Depending on where you are in the world, Cyprus might be known to you as either a holiday destination, a place to retire in the sun, or a financial services hub. Whatever your vision of this Mediterranean Island, it is invariably linked to its geographical location between East and West, its mild climate and its sandy beaches.
What most people only discover during their first actual visit is that Cyprus, despite its small size and total population well under a million, has so much more to offer. History and mythology go hand in hand; famous archaeological sites rest alongside luxurious urban construction; cool unspoiled mountains complement the developed coastline. Whatever your reason for travelling to Cyprus, whether for business or pleasure, three characteristics will be engraved in your memory: the Cypriots’ warm and spontaneous hospitality, the European lifestyle that is woven into a more comfortable Mediterranean pace, and the safe environment – Cyprus has the lowest crime rate in Europe. Combine all these factors and it becomes clear why tourism – and by extension the real estate market – is the backbone of the Cyprus economy.
A Safe Haven in the Region
Apart from the natural, geographical and historical assets of the island, Cyprus stands out on yet another level. In a region marked by political instability and conflict, this island, a member state of the European Union, is not only a magnet for summer holidaymakers. It appeals to EU citizens who value a home in the sun, but also to non-EU citizens who appreciate having a second home they and their families can escape to at any moment. Thus, development in Cyprus focuses on both tourist infrastructure as well as residential and commercial development, in particular in the coastal areas.
Given the conditions as described, investors can easily take the next mental step: While demand for coastal properties is clearly there and growing, Cyprus is and will always be a small island with a finite coastline – and therefore limited real estate and decreasing availability of properties. Indeed, land that is available for sale is even less than meets the eye. Although one might see coastal swaths that are not built up, many such land parcels are either government property, or family owned assets that are not available for sale, or agricultural land with neither road access nor public utilities. As such, the value of any property that is actually on the market is destined to increase; and the closer it is to the sea and the popular tourist resorts, the faster and higher its market price is bound to rise, even in the short term and certainly in the long term. It is a textbook formula for golden investment opportunities.
Such conditions are in and of themselves enough to excite investors; but there is even more to tickle their interest. After the economic setback that the island suffered three years ago, the Cyprus Government has gone to great lengths to attract direct foreign investment, in particular to give the core of its economy – tourism and real estate – a shot in the arm. The residency-by-investment and citizenship-by-investment programmes were tailored to attract non-EU citizens. Both programmes, which do not require physical permanent residence on the island, were welcomed by investors, particularly from the Far East, the Middle East and Russia. They recognized the benefits of residence status, and better still citizenship, in an EU member state – with a more appealing climate and quality of life. More recently, the advantages of both programmes have been enhanced with the introduction in 2015 of the tax-exempt ‘non-domiciled’ status. Anyone who spends less than 183 days per year in Cyprus is considered ‘non-domiciled’ and exempted from personal tax.
Investors interested in development projects will benefit from another new incentive: the significant increase in the building coefficient in tourist centres. This measure was introduced to help Cyprus satisfy the increased demand for beds and tourist infrastructure in and around the resorts.
To identify the most promising properties, investors follow a basic rule of thumb: chose a location close to the sea and in the vicinity of one of the more popular tourist resorts. Proximity to a sandy beach will automatically multiply the investment’s potential. Based on these criteria, the beautiful southeastern coast of Cyprus around Agia Napa and Protaras and extending towards the stunning landscape of Cape Greco ranks at the top of the ‘desirable’ list. With less than 8% of such properties still on the market, each plot or parcel, compact villa or luxurious, fully serviced mansion overlooking the sea is an opportunity to be grasped, the sooner the better. Travelling westwards, Limassol offers exclusive residences, especially for yacht owners, as well as high-end serviced residential condominiums on the seafront.
To sell or to Rent?
By definition, investments are designed to deliver a profit, either by selling at a later stage, or by renting to generate ongoing revenue. Investors interested in buy-to-sell opportunities tend to prefer plots of land with direct access to the beach. These can either be sold as they were purchased, or after development – at a significantly higher profit. Here two additional government incentives are worth noting: For all transactions concluded by December 2016, the sale of real estate is capital gains free, and transfer fees have been reduced by 50%. Both incentives may well be extended.
Based on tour operators’ demand, the ‘buy-to-rent’ option is recommended for tourist villas or apartments in resort centres, as well as fully serviced, luxury holiday accommodation anywhere on the coast. The most desirable properties are often combined with guaranteed rental schemes.
As the economy starts to pick up again, and the first growth figures are being registered, many experts believe that the time for investment in coastal real estate in Cyprus is now, in order to take advantage of the current government programmes and incentives. Depending on an investor’s personal objectives and long-term strategy, the only question is ‘which one?’.