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Why Invest in Cyprus Property?

Last updated January 2018

Cyprus is positioned at the crossroads of Asia, Africa and Europe unrivalled connectivity to all three continents.

Important Landmarks for Cyprus was becoming a full member of the EU in 2004 and joining the Eurozone in 2008.

With 340 days a year of sunshine and 57 Blue Flag Beaches Cyprus has the climate to attract and keep international investors and their families.

Since the long publicized problems of earlier in the decade Cyprus has gone from strength to strength having reinvented itself as a tax haven for businesses and High Net Worth Individuals (HNWI). 

Cyprus now has one of the most favorable tax and business friendly regimes in Cyprus

 

 

Tax Benefits of Cyprus

  • VAT – only 5% on the first property Purchased, instead of 19%
  • Purchase a property with VAT and you pay 0% Transfer Tax. Saving of approx. 6%.
  • No Inheritance Tax
  • Low Personal income Tax (1st €19500 tax free)
  • Lowest Corporation Tax in Europe at 12.5%
  • If you do not live in Cyprus for more than 183 days per year then no personal tax is payable.
  • Property yearly running cost less than 1% including local Taxes
  • One off property stamp duty less than 0.2% of the property Value

Setting up a Cyprus Company

  • Set up completed in 4 days, cost only €2000
  • Lowest Corporation Tax in Europe at 12.5%
  • Financial Company licensing in Cyprus allows Business rights in all of Europe
  • Register as an “Intellectual Property Holding Vehicle” and pay only 2.5% Tax
  • 0% Tax on Dividends
  • Tax losses carried forward for up to 5 year
  • No Exchange control on the movement of Funds
  • Profits from the sale of Shares and any other financial instrument, such as Bonds or debentures are exempt from tax
  • Double taxation with over 40 countries
  • Confidentiality and Anonymity of the Beneficial Owners

Another big driver for inward investment has been the EU permanent residency and EU Passport and Citizenship program. Just through the Exclusive Hot Properties network we are aware of over 500 Million Euros worth of investment into property and that does not include the additional investment from those HNWIs moving business interests and setting up new business in Cyprus.

The Cyprus economy currently has GDP of 17.4 Billion Euros which is made up of 81.7% of services, 15.9% of Industry and 2.4% of Agriculture. The Economic trends are good for the future with GDP for 2016 at 2.8%, 2017 at 3.1% and projected at 2.5% for 2018. 22% of the economy is based on Tourism and 34% on Real Estate. Finally another major positive factor was company registrations were up 27% in 2016.

Property investment in Cyprus

In the second quarter 2017 market research by RICS they made the following observations

Market Capital Values

The Property Price Index has recorded increases on an annual basis in all cities and asset classes, with significant increases being recorded in Limassol, Nicosia and Larnaca, whilst Paphos and Paralimni have shown smaller annual increases.

Market Rental Values

Across Cyprus, on a quarterly basis rental values increased by 3.0% for apartments, 1.0% for houses, 2.0% for retail, 3.7% for offices and 0.7% for warehouses. Compared to Q2 2016, rents increased by 8.3% for flats, 10.2% for houses, 6.8% for retail, 14.4% for offices and for warehouses 4.2%. All asset classes have shown a consecutive quarterly growth.

Appraisal based initial yields

At the Q2 of 2017 average gross yields stood at 4.1% for apartments, 2.1% for houses, 5.4% for retail, 4.3% for warehouses, and 4.9% for offices. The parallel reduction and/or stabilization in capital values and rents are keeping investment yields relatively stable and at low levels (compared to yields overseas). This suggests that there is still room for some repricing of capital values to take place, especially for properties in secondary locations.

If we then turn to the PWC 2017 first half report they report the following transactional Volumes

  • 20% increase in sale contracts across Cyprus
  • Limassol recorded the highest growth in no. of sale contracts during H1 2017 (33,4%), compared to H1 2016, followed by Famagusta (28%) and Nicosia (23%)Real estate price evolution
  • Residential property prices increased by 4% as per RICS Index in Q1 2017 compared to Q4 2016
  • Commercial property prices as per the RICS index recorded a quarterly growth of 4% for retail properties, 3% for industrial properties and 3% for offices

Foreign Transaction Activity

  • 106% increase in sale contracts filed by foreign buyers compared to H1 2016
  • Paphos and Limassol appear to be the preferred cities by foreign buyers during this period
  • High-end Residential Property Segment (€1,5mln)
  • 59% increase in sale contracts for high-end residential properties compared to H1 2016
  • Limassol attracts c.60% of transactions in the high-end residential property
  • Construction Activity, In terms of value, 34% increase was recorded in building permits issued across Cyprus

So Now You Have the Facts What Does this Mean for Cyprus Property Investment?

From an Exclusive Hot Properties point of view as 95% of our clients are buying via the Golden Visa or Golden Passport it’s very positive in that what they invest in is likely to have both rental yield and capital growth even if there primary reason for buying the property was a residency or citizenship based decision. So this should also be a positive point for those who are thinking of retiring to Cyprus or relocating from a colder European country.

Saying all of the above the other benefits such as very low taxation, residency or Citizenship and Business friendly government are much more likely reasons to invest in Cyprus property but the bottom line here is Cyprus has many good reasons why you should consider investing in Cyprus property.

 

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