The property market in Cyprus has been hit by the news of the Brexit referendum, which, to say the least, was unexpected and is likely to have serious outcomes, especially for the British expat population here. We can’t blame you if you are planning to sell your property in Cyprus in view of the latest developments.
Regardless, it is important that you should stay up-to-date with the latest situation in the property market in Portugal. Keeping this in mind, we tell you what you should know about the property market in Cyprus.
Property Prices in Cyprus Have Been on the Rise Since 2015
The 26th edition of the RICS Cyprus Property Price Index stated that the average price of apartments and houses across Cyprus rose by 1.2% to 1.5% in the first quarter of 2016. According to RICS Index, property prices have been on the rise in all urban centres of Cyprus. Prices of all types of properties have risen, residential as well as commercial.
Famagusta registered the highest increase in apartment prices of 1.5%. The biggest increase in house prices of 5.6% was registered in Paphos. Retail properties fallen value by an average 0.5%, and offices and warehouses rose in value by 1.5% and 1.2% respectively.
Apartment prices have fallen by 0.2% across Cyprus on an average, while house prices have risen by 0.6%. Retail properties and warehouses have fallen in value by 1.3% and 2.3% and price of office spaces has risen by 0.7%.
The banking system in Cyprus has struggled for many years since the 2008 economic recession and the subsequent housing collapse. While there have been more real estate transactions in 2016 than at any time during the last few years, the volume of the transactions has been a lot higher.
Local buyers have generally remained disinterested in the property market here because of high rate of debt and unemployment in the country. Most of the local buyers who have purchased homes or apartments in Cyprus have been able to do so only with the help of bank-finance. Cash-only deals are few and far between, at least with local buyers of property here in Cyprus.
Rental value have witnessed a secular rise across Cyprus. Rental values of apartments have risen by 3.6%, for homes, by 1.8%, for retail by 0.2% and for warehouse and offices by 0.4% and 0.6% respectively on a quarterly basis. On an annual basis, rents have increased by 4.2% for apartment and 2.4% for houses.
The average gross yields were reasonable, at 2% for houses and 4% for apartments. All of this suggests that there is a plenty of room for growth in the Cyprus housing market and we are not too far off from witnessing a re-pricing of the properties in Cyprus. This can happen either later this year or in 2017.
The investment yields in Cyprus are very stable and have been at a low level for a long time, which indicates that the housing market here is ripe for growth.
As you can see in the graph below, property prices were on a secular decline in Cyprus since 2009, but have recently started rising again. This is great news indeed for both buyers and sellers of properties in Cyprus. Buyers appreciate a healthy housing market as it as it gives them some sort of an assurance about the quality of their investment, while sellers like the fact that they are now able to fetch a higher price for their property.
A Hotly Contested Debate Over Property Taxes
In a move that has come in for a lot of criticism, the Cyprus government has formulated a new proposal which would mean that Immovable Property Tax will now be calculated at a flat rate of 0.035% based on 2013 property valuations.
These changes are expected to generate €30 million in revenue for the government, in addition to the €15 million collected by the local administration. The government has come out with the new proposal as the municipalities have already been issuing their property tax demands.
Immovable Property Tax is a hot issue in Cyprus and every political party has out forward proposals to revise it on an urgent basis. The leftist political party AKEL has demanded a progressive tax system, which means the higher the property value, higher the tax rate.
This is something that the other political parties agree with as well, but there is no agreement as to how the tax burden should be distributed among homeowners in the island.
Another political party DISY wanted Immovable Property Tax to be scrapped on an urgent basis and to make up for the consequent revenue loss by reducing the pensions paid to government officials.
So the property tax debate continues to be hotly contested in Cyprus and we are no closer to having a resolution as yet.
BREXIT is a Reality. What Next for British Expats in Cyprus?
Okay, Brexit has just happened. June 23, 2016 will be remembered in history as the day Britain decided to leave the European Union after a referendum that saw 52% of the British public voting “Leave” and only 48% supporting “Remain”. We have discussed Brexit and the fallout for the overseas property market in detail here. But what about Cyprus? How does Brexit affect British expats in Cyprus?
To give you a hint, there’s been a rush among expats to apply for a Cyprus passport. Chris Hadjikyriacou, the sales manager of BuySell, a local agency in Cyprus, which helps people with their Cypriot passport application says inquiries from Brits have been higher than ever following the Brexit referendum.
Mr. Hadjikyriacou says, “Yes we’ve had loads of British people calling. We have had about 15 serious inquiries since Brexit. We’ve never had them before and this is quite a lot in a few days considering you have to have €2.5m to invest [to obtain citizenship] . . . Before this, the majority of our inquiries came from China.”
Understandably, British expats such as Ian Alexander, who is 68 and has lived in Paphos for 11 years, are worried about the vote and what it means for their future. Mr. Alexander says he is depressed with what happened on June 23rd. He says, “Living here one of my concerns is what the future holds for us. But President Anastasiades said a few weeks ago that British money is vitally important to the Cypriot economy and the two countries have strong ties.”
“I’m depressed because there will be lots of changes in Britain and sterling. The impact of leaving will have long term effects, although it will take some time to leave and on what terms,” Mr. Alexander adds.
Another British expat, Debbie Bell, who heads the Paphos branch of the United Kingdom Citizens’ Association, says she was shocked by the vote and was worried about what it meant for her restaurant business. She had voted for Remain along with her husband through a postal ballot, as had her three adult children in the UK, but to no avail.
Ms. Bell says, “I went to the butcher’s this morning and he was shocked like me, as he gets a lot of his supplies from the UK and I buy from him. He is a local business here and we don’t know what will happen. We need to let the dust settle.”
She is equally worried about what Brexit would mean for expat pensioners in Cyprus, who are her main customers, as any drop in the sterling will have an immediate impact on their income from the UK state pension, and would affect their buying power.
Ms. Bell explains, “They may not be able to live the life they’ve become accustomed to anyway. Many of them may not be able to visit the club anymore, and that’s really sad, as for some of them, it’s their life.”
It’s not just the British expats who are worried about Brexit, tourism is the main industry in Cyprus and British holidaymakers make a chunk of the tourists here.
So many tourism industry professionals, such as Euripides Loizides, the secretary of the Paphos hoteliers’ association, are concerned about what might happen in the near future, as the fall in sterling would have an impact on the buying power of British tourists.
Mr. Loizides explains, “It’s not only tourism that could suffer; we don’t know the extent of how British investors may suffer. They historically buy a lot of property here for example. I’m thinking of the global market, everyone will be affected. The financial markets are worried and no one can predict the ultimate outcome.” So the extent of British buying property in Cyprus maybe over.
He adds, “I think that the British voted with their hearts and not with logic this time. Cypriots are very close to the British people, we like them and almost everyone here speaks the English language, our position won’t change.”
While the referendum is done and dusted, Brexit is expected to be a long drawn affair, the first step of which would be to invoke Article 50 of the Treaty on European Union. The next British Prime Minister, presumably Theresa May, is expected to be the one to set things in motion. The whole process would actually take at least two years or more.
So our advice for British expats in Cyprus is to keep calm and do what they are doing. Things should continue as they are. In fact both the British and Cyprus government are very keen to make sure that the transition remains smooth and as painless as possible. The excellent relationship between Britain and Cyprus is expected to continue, Brexit or no Brexit.