Today we're going to look at what's best to buy to rent in Limassol: an apartment or a house?
With its stunning coastline and thriving economy, Limassol has become a hotspot for property investment. But which type of property will bring in more rental income? Let's find out together, using specific examples.
Flats vs. houses: advantages and disadvantages
Flats
Flats are usually cheaper to buy and easier to manage, making them attractive to investors. They are easier to rent, especially in central areas such as the Molos promenade, business Neapolis and relaxed Germasogeia, where rental demand is always high. At the same time, they offer less space and privacy, which can discourage permanent tenants. The downside is the dependence on the building management to renovate the communal areas.
Houses
Houses, on the other hand, attract families because they offer more space and privacy. Rents are potentially higher due to additional amenities such as a private pool, garden and parking for 3 cars. However, they are more expensive to buy and require more maintenance, which can reduce your net return. It can also be more difficult to find tenants for houses, especially if they are out of town.
Examples and profitability
Let's look at some real examples and calculate their approximate rental yields to see which is more profitable.
- 1-bedroom apartment in Agios Tikhonas. Cost including VAT 443 thousand euros, estimated rent 1200 euros/month, yield ~3.25%.
- 2-bedroom apartment on Molos promenade. Cost 300 thousand euros, rent 2000 euros/month, yield ~8%.
- 2-bedroom apartment in Germasoya. Cost including VAT 713 thousand euros, rent 1800 euros / month, yield ~3.03%.
- 3-bedroom penthouse in the centre of Limassol. Cost including VAT 1.56 million euros, rent about 3000 euros / month, yield ~2.31%.
- 5-bedroom villa in Muttaiyaka. Cost including VAT €2.3 million, rent €4000 per month, yield ~2.07%.
- 3-bedroom house in Agios Tikhonas. The cost of 990 thousand euros, rent 2500 euros / month, yield ~3.03%.
- 2-bedroom terraced house in Germasoya. Cost 690 thousand euros, rent 1500 euros / month, yield ~2.61%.
- 2-bedroom townhouse in Erimi. Cost 290 thousand euros, rent 800 euros / month, yield ~3.31%.
It can be assumed that apartments in central and tourist areas such as Molos have much higher yields (up to %), while houses, especially large villas, have lower yields (e.g. 2.07% for a villa in Muttaiyaka). Unexpectedly, even in prestigious areas such as Agios Tychonas, rental yields can be lower than expected due to the high cost of buying houses and their lower liquidity on the rental market.
What is happening in the Limassol property market?
Let's take a closer look at the rental property market in Limassol, using recent examples and market data. We will look at the advantages and disadvantages of apartments and houses, analyse specific properties and draw conclusions to help investors make their decisions. Let's go!
Limassol, the second largest city in Cyprus, is a major centre for property investment due to its coastal location, developed infrastructure and popularity with foreign buyers. According to the Central Bank of Cyprus, the Residential Property Price Index (RPPI) will increase by 7.7% in 2023, with flat prices rising by 10.7% and house prices by 5.7%. In 2024, flat prices will increase by 8.4% and house prices by 3%. This indicates a higher rate of price growth for flats, making them attractive for long-term investment.
Rental yields also vary: according to Rental Yields in Cyprus in 2022, the average yield for 2-bedroom flats in Limassol is around 4%, but more recent data, such as Analysis reveals Limassol top of the props in 2023, shows yields of up to 7.8 per cent for 2-bedroom flats in prime areas.
Location and its impact
- Agios Tychonas district. A suburb of Limassol, popular with tourists, with developed infrastructure. Flats here have moderate yields (~3.25% for a 1-bedroom), but houses (~3.03% for a 3-bedroom) are also competitive.
- Molos. A central area with high demand, especially for sea view apartments, which explains the yield of 8%.
- Germasogeia. A tourist area with good infrastructure, but yields for apartments (~3.03%) and townhouses (~2.61%) are lower due to high costs.
- Muttaiyaka. A suburb with a focus on luxury villas, low yields (~2.07%) due to high prices (average price €2.3 million).
- Erimi. A quiet village 20 minutes from Limassol, with lower rental yields (~3.31% for townhouses) but affordable (prices from €290,000).
Tax and legal
In Cyprus there is a 19% VAT on new developments which adds to the total cost of the investment. For example, for a new apartment in Agios Tychonas (€372,000 + VAT = €442.7,000) this will have a significant impact on returns. For resale properties, such as a house in Agios Tychonas for €990,000, VAT does not apply, making them more attractive in terms of initial cost (VAT on property in Cyprus).
Recommendations for investors
Research shows that apartments, especially in central and tourist areas, are likely to offer higher rental yields and pay for themselves more quickly. However, houses may be preferable as a long-term investment if you are family orientated or looking for more space. Things to consider:
- Yield. Apartments in the centre by the sea show yields of up to %, while houses rarely exceed 3.31%.
- Location. Central areas are preferable for renting, but suburbs such as Erimi may be more economical to buy.
- Market trends. Limassol's flat market shows faster price growth and flexibility, making it the most attractive for capital growth.
In conclusion, to maximise rental yields in Limassol, it is probably worth considering flats in prestigious areas such as Molos, but keep in mind the individual characteristics of each property and market conditions.
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