By Yana Jamieson Property World Issue 3
Cyprus is mid-way between Dubai and the UK. So buying a property in Cyprus can be both an investment and a convenient holiday home, just three and a half hours from Dubai. It is a safe, pretty island, with a wonderful climate, distinct seasons, fresh air, friendly people, a very low crime rate and sense of history...I could go on!
What effect has Cyprus's entry into the EU had on buying property in Cyprus?
Cyprus will formally join the European Union from the 1st May 2004. This is a major milestone for Cyprus with many benefits. We have already seen property prices rising this year in anticipation of EU entry. There has been a sizeable increase in people looking to buy in Cyprus - especially Brits. EU citizens will have the automatic right to work on the island and social security and other benefits will be transferable as between other EU states.
Is buy to let a good option in Cyprus at the moment?
Yes. There is a strong seasonal market for short term lets. For example, if you put a 30% down payment on a property then around 35 weeks letting would cover over 66% of a mortgage to pay for the property, and that's based on a 10 year term! A purchase therefore becomes self-funding within a relatively short time. Also the property is still available for your own use when vacant. Cyprus is likely to become even more popular as a holiday destination, as flights from northern Europe will fall in price next year leading to an even stronger lettings market.
What are the benefits of investing in Cyprus Property? Many readers have suffered in the stock markets in recent years. Cash is secure - but returns are low. So, firstly, property is attractive in general. Secondly, in Europe Cyprus is unquestionably right now one of the very best places to invest in property. The main factor behind this is obviously Cyprus's membership of the EU. The capital value of your property is likely to rise considerably over the next few years. Also rental returns are strong and likely to improve which makes a property investment in Cyprus even more attractive.
What kind of return can I expect on my investment? That's very difficult to answer. It depends on the specific property, on location and on timing: when you buy and when you sell. As a rough guide we would say clients should expect 15-25% gains annually over the next 1-5 years and that's probably conservative. Also the" gearing effect" of buying with a mortgage could realise a much higher percentage return on your actual capital invested. In the next year, in particular, returns could be very strong indeed. While there are no guarantees in life, Cyprus property offers a highly attractive investment opportunity. I've bought there myself, so at least I'm putting my money where my mouth is!
As an expat how can I obtain a mortgage?
As I said, from next May a range of products will be available from UK providers. However, Cypriot banks already offer foreign currency mortgages to expats, which are competitive and straightforward to arrange. Hellenic Bank, for example, offer flexible and attractive mortgages to expats and are efficient and pleasant to deal with. Another consideration, especially for UK investors, is that they may have substantial capital tied up in a UK property. Several banks, including HSBC, now offer 'Equity Release Schemes', which allow you to 'unlock' this money enabling an investment in a Cyprus property.
How can you be so confident prices will rise in the coming year?
That is a good question and the easy response, because of Cyprus's entry into the EU next May.
You may ask why are people waiting?
Reasons? I will cite two in particular: some people prefer to buy with a mortgage from a UK provider - The Abbey and the Halifax - will only offer mortgages for Cyprus from next summer. Secondly, many UK based buyers already own a property on the island and would like a second one as an investment. At present an individual can own only one property however from next May EU nationals no longer have this restriction. Interest in Cyprus will increase as May approaches and therefore demand - that can only increase prices.
What is the average cost of a property?
Whenever anyone asks me about "averages" I think ofthe story about the man with his feet in the fridge and his head is in the oven who says that on "average" his body temperature is O.K! Average prices perhaps not, but I can definitely provide the price range. The price range is wide in Cyprus from £40,000 apartments to beach properties at £70,000 to villas at £90,000. Its all about location. Some buyers are ecstatic about a villa for £180,000 with breathtaking sea views. There is also the spectacular Aphrodite Hills development, this is Cyprus's first resort of it's type with a championship golf course, health spa, tennis academy. Here you buy a lifestyle, prices start at £150,000 and go up to well over £ 400,000 for a premium villa with pool. Certainly like-for-like, prices are lower in Cyprus than, say, Spain or Portugal. Another reason for the exceptional interest in Cyprus property at present.
