1.Market Overview 

1a. Cyprus Real Estate Market Introduction 

Cyprus’ economy has shown resilience against external shocks, such as geopolitical tensions and climate change with expected GDP growth of 2.2% for 2023. The country’s small size and global outlook provide it with the agility to adapt and thrive. 

The Cyprus real estate market is being shaped by several key factors. Geopolitical tensions and regional unrest have driven foreign demand, with investors seeking stability, leading to rising property prices, especially in high-end areas like Limassol. High mortgage rates have reduced local buying power, balancing demand but not discouraging foreign interest in Cyprus as a safe investment haven. Additionally, increasing construction costs are affecting supply, putting upward pressure on prices. The Cyprus residency by investment programme, or Golden Visa, further fuels demand by offering non-EU nationals residency through substantial property investments, making Cyprus particularly attractive to international buyers.

The Cypriot real estate market has become a prominent investment hub in the Mediterranean, attracting both local and international buyers. Its appeal is driven by a combination of strategic location, favourable tax regimes, and a thriving tourism industry, making it one of the key markets in the region. 

1b.  Key Statistics 

In 2023, Cyprus’s residential property price index displayed steady year-on-year growth, starting at 7.66% (1.76% when adjusted for inflation) in Q1 and rising to 8.28% (6.54% inflation-adjusted) by Q4, per the Central Bank of Cyprus. This marks the first annual inflation-adjusted price increase since 2021. At the same time, in June 2024, gross rental yields for apartments in Cyprus averaged 4.57%, a slight decrease from 4.91% reported in July 2023.

 The annual percentage rate of charge on mortgages, used by the Central Bank of Cyprus to measure the actual cost of loans, increased. At 5.15%, the indicator notably exceeds the eurozone average

In the first five months of the year, 6,231 property sales contracts were registered, showing a slight decline of less than 1% compared to the same period in 2023. Domestic sales grew by 12.2%, while overseas sales dropped by 16.5%, leading to varied district performance. Coastal areas like Paphos and Limassol, typically popular among overseas buyers, experienced reduced activity.

The Real Estate & Construction sector accounted for 14% of Cyprus’s Gross Value Added (GVA) in 2023, with its GVA output increasing by 3% over this period. This growth underscores the sector’s continued resilience and key role in the island’s economy.

2.Legal Environment 

2a. Regulatory Environment 

The Cypriot legal framework for real estate is structured to ensure transparency, protect both buyers and sellers and facilitate secure property transactions. The primary laws governing property include the Immovable Property Law, which regulates ownership, the Co-Ownership of Immovable Property, Contract Law, which provides the foundation for contract enforcement, and the Transfer and Mortgage of Immovable Property Law, which handles property transfer and mortgage processes. 

For sellers, legal compliance involves ensuring a clear title and settling any outstanding taxes before transfer. The transfer of ownership is formalized at the District Land Registry, where documentation and tax clearances must be in order to complete the issuance of a new Title Deed in the buyer’s name.

2b. Recent legal changes 

Amendments to Law 132(I)/2023

The December 2023 amendment to Cyprus’s sale of property law, Law 132(I)/2023, introduces substantial protections for property buyers, particularly regarding transactions involving properties with existing mortgages. This amendment allows buyers to directly settle payments with mortgage lenders, facilitating a smoother transfer of property ownership by giving these transactions priority over existing encumbrances. Additionally, sellers are now required to provide a recent Survey Certificate, issued within five days of contract signing, to improve transparency and ensure buyers are well informed. To enforce these regulations, the Director of the Department of Cadastre and Land Surveying is authorized to impose fines on sellers and mortgage lenders for non-compliance, reinforcing these new consumer protections in property transactions.

Amendments to Law N.9/1965

The 2023 amendments to Cyprus’s Transfer and Mortgage of Immovable Property Law (N.9/1965) introduce key provisions to address mortgage delinquencies, clarify terms, and streamline the handling of property transfers for debt reduction. Notably, Article 44B was amended to standardize notices sent by mortgagees regarding arrears, requiring them to be verified by a statutory auditor or auditing firm, with the stipulation that these notices need only be sent once unless a court order or property sale application exists. A new Article 44ΓΑ mandates that all divestment proceedings that haven’t progressed to a successful auction under previous notices must restart, invalidating prior notices to ensure procedural uniformity. Additionally, Article 44IE now provides standardized definitions for terms like “Licensed Institute” and “Main Residence,” while Article 44IH extends certain deadlines to December 31, 2024. New articles, 44KH and 44KΘ, were also introduced, focusing on the transfer of mortgaged property to offset debts. These changes aim to enhance procedural fairness and provide clearer guidelines for lenders, debtors, and other stakeholders in property transactions.

