avoid additional exchange rate charges.

Passports, visas and residency

Passports and visas

To enter Cyprus, British citizens need a passport, which must be valid for the duration of their stay. A visa is not required.

Residency

Cyprus does not require EU citizens (including British nationals) to have residence permits. They can, however, be useful in certain circumstances (when applying for a driver’s licence, for example, or for tax purposes) as official proof of residence.

A non-Cypriot who owns property in Cyprus is entitled to a residence permit. As long as he can prove that he and his family are self-supporting, one will be granted without difficulty.

The Cypriot economy

The Republic of Cyprus has a capitalist economy dominated by the service sector, which accounts for 76 per cent of GDP. The financial services sector is key, and the island is also heavily dependent on tourism to fill its coffers.

The International Monetary Fund has predicted that the economy in Cyprus is likely to grow 1.5 to 2 per cent during 2011. However, Wes McGrew, the IMF's European Department deputy division chief, has advised the Cypriot government to “move forcefully” in regards to financial reforms if the islands debts are to be reduced.

Cyprus acceded to the EU in May 2004, and joined the European Exchange Rate Mechanism (ERM2) in May 2005. It adopted the euro in 2008.

Communications

Telephone

Telephone communications are generally excellent in Cyprus, both for landlines and mobile reception. Public telephones are available in most towns and post offices. Calls can be made with cash and phone cards, which can be bought at retail outlets and post offices. The country dialling code is +357.

Internet

Internet access in Cyprus can be obtained through dial-up service, cable-modem, dedicated lines and DSL. Broadband is increasingly widely available in homes as well as in the workplace. The Cyprus country suffix is .cy

And finally...

Buying a home abroad for pleasure or profit is a major decision and one that should not be taken lightly. It is vital to ensure you have researched all aspects thoroughly and have all the relevant facts to hand before committing to a purchase.

Individual circumstances will vary widely, so it is essential to obtain professional advice and guidance tailored to your particular situation, especially in areas such as property purchase, potential rental returns, taxation and mortgages.

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© Copyright Buy Associates Limited 2006

All circumstances vary. BuyAssociation provides general advice for guidance purposes only. It is strongly recommended that you seek professional advice before making any purchase.

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