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Property Investment Strategies – Cyprus

If you are considering a property purchase in Cyprus, it’s important to be aware of the local investment arena and the various strategies available in order to benefit fully from a well planned investment.

General Factors

In the Republic of Cyprus, focus is on successfully meeting all EU criteria since its membership in 2004, while it is clearly reaping the rewards of a strong and stable economy. The Republic is prospering further due to its adoption of the Euro on New Year’s Day 2008.

Since membership of the single European currency, Cyprus has adopted the same rate of interest applied across the Eurozone which currently stands at 4%, enhancing the island’s appeal as an investment market for foreign buyers.

Cyprus is currently undergoing the Strategic Plan for Tourism 2010 which aims at upgrading the facilities and resorts of Cyprus to 21st century tourism standards. This is good news for all kinds of property investors in Cyprus who are assured their properties and related amenities will fall in line with current demand. Investors should also expect to see an increase in the number of theme parks, eco-tourism, marinas and golf courses to cater for the diverse needs of modern tourists.

Economic Factors

The island enjoys a standard of living that is higher than other European Union member-states while economic performance compares very well to that of most other EU countries.

The downturn of the Cyprus Stock Exchange pushed most of the capital towards the property market, since the stock market could not rise up to investor expectations, leaving the property market as the best major investment alternative in Cyprus

The banking sector is the major financier for both investors and developers alike. Cyprus property is expected to benefit from the uncertainty and pessimistic expectations in the English property market, since many investors prefer to transfer their capital to more secure property markets such as Cyprus with better future potential.

British investors have very strong buying power in Cyprus and they can use gearing from their investments in England to buy significantly more in Cyprus. Since its joining of the EU in 2004, Cyprus has enjoyed capital growth of approximately 20% while property prices remain considerably lower (up to 30% lower) than in destinations such as France or Spain.

Political Factors

Since 1974, Cyprus has been divided into the government-controlled southern two thirds of the island and the remaining one third in the northern part, administered by Turkish Cypriots. Shortly after founding the Greek Republic in the south, serious differences arose between the two communities about the implementation and interpretation of the new constitution. The Greek Cypriots argued that Turkish Cypriot interests were obstacles the efficient running of their government. Since a military coup in 1974, UN peacekeeping forces have maintained a buffer zone between the two sides. Apart from the occasional demonstration or incidents between soldiers, the island has remained completely free of violent conflict.

Natural Factors

Cyprus has long held many attractions for British retirees and holiday makers alike. The warm climate, beautiful beaches, countryside and sedate lifestyle make it an ideal location for those seeking a quieter pace of life. Just enough rainfall and stunning hot summers, make Cyprus the ideal Mediterranean destination for an ongoing influx of tourists and property buyers. Beautiful golden Mediterranean beaches and ancient monuments, along with an interesting mix of international cultures are further attractions of the island.

The government has launched a new golf policy which will increase the number of 18-hole golf courses on the island from 3 to 14. This factor, along with continued property development all over the island, indicates significant growth, which can only be encouraging to foreign investors.
Other factors that make buyers choose Cyprus property above many other locations is the security offered by Cyprus real-estate investment, the fact that English is so widely spoken and the legal systems are reassuringly akin to familiar European standards.

Logistical Factors

A major tourist destination and the third largest island in the Mediterranean, the Republic of Cyprus is well equipped with international airports to serve an ever expanding tourist industry. The two major international airports with direct 5 ½ hour flights to the UK are located at Larnaca and Paphos.

Additionally, the road infrastructure is considered to be of great importance in Cyprus due to an ever increasing need to cater for today’s more independent and adventurous tourist wishing to explore the island with ease. These roads will of course increase ease of transit of merchandise as well as people to every location on the island.

Short Term Investment Strategy

Key Opportunity

As a former English colony, the Republic of Cyprus (Southern Cyprus) is reassuringly “British” for UK tourists and homebuyers on the island. English is still widely spoken and the large expatriate community ensures that this will remain the case, while many laws and administrative procedures are akin to “back home”. These familiarities, in conjunction with over 300 days of sunshine per year and 648 m of beautiful coastline, entice an ever increasing number of visitors and property investors to the island for business, pleasure and relocation.

The Strategic Plan for Tourism 2010 plans to upgrade tourist facilities and resorts with the main aim of launching Cyprus tourism well into the 21st century. The plan includes the establishment of new theme parks, agro/nature tourism, marinas and several golf courses – all great news for overseas investors who seek a stable tourist market, high rental potential and good capital returns.

A high-income country, the Republic of Cyprus comes 16th in the world in terms of per capita income. This means a high standard of living, superior to that of many other EU states and an impressive economic performance.

Property prices remain roughly 30% lower than in some other European destinations such as France or Spain, so British and other property investors are enjoying strong buying power in Cyprus with capital growth reaching 30% – 40% per annum since EU membership in 2004.

