Published on 28 October 2005 at 03:01 pm
Filed under: Europe:- Cyprus Property Guides » Cyprus Property Investment Guide
The Republic of Cyprus is an exciting country for property investors and one which already offers fantastic capital growth and rental yields and which is likely to see improvements in these two profit areas over the medium term as Cyprus aligns itself for adoption of the Euro in 2008.
Furthermore an investor has an exceptionally strong year round tourist market to focus on as well as a growing second home market and a well established retirement market offering the right amount and type of investment diversity in one country that an investor requires when building a successful portfolio.
Since Cyprus joined the European Union in 2004 it has enjoyed a period of significant investment which has boosted the country’s economy and improved the infrastructure, education and healthcare services available in Cyprus. The economy in Cyprus grew by 3.8% in 2005 – well above the European Union average. More international businesses particularly in the fields of finance have established regional bases in Cyprus and all this inward flow of financial assistance and investment has helped make Cyprus into an even more attractive country for tourists, expatriates and retirees who are already attracted to the island’s perfect climate and stunning natural beauty.
The next goal for Cyprus is membership of the Euro-zone and the adoption of the Euro as the country’s currency. It is on track to reach the economic milestones it has been set to achieve membership by 2008 – for example the Minister of Finance Michalis Sarris recently announced that the budget deficit should drop to below 2% of GDP by the end of 2006 which is an important milestone and achievement for Cyprus.
As a further part of Cyprus’ progress towards acceptance it is having to reduce its interest rates. This is proving very popular with overseas property buyers who have already seen rates drop from 5% to 4.25% and who are aware that rates could drop as low as 2.5% which is the European Central Bank‘s base rate currently. Generally speaking as interest rates fall people can afford to borrow more money to buy property and more people can afford to enter the property market – in addition to this 100% mortgages are available to finance property purchases in Cyprus from certain lenders making it even easier to afford a property in Cyprus.
In Cyprus demand for property already outstrips supply therefore a growth in the numbers of those able to enter the market is resulting in an increase in the underlying value of properties with capital growth figures in the year to date in the region of an impressive 18% - and for a property investor this represents great immediate potential from an established market which is getting harder to come by as worldwide established property markets are slowing down.
There are fewer people buying off plan and flipping properties for resale as they come to completion in Cyprus as rental yields are impressive at an average 8% and many investors are aware that they can potentially reap greater profits if they hold onto their properties for longer as stated. Those who buy to let in Cyprus are enjoying gradually increasing rental yields and in some cases investors are buying off plan and buying into guaranteed periods and levels of rent being offered by large developers and tour operators who are able to give these guarantees because the appeal of Cyprus from a tourist perspective which is also increasing.
Cyprus is an increasingly attractive destination as it begins to get a better handle on pricing accommodation and flight packages. In the recent past Cyprus was gaining an unfavourable reputation for being an expensive medium haul destination but the tourism industry has fought back with price reductions and an aggressive campaign to attract more visitors. The appeal from a tourist’s perspective is now increasing in part because of a rise in the numbers of direct flights to and from Cyprus that is making the island more accessible. An example of just one major flight operator to expand operations is British Airways which now flies direct to Cyprus 19 times a week.
Since Cyprus joined the EU in 2004 it has raised its profile worldwide as an exciting and beautiful destination in which to holiday. Furthermore Cyprus is a unique destination as it has year round appeal. While one cannot sunbathe in the winter one can enjoy a beautiful and mild climate and escape the harsh northern European winter, therefore the long let retirement market rent out properties throughout the winter months in Cyprus for attractive sums of money and offer an investor another market to target.
The other market sector that an investor could target is the growing full time retirement market attracted to the island because Cyprus is relatively tax friendly- pension income is only taxed at 5% for example and there is no inheritance tax on all estate property all over the world for permanent residents of Cyprus apparently (although I would suggest those domiciled in the UK should check their status), has a fairly low cost of living, a perfect climate, excellent and affordable healthcare facilities and is almost as popular with retiree escapees as Spain and yet property for sale in Cyprus is at least 30% cheaper than the majority of properties in Spain’s most popular regions. Therefore the retirement and second or holiday home markets offer an investor a way to resell to release capital growth.
It seems that the future for property investment profit in Cyprus appears to be very positive indeed and sustainable at least for the medium term. Other data applicable to this discussion includes the fact that Cyprus and Egypt have returned positive initial findings from their joint exploration efforts in Cypriot waters for oil and gas deposits and Cyprus is seeking to diversify and develop into fields of education and healthcare in a bid to lessen the nation’s reliance on tourism and real estate and guard against any shake up in one given industry sector seriously undermining the economy.
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