Pitfalls when investing in property in Cyprus

Подводные камни при инвестициях в недвижимость Кипра
13 October 2022 Irina Starinskaia
1325

Today Cyprus is one of the leading destinations in Europe for real estate investment.

At the same time, the country remains as loyal as possible to all buyers and practically does not limit the appetite and opportunities of those wishing to invest in its economy.

According to the latest data from Eurostat, prices for renting and buying real estate in Cyprus are the most favorable in Europe. Given that there was a price peak on the island in 2010, today's prices cannot be called really high. Moreover, since 2010 the cost has decreased by 6%. Thus, there is reason to believe that the price ceiling has not been reached and there are growth prospects.

Portrait of a Cypriot investor

Cyprus is widely open to the international market and has a soft tax program for businessmen and highly qualified professionals who come to live on the island with their families. Accordingly, there are a lot of foreigners here. At the same time, citizens of China and the Middle East countries prevail among investors. There are many investors from Russia and other post-Soviet countries who choose Cyprus, including for permanent residence.

There are people who are looking for real estate fore themselves - they first of all look at the price and choose more modest options. There are investors who look at the developer in general, at the project, its location and clearly understand how they will earn on this in the future.

As a rule, professional investors invest in residential complexes, which are later rented out. For example, they invested 2-3 million euros in the construction of the complex, and then rent them out at 25-30 thousand euros every month.

At the same time, the average yield from the purchase of new buildings is 5-9%. Investors who bought new real estate at the off-plan stage can resell it later with a profit of 30-40%.

Why do people invest in Cyprus real estate today:

  1. Preservation of capital is perhaps the main goal. The idea of ​​"parking" your hard-earned money in a country with a mild investment climate seems reasonable to many.
  2. A stable additional income is a nice bonus for those who are not yet ready for a large business on the island, but want to check how it all works.
  3. Getting a basic income. A number of investors in Cyprus (who have 5-6 properties and more) may well make money on real estate. This is especially true for the commercial sector of the market.
  4. Obtaining a residence permit. Invest 300 thousand euros in real estate and forget about the annual visits of the family for documents to the Immigration Center forever.

Which is actually easier: to invest or sell real estate in Cyprus.

An investor's nightmare is illiquid real estate.

In general, the investment market and the sales market are two completely different areas of business. Anyone who chooses to invest in real estate really makes money on it.

For example, an investor has chosen a project for 400,000 euros, which will take 1.5 years to be built. After 7 months, they become approximately 150 thousand euros more expensive. At this stage, the project becomes more popular and can already be resold at a price of 500 thousand euros. You don't even have to wait for the construction to be finished.

There are also a number of such new projects. For example, seafront 180 ° Limassol Residence, which cost per square meter today is only 6 thousand euros. By the end of the project, the price can easily rise to 8-9 thousand euros per square meter.

For comparison, let's take a look at the Eden Roc Residence block A project in Limassol as an example. When it was built, few people dared to buy expensive real estate in it, which was estimated at 6,000 euros per square meter. Well, now the secondary real estate in this block is for at least 8-9 thousand euros per square meter.

Pitfalls in investment

Resale property

An encumbrance check is required. When investing in resale real estate, you should always check for heirs who can claim the property. For this, a research procedure is organized, which entails additional costs.

The quality of housing built before 2005 is significantly inferior to buildings built after 2010 and more modern. First of all, this concerns the energy efficiency and seismic stability of structures. In this regard, houses of 2016 and younger stand out favorably.

Often a major overhaul is required. And this applies not only to the apartment, but also to the whole building. We are talking about such complexities, which will be known only upon settlement. For example, the house may have problems with sewerage, insects, rainwater drains in the winter, and so on.

Resale properties often require renovation. Experts recommend paying attention to which developer constructs the building and what materials were used. The reason is that in Cyprus there are 30-year-old houses in perfect condition and completely dilapidated 20-year-old buildings that are useless to repair.

The presence of uncoordinated redevelopments. This is not a big problem: everything can be agreed upon in the future. But the bureaucratic process can drag on for years. For resale, it is better to choose objects with full compliance with the architectural plan of the premises.

The presence of "dangerous" neighbors. Most likely, everything is not as bad as it might seem at first glance, but street parties at the entrance and tart curry flavors can start to tire. In general, any property that is rented, regardless of the market segment, is fraught with this heavy pitfall.