With many new off-plan developments going up on Cyprus, it’s important to ensure your chosen off-plan property is priced a good deal lower than neighbouring completed prices, allowing power for “flip” investments in which capital investors sell on the unit prior to project completion. In this way investors take advantage of substantial capital appreciation over the construction period.


Average construction time for Cypriot off-plan development is between 18 months and two years. Short term investors normally look to profit from a highly promising market, selling on their unit to mid or long term investors approximately 14 to18 months after making their initial reservation, regardless of whether or not the project is yet completed.

Payment terms vary; good projects will often offer terms of 30% – 40% deposit with the balance due upon completion, allowing short term investors to operate their strategy with minimum capital outlay. Of course, the earlier the investment is made, the lower the prices and greater the eventual returns. The early investor also gains the first choice of the best units and these will always be first to attract buyers in the future.

Level of Complexity

Short term strategies offer the lowest level of complexity as the purchase has not yet been officially made; therefore, no property taxes or maintenance or management charges are due. This is a simple capital investment, often with no need to proceed to purchase contract or make any finance arrangements. Always check with the developer if there are any charges made to “flip”, or reassign your contract, and at what stage you are permitted to do so, before you proceed.

Risk Assessment

All investors must carefully assess the particular project and units they wish to invest in. In many cases a wide range of other projects will be under construction and a choice will need to be made. This will be need to be based of how a particular development or project will outshine its competitors in terms of appearance, location, on-site facilities and the unit itself. Investors will also need to consider issues such as the number of other units available within the particular development, predicted demand as well as competition for the type of property in they propose to invest.

To curb risk, a short-term investor normally seeks an early purchase of the best possible unit, i.e. a corner unit, a penthouse or ground floor unit with a private garden, which will always sell in preference to a standard first floor unit.

Investors need to be clear how their exit strategy is to run. How will the unit be marketed and by whom? How much will the selling agents charge in commission? Should a buyer not be found prior to completion of the property, investors must be confident they can cover payment to completion of the unit and adapt their strategy if necessary.

Short term “flip” investments are undoubtedly more risky than longer term strategies, but, with sound research and careful planning in place, off-plan purchase in well located Italian projects offers a sound investment with lucrative returns on investment.


Cyprus property offers potentially high capital appreciation of between 30% and 40% in carefully selected resort areas. Despite being an established overseas property market, Cyprus’ progress since EU membership is extraordinary and creating strong opportunity for fresh investment into Cyprus.

Shrewd investors have the opportunity to achieve maximum returns by selecting prime resorts at pre-release pricing levels. By reserving at pre-release stage, investors profit from discounted prices and, in many cases, these are subject to successful planning applications, allowing for additional pricing uplift. Reservations on this type of project allow for full refunds if necessary and secure escrow accounts in place to protect investors’ funds. An earlier than normal reservation, affords the maximum possible returns on investment on any given project.


This short term investment strategy is purely based on capital outlay. In order to cover all eventualities, investors MUST be confident they can complete the purchase if necessary, even if using a buy to flip strategy. This covers all eventualities.


Purchasing a property and then re-selling prior to completion is a tax-efficient way to invest as it allows buyers in many countries to avoid any property transfer taxes and side-steps capital gains tax, should they choose to sell on the contract prior to project completion. However, depending on the development and locality in which you buy, this situation may vary and investors are advised to be sure whether or not they need to pay any Cypriot taxes in full prior to selling on their contracts.

Medium to Long Term Investment Strategy

Key Opportunity

Mid to long term investors in Cyprus property are set to reap long term benefits of a growing tourism industry on the island. With old fashioned restrictive rules on foreign ownership having been lifted, a surge of foreign interest and corresponding market buoyancy is now characteristic of the Republic.

While the Cyprus government is currently concentrating on greatly improving the standards of its tourist infrastructure, investors are set to see vast improvements and additions to tourist amenities on the island, making for a strong and growing investment arena in which to operate. Tourist numbers in August 2007 were already up 8.1% on the previous year and this figure is expected to be greater as the island continues its growth and demand is high within the quality holiday rental market.

With property prices still approximately 30% lower than in comparable Mediterranean European destinations, Cyprus is an obvious choice for investors seeking affordable prices, high growth figures and a strong tourist market in which to resell or employ their longer term buy-to-let strategies.


Average construction time on Cyprus projects, from project sales release to completion of construction, is approximately one year. Mid to long term investors look to hold onto their units after construction, normally for at least 18 months from initial reservation, either to rent it out and/or benefit from capital appreciation upon eventual resale. Many long term investors wish to generate significant and reliable rental income over a period of time as sustained rental returns are their main focus, followed by capital appreciation over time.