 

2c. Compliance 

In Cyprus, compliance in real estate transactions is essential to ensure legality, transparency, and security for both buyers and sellers. The legal framework governing property transactions imposes various obligations on parties to protect their rights and maintain market integrity. These requirements include the following:

1. Due Diligence Compliance for Buyers

• Title Verification: Buyers must confirm the property’s title deed to ensure clear ownership, verifying there are no encumbrances or restrictions on the property.
• Planning and Building Permits: Buyers need to ensure that all planning and building permits are in place, particularly for new or recently constructed properties.
• Structural Assessment: For older properties, a structural survey is recommended to identify any physical issues that may affect the property’s value or condition.

2. Contract of Sale Registration

• Mandatory Deposit at District Land Registry: The Contract of Sale must be deposited with the District Land Registry within six months of signing to protect the buyer’s rights and prevent any subsequent sale of the property to a third party.
• Penalties for Delayed Registration: Missing the six-month deadline exposes the buyer to significant risks, as the contract’s protections may be voided.

3. Financial and Tax Compliance

• Stamp Duty and Transfer Fees: Buyers must pay stamp duty on the Contract of Sale based on the purchase price, and transfer fees to the Land Registry when ownership is transferred.
• VAT for New Properties: A 19% VAT applies to new properties, though a reduced rate of 5% is available for first-time buyers under specific conditions.
• Capital Gains Tax for Sellers: Sellers pay a capital gains tax of 20% on any profit from the sale, with exemptions available in certain cases.
• Outstanding Immovable Property Tax: Although this tax was abolished in 2017, any unpaid amounts must be settled before property transfer to avoid delays.

4. Bank Due Diligence for Foreign Buyers

• Pre-Sale Banking Introduction: Foreign buyers are encouraged to connect with Cypriot banks early to complete banking due diligence, which can be a lengthy process due to current compliance requirements, before finalizing the sale.

5. Residency Compliance for International Investors

• Residency Program Requirements: Non-EU buyers investing at least €300,000 in new residential properties are eligible for permanent residency under Regulations 5 and 6(2) of the Aliens and Immigration Regulations. This program mandates investment in a brand-new property and grants residency within a few months.

6. Legal Representation and Disclosure Requirements for Sellers

• Disclosure Compliance: Sellers must ensure all property information is accurate and disclose all relevant property details to prevent future disputes.
• Legal Document Preparedness: Sellers must have a clear and unencumbered Title Deed and settle any unpaid taxes before finalizing the sale.

2d. Residency and Citizenship Programs

The Cyprus Golden Visa program offers foreign investors permanent residency through an investment of at least €300,000, with an additional annual income requirement of €50,000. Applicants can invest in new residential properties, shares in Cypriot companies with at least five employees, or collective investment funds. The visa allows the applicant, their spouse, and dependent children to reside in Cyprus permanently, but working rights are limited to roles as company directors or shareholders in Cypriot entities. Children up to 25 can be included if they are students and non-dependent adult children can be covered with an increased investment per child. The applicant must meet criteria including a clear criminal record and proof of investment maintenance, verified annually, with criminal record checks every three years. Residency holders must visit Cyprus at least once every two years to maintain their status.

Although Cyprus’s “Golden Passport” citizenship by investment program was discontinued in 2020, the Golden Visa allows eligible residents to apply for citizenship after residing in Cyprus for eight out of ten years, with uninterrupted residence in the final year before applying. The visa offers tax benefits like low personal and corporate tax rates, no inheritance or wealth tax, and exemptions on dividend income. Cyprus also provides a robust business environment supported by economic resilience and EU-backed recovery plans, making the Golden Visa an attractive option for investors seeking stability and growth in the European market.