Advantages of investing in resale:

  1. Ready and understandable housing that you can touch, see and check before buying.
  2. Infrastructure near the house.
  3. No VAT. Rating is useless.

Pitfalls in investment

Primary real estate

Uncertainty about the size of the areas. Developers calculate the living area of ​​real estate in different ways. According to market experts, gradually they come to a common denominator. The reason for such disagreements is the difference in the approach to business of foreign companies. For example, a 100 m2 apartment may actually be 70 m2, as the developer saw fit to include the area of ​​the landing on the floor, as well as the reception for the concierge.

Doesn't always meet expectations. Buying real estate at the initial stage does not always meet expectations: the picture is one thing, but the result is another. Indeed, the overall architectural design is not always 100% consistent. But in general, this applies to trifles: the shade of finishing materials, the color of plumbing, and so on.

VAT 19% will have to be paid. In any case, when reselling, the investor will include these 19% in the price. Recall that when it comes to the purchase of the first and main real estate, VAT will be 5%. The amount of 5% tax will not change if the property is not used for commercial purposes for the first 10 years of ownership).

New buildings are expensive. In Cyprus, primary real estate is more expensive than the average for Russia and the CIS countries, but cheaper than the average for the European Union and other financial centers of the world. Plus, buying a new building in Cyprus, the yield will be 5-9%. The average price per square meter is 3000 euros.

Infrastructure and local area are not always a priority for developers. Nevertheless, today there is a noticeable tendency for developers to increase their attention to the local area: gated complexes with swimming pools, cafes, underground parking lots, children's parks and other infrastructure appear.

No title. The document on the right of ownership - Title - sometimes you really have to wait for years. Fortunately, most often this is not the case, the document is issued immediately after the approval of the completed project by the state committee. All this was foreseen by the developers of Cyprus: in order to resell a new building today at the construction stage, a title is not needed. In time, such a transaction can take no more than one day. Through the developer, a cancellation agreement is being prepared. Further, the Agreement with the old buyer is canceled, and a new Agreement is concluded with the new owner, respectively. Sometimes they even do without a cancellation agreement, describing the transaction in detail in a new agreement.

Seasonality. Despite the fact that the last 10 years there has been a general trend of moving away from seasonality, it still exists in the resort towns of Ayia Napa, Protaras and Paralimni. Moreover, the last two cities cannot be called deserted: they are populated by local residents all year round. But there are cities in which seasonality is completely absent: the capital Nicosia, business Limassol, and Larnaca does not sleep in the winter. In recent years, thousands of foreigners and indigenous people have moved to Paphos for permanent residence. And there is no doubt that the population of cities will only grow.


Advantages of investing in new buildings:

  1. Pure history.
  2. Phased payment at the initial stages of construction.
  3. Modern housing.
  4. High profitability.
  5. By the end, and sometimes by the middle, of the construction, real estate is getting more expensive by an average of 30-40%. 

We have tried to list all possible pitfalls when investing in real estate in Cyprus. But do not forget that each transaction is individual, unique and interesting in its own way.

You can find more real estate options in the catalog of the agency No. 1 in Cyprus DOM, and also get advice from professional brokers, learn about new projects in all cities of Cyprus.

Read also:

  1. The best gated residential family complexes in Limassol
  2. General Health Care system of GESI in Cyprus
  3. Villa or apartment: what to choose for living in Paphos?
  4. 10 reasons to invest in Protaras Real Estate
  5. How is it profitable to rent an office in Cyprus?
  6. School near home: options for buying real estate near the most popular educational institutions in Cyprus
Source: DOM
Photos: DOM, Pixabay
29 November 2022 2:59
it's good that there are reliable real estate companies
Олег К
Олег К
3 December 2022 11:10
I agree
Place qoute
New objects

House for sale

€ 390 000

House for sale

€ 375 000

House for sale

€ 370 000

Flat for rent

€ 3 500

€ 6 000

House for sale

€ 2 150 000

House for sale

€ 1 850 000

Flat for rent

€ 3 500

Apartment for sale

€ 1 100 000

Flat for rent

€ 700
Компания «Dom Real Estate» Контакты:
Адрес: Limassol, Cyprus,
Телефон:+357 25 212 212, Электронная почта: info@dom.com.cy