Capital appreciation is expected to continue to perform exceptionally well over the next 5 years, particularly in view of the current drive for increased tourism by 2010, and the longer investors are able to leave capital in their purchase, the higher their potential returns will be. Tourist numbers are rising and the resulting strength in the buy-to-let market allows investors to reap in solid capital growth from their properties, all the while supplementing this income with high rental yields in key tourist resort areas.

Level of Complexity

In the case of off-plan purchase, full payment for the property needs to be completed at various stages of construction, prior to final completion of the purchase.

For mid to long term investors, all costs will be applicable, of around 10% of the purchase price while ongoing costs such as maintenance, community fees and utility bills will also need to be factored into the strategy finance plan. Bear in mind it’s advisable to open a bank account in Cyprus in order to pay in local currency (CYP) for the property’s utilities and other ongoing expenses.

Some good arrangements are often to be made with property management and rental companies that are usually conveniently based on or near the property. These ensure that such ongoing costs are covered and that your unit is rented out regularly. Maintaining a property abroad can therefore become no more complex than an investment closer to home.

Key Risks

A medium to long term investment strategy entails much lower financial risk than a short term plan which relies on finding a buyer within a very short time frame. Provided the right investment is made on a quality, well located project with multiple facilities, establishing a rental market and eventually a buyer for your investment should not be difficult. However, as with any investment, patience and money is sometimes required until the end user is found.

As a favourite retirement and holiday location, Cyprus attracts ever-increasing numbers of tourists and modern new resorts going up on the island are boding very well for mid to long term investors who are already enjoying relatively high growth rates. This situation of course translates to an increase in buyers and renters on the one hand, but brings with it intensified competition on the other.

By appointing independent legal representation, the investor can be sure that all the necessary paperwork is in place before signing the purchase contract.

Property ownership in Southern Cyprus can be purchased Freehold, leaving no room for ownership disputes.


Cyprus has always been a popular destination for holiday makers and those seeking a quieter pace of life. Investment in Cyprus remains a good prospect with solid returns on investment of up to 20% per annum. With property prices still around 30% lower than in other comparable Mediterranean destinations, investors are not only enjoying high returns but affordable prices at which to buy. As a result the number of property transactions in Cyprus in the first half of 2007 was up almost 30%.

Cyprus has long been a popular holiday destination for British tourists, possibly because settling in is not as much of a culture shock as on other Mediterranean islands. English is widely spoken on this former British colony. For property investors, the land registry system is similar to back home. Familiarities such as these, set in the context of over 300 days of sunshine a year and 648 km of coastline, are clear enticements for the British to continue to flock to the island for both business and pleasure.

Rental yields are also high at an average 8% and many investors are reaping good profits by holding onto their properties for a period of years. Those who buy to let in Cyprus are also enjoying gradually increasing rental yields and in some cases investors are buying off-plan and buying into guaranteed rental arrangements. Large developers and tour operators are able to give these guarantees because of the strong and growing appeal of Cyprus as a tourist location.


Finance is widely available for EU and non-EU citizens from Cypriot banks as well as European branches. A bank mortgage loan is one of the most widely used forms of finance for property purchase in Cyprus. Today 100% mortgages are available to finance property purchases in Cyprus from certain lenders making it even easier to afford a property in Cyprus.

A reduction in bank interest rates is enticing overseas property buyers who have already seen rates drop from 5% to around 4% This represents great potential from an already well-established property market. With a fall in interest rates and 100% finance comes renewed market buoyancy to the Cyprus real estate arena.

It often makes financial sense to buy property as a company. For legal, tax and inheritance law reasons you are recommended to review this option. will gladly give you expert advice as to whether this is a suitable option for your particular circumstances. Release of equity from investors’ other properties, be it in their country of origin or in other investment locations, can also be an easy option to raise finance for a purchase in Cyprus.


The purchase of property in Cyprus is not a complex procedure and for the most part, a foreign national has the same rights in the buying process as any Cypriot citizen.

Purchase taxes range from 3% on the first CYP 50,000 to 8% on CYP 100,000 and over.

Annual property tax is also due and is set at between 2% and 3.5% of the market value. Offshore status allows many foreign companies (located in Cyprus but conducting business abroad only) to benefit from many highly beneficial tax and duty-free concessions.

Capital Gains Tax is charged on disposals of real property and shares in companies owning real property in Cyprus. The first CYP10,000 of a gain is tax exempt. This exemption limit rises to CYP 50,000 if the seller has lived in the property continuously for the previous five years. In some circumstances, further allowances are granted for transfer fees, inflation and improvements made to property, but the total exemption cannot exceed a CYP 50,000 limit.

For retirees, Cyprus is has relatively tax-friendly pension income regime where pension income is only taxed at 5% and there will be no inheritance tax paid on all worldwide property for permanent residents of Cyprus.

Cyprus has double taxation treaties with 26 countries, including the USA, and there are no exchange restrictions on current international transactions. Non-residents and foreign investors may freely repatriate proceeds from their property investment in Cyprus.

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