Updated: October 04, 2024
Investing in a property portfolio in Cyprus can be a profitable opportunity. Investors worldwide, including those from European Union countries, constantly invest in the island. Property sales in Cyprus for 2023 reached a total of 4.399 billion, an increase of 216 million from 2022 and 1.208 billion from 2021.
Given the island's current recovery of its construction industry, now is the ideal time to invest. This article will examine the main benefits investors enjoy when investing in property in Cyprus.
If a foreign national invests 300,000 Euros, he/she can get a permanent residency visa. He/she may purchase:
Also, the investor must show that their income comes from abroad.
It is an excellent opportunity for any investor to secure a residency permit in Cyprus. Additionally, investors can apply for citizenship in Cyprus after eight years of residing there. Therefore, they will become Cypriot citizens and European Union citizens. The residency gives the right to stay, open a company, and do business in Cyprus.
Finally, investors buying their first property for residency can also benefit from a reduced VAT rate. If the property is the investor's primary residence, they can pay 5% VAT instead of 19%. The VAT reduction will only apply to 130 square meters of internal covered areas. Any area over 130 square meters is taxed at the standard rate of 19%.
Third-country nationals require permission from the Council of Ministers to purchase property in Cyprus. This simple process involves completing a form, and the Council of Ministers will not refuse permission to applicants acting in good faith.
Having a residence permit in a country that is a member of the EU and the Eurozone is advantageous. It allows enjoying almost the same benefits as European citizens.
Investors who acquire the residence permit can do business on the island. Thus, they can enjoy tax advantages and the free movement of services and goods.
The corporate tax is 12.5% on profits, one of the lowest in Europe. Investors can also enjoy non-domicile tax residency benefits, granting them the right to receive their dividends without tax imposed.
The level of education is very high in the country. There are many international English-speaking schools and universities. Also, many UK universities have opened branches in Cyprus.
Cyprus is considered one of the safest countries globally and an ideal place for a family.
Buying a property in Cyprus in 2024 is considered a good investment. There is increased demand for property rentals, especially in Limassol, one of the most popular locations.
Property rental yields in Cyprus range from 4% to 6%, depending on the real estate type and location. There is demand for both residential and commercial properties.
According to the Central Bank of Cyprus, the Residential Property Price Index (RPPI) has been increasing annually for the past eight years (source - Indices by Central Bank of Cyprus). The long-term appreciation of real estate prices makes it one of the safest investments currently available.
As inflation rises, property values follow, so an owner's rental income can also increase. The actual value of the asset also increases with the inflation rate. Many investors use real estate investing as their first option against inflation.
There is a favourable tax regime for individuals and businesses on the island. Compared with other countries worldwide, the taxation of rental income in Cyprus is very low. Thus, you may purchase the required real estate and rent it out.
For non-tax island residents, rental income is only subject to personal income tax. Twenty per cent of rental income is exempt from any tax. More importantly, the remaining rental income is taxed only after all other allowable deductions are made. The first €19.500 is not subject to any tax.
On the contrary, tax residents of Cyprus (domiciled) are also subject to Special Defence Contribution, levied on rental income.
Cyprus has no immovable property tax and no inheritance tax, which can potentially lead to higher returns on investments. Property tax in Cyprus was abolished in 2017, and inheritance tax was abolished in 2000.
As of October 2024, the median apartment price in Cyprus is € 517,375, with the median price per square meter around € 4,084. The median house/villa price is € 690,000, with the median price per square meter around € 3,396 (data source - Cyprus property investment guide by DevelopersCyprus).
Residential property prices differ between towns, as they do in most European countries. This is because of the demand for seaside properties, luxurious villas, and vacation or holiday homes.
For example, property prices in Limassol tend to be higher than those in Paphos, Larnaca, Nicosia, or Ayia Napa. The reason is the increased demand for such properties in the city.
During the pandemic, despite the decreased demand by international buyers, the domestic property market kept prices stable. The government provided incentives, which raised the domestic demand. The Cyprus real estate market and prices are generally expected to remain stable or increase this year.
Significant is the fact that Cyprus construction activity shows considerable recovery. Construction output rose by 7,4% year-on-year in the second quarter of 2023. According to CyStat, the output of construction and real estate activities to GVA (Gross Added Value) is increasing for the second quarter of 2023. Eurostat data shows that the number of construction employees has reached an all-time high for June 2023. A stable and successful construction industry provides overseas investors with numerous economic opportunities.
Consequently, Cyprus provides numerous opportunities for individuals who wish to invest in immovable property. Currently, the construction sector is powerful and worth taking advantage of. Furthermore, the legal system and tax regime will always benefit those wisely prepared to invest in Cyprus property.
What is of most importance is to take the appropriate legal, financial planning, and property advice. Local real estate lawyers will be the most appropriate advisors to employ if you seek advice from experienced, talented, and committed individuals.
What is the most profitable property investment?
A lot depends on context, but the most profitable property investments are considered residential rental properties, commercial properties for rent, vacation rentals, renovations and investments in REITs.
These are shares in Real Estate Investment Trusts, which invest in property. You do not buy and deal with any properties yourself; you buy shares in those companies, and the shares are traded in the stock market.
Typically, REITs provide high yields for investors. Keep in mind that investment in real estate can be a steady source of income but requires a budget and, depending on the type of investment, a degree of expertise. Before proceeding, you are advised to talk to a financial advisor, lawyer or real estate agent.
Is the property in Cyprus a good investment?
The short answer is yes. Demand is rising for all types of property, especially residential apartments, and rental yields remain high. For example, for the first quarter of 2024, they were 5,44% for apartments and 5,83% for retail (RICS Cyprus Property Index).
Where is the best place to invest in Cyprus?
A lot depends on your plans, budget and outlook. The most expensive properties are on or near the sea, and the area most in demand is Limassol. However, expats and retirees prefer Paphos.
You might need to decide which part of the market you go for. The villages and mountains attract buyers who love the quiet lifestyle; the capital, Nicosia, is a central choice for students and entrepreneurs. Larnaca is the airport's location and attracts families and business people alike.
How to make a property investment in Cyprus?
You will need a budget and plan: will you buy, sell, rent, renovate? Real estate investment is safe but does not liquefy quickly and makes profits in the long run. So, if you are looking for a quick profit, real estate investment is not for you.
Some areas, like renting, do not require expertise, but you must be there for your tenant(s) and help them with repairs and maintenance. The second step is to contact a real estate agent and a lawyer to deal with the regulations, laws, permits and other practical matters.
If you are an EU national, you can trade in property without restrictions; however, to register as a Cyprus resident, you must show sufficient funds to support yourself and your family.
If you are a third-country national, you will need government permissions for residence (residence permit) and buying or dealing with property.
What are the different types of property investment?
There are various residential rental properties, commercial properties for rent, vacation rentals, renovations, and investments in REITs. REITs are shares in Real Estate Investment Trusts, companies that invest in property.
You do not buy and deal with any properties yourself; you purchase shares in those companies, which are traded in the stock market.
George K. Konstantinou
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