3.Commercial Updates:

3a. Investment Opportunities 

The Cyprus real estate market in 2024 offers promising investment opportunities across emerging regions and high-demand property types. Larnaca, for instance, has seen substantial growth with property sales rising by 35% in the first nine months of the year, driven by the redevelopment of its port and marina and new retail centers. This has made luxury apartment developments particularly attractive to investors. Limassol also continues to draw attention, holding over 30% of Cyprus’s property sales during the same period, attracting both local and international buyers with its dynamic environment and numerous high-end projects.

In terms of property types, residential and commercial properties are in high demand. Residential properties, especially luxury villas and apartments, benefit from Cyprus’s strong tourism sector. For commercial properties like offices and retail spaces, returns can be even higher, particularly in regions with high demand for apartment blocks and upscale office spaces. The sustained growth in property prices, especially for apartments, presents an attractive opportunity for capital appreciation, making both residential and commercial properties solid options for investors seeking favorable returns in Cyprus.

3b. Challenges and Risks 

The Cypriot real estate market faces several challenges that could impact its stability and growth. Economic uncertainties, including inflation and high mortgage rates, have reduced local buyers’ purchasing power, making homeownership more difficult. This has led to a shift in demand towards more affordable housing options, such as apartments, and a decline in transactions for larger homes. 

Additionally, the market is experiencing a supply crunch due to slower new construction amid continued high demand. This shortage has driven up rental prices, particularly in popular urban and tourist areas. Rising construction costs further exacerbate the issue, as they contribute to the upward pressure on property prices and may deter new developments. 

3c. The Competitive Landscape and Promising Projects

The Cypriot real estate market is characterized by a diverse array of developers and construction firms, with several key players leading significant projects across the island. Notable among these are Aristo Developers, Pafilia Property Developers, and Leptos Estates, each contributing to the sector’s growth through large-scale residential and commercial developments. 

Noteworthy projects include Limassol Greens, a vast development featuring an 18-hole golf course, a clubhouse, 500 villas, and 250 apartments, catering to both local and international investors seeking premium lifestyle properties. Another influential project is the Minthis development in Paphos by Pafilia Property Developers, which offers exclusive villas and suites along with leisure amenities like a golf course, sports fields, a spa, and wellness facilities.

Several major projects are poised to significantly influence the market landscape soon. The Limassol Mall, developed by CAC Papantoniou Ltd and others, is set to become a prominent shopping destination in Ayios Athanasios, featuring approximately 90 shops, multiple restaurants, a cinema, and ample parking facilities. Another notable development is The Mall of Limassol by Atterbury Europe, located in Mesa Geitonia, which will offer over 50 stores, a hypermarket, a cinema, and a playground, enhancing the retail experience in the region. These projects are expected to attract both local and international investors, enhancing the appeal of Cyprus as a prime real estate destination.

4.Practical Guide for Buyers and Sellers 

For buyers and investors navigating the Cypriot real estate market, it’s crucial to understand both legal procedures and market-specific considerations. 

Navigating Legal Processes

• Due Diligence: Verify title deeds, permits, and any property encumbrances to ensure clear ownership.
• Legal Assistance: Engage a local lawyer to help with the Contract of Sale, which must be registered within six months at the District Land Registry to protect your rights.

Key Considerations When Choosing a Property

• Location: Coastal areas like Limassol and Larnaca are popular, with high demand and growth potential.
• Property Type:
  • Residential Properties: Good for rental income, especially in tourist-heavy areas.
  • Commercial Investments: Considered for high returns in urban areas with business growth.

Financial and Market Factors

• Market Trends: Be aware of rising mortgage rates and construction costs, which impact property values.
• Residency Program: The Cyprus residency-by-investment program offers non-EU buyers a route to residency, enhancing investment appeal.

 

In conclusion, the Cyprus real estate market offers a unique blend of opportunity and stability for both local and international investors, driven by a strategic location, favorable tax benefits, and a robust legal framework. While demand continues to rise, particularly in key coastal areas, challenges such as high mortgage rates and supply constraints are shaping investment decisions. Nonetheless, Cyprus’s attractive residency-by-investment program and large-scale developments promise strong returns, especially in high-demand regions like Limassol and Larnaca. By staying informed about regulatory updates and carefully considering property types and locations, investors can leverage Cyprus’s resilient market environment to secure lasting and profitable real estate ventures.