Please take a few minutes to read about why you should look at buying in Cyprus and why it is such a good place to buy generally.
Cyprus has seen substantial capital gains over recent years but from a very low starting point.
At its peak, Cyprus has seen property gains in the region of 18% due in part to the reasonable mortgage deposit requirements.
Countries like France, Spain, Bulgaria and Dubai have become firm favourites with investors, but few investors would argue that Cyprus has become one of the top investment destinations.
Investors who know their numbers are generally seeking a number of key attributes in any given country they choose to invest in and we can address these in turn.
Mortgage Rates and Deposits Required
As every investor should know, your money should be made to work hard and this is difficult to achieve if you cannot obtain high Loan to Value mortgages in a country. There are now a range of mortgages on resale and new build property.
New build in particular has the opportunity to achieve mortgage levels of 85% or even 90% Loan to Value ratios in the case of strong client covenants, through bank contacts Cyprus XYZ has in Cyprus.
Normal deposit levels in Cyprus, particularity on resale property, would be around 30% and this is a strong incentive for investors to purchase new property rather than old. If property prices rose 15% for example, and one investor had achieved a 15% deposit and another a 30% deposit, then the first investor would achieve a 100% return on equity and the second a 50% return on equity.
In addition, the mortgage rate that applies on a property loan can make the difference between profitable rentals and losing money. In Cyprus the Cypriot pound mortgage rate has seen three reductions in 2005 with many more expected over the next two years as the Cypriot base rate aligns with the European Euro base rate. This will see Cypriot pound mortgage rates lower from around 7% currently down to perhaps 3% as is normal in other European countries who are fully within the Euro.
However, investors who wish to have a lower interest rate immediately can choose from a Euro mortgage at around 4% today, or a Swiss franc mortgage at around 3.25% today. Compared to the yields available of 8% to 12% in Southern Cyprus, it can be seen that property investment rental income can be very profitable.
Capital Gains Potential
It can be seen by an experienced investor that the reduction in mortgage interest rates will doubtless lead to further capital gains in the country. This is normally due to the cost of servicing a loan dropping significantly and this providing extra demand from investors at higher and higher prices. Buying today, before Cyprus joins the Euro, is a sound strategy for maximizing the chance of capital appreciation.
The level of profit on rental income versus to mortgage cost will doubtless drive prices up for as long as there is a profit to be had and Cyprus XYZ estimates that property prices in Cyprus will grow over the next five years by around 50 to 100% from current levels if mortgage rates drop as expected.
Strength of the Lettings Market
The lettings market in Cyprus is very strong but it is also very fragmented. There are many small rental agencies and of course owners advertise on web sites to achieve private rentals are there are few large separate Cyprus based rental companies as yet.
With an 8% gross yield very achievable in Cyprus without substantial marketing, it can be seen that once lettings become more efficient, the yield will go up and hence property prices will probably follow in turn pushing yields back down. This is due to the standard effect that value investors chase high yields and the weight of money tends to drive up property prices.
CYPRUS XYZ has access to a number of guaranteed rental schemes providing two years or more guaranteed income in some cases. We can also provide help in locating suitable Cypriot letting agencies or assistance in choosing the best web sites to advertise on.
Ease of Resale
Cyprus has significant demand not only as a second-home destination but also as a retirement destination and these buyers are not as sensitive to the size of deposit required as investors are. Cyprus will always have a very significant resale market and, unlike other countries where it can be difficult to resell a property in competition with new build developments we consider Cyprus to be one of the better markets in which to resell.
Where best to invest in Cyprus?
There is a healthy domestic residential letting market in most towns in Cyprus but some are better suited to holiday lets.
The towns of Paphos, Protaras and Ayia Napa (much improved in recent years from the young bar culture it was well known for) have very high tourist traffic. Paphos in particular has a twelve-month season due to the April to October holiday season and the very mild winters making it very popular as a winter retirement location on lets of a few weeks to a few months.
The eastern tourist towns of Protaras, Ayia Napa and Paralimni shut down from a tourist point of view from November to April and are only suitable for summer lets.
The eastern end of the island most certainly has the best beaches and, over time and with more flights, Paralimni and Protaras may well offer the best holiday let returns, but the majority of visitors prefer the Paphos end of the island at present.
In Paphos good areas for investment are Kato Paphos, Tala, Tomb of the Kings, Universal, Chloraka, Sea Caves and Peyia.
In Protaras areas around Protaras, Kapparis and Pernera are good for maximizing holiday lets. Areas around Paralimni and Dereynia are better for 12-month rentals.
For residential lettings, Nicosia, Limassol and Larnaca residential districts will generate good returns, typically two/three bedroom spacious apartments with large terraces close to business and commercial centres or detached villas in the suburbs.
Estimated rental returns
CYPRUS XYZ sources some developments with guaranteed rental returns for 12-24 month periods or even longer as well as providing help with sourcing reliable property management services.
Rentals in Cyprus will generally yield around 8% gross but professional marketing can see this rise to 12%. After management fees, changeover costs and general maintenance and repairs and other running costs, net yields are closer to 5-7%. This compares well to the mortgage rate and can be very profitable.
Fly To Let - holiday rentals and lettings on a short term basis :
The season in Cyprus can be defined as :
• High season - from May-September with occupancy levels of 50-65%.
• Low season - from October-April would recommend long-term letting primarily in the Paphos area where rental income would be half that in the high season.
Holiday let rental income is approximately as shown below, but there is a wide variation between owners letting out their properties, and you must take a professional view on the marketing of your property to maximize income if you wish to cover all your costs and make a profit :
• 2-bed apartment/townhouse/villa/semi-detached with communal swimming pool – approximately CY£60.00 per day in the high season
• 3 bed the same – approximately CY£60.00-70.00 per day in the high season
• 2 or 3 bed villa with private pool – Approx. CY£130.00-150.00 per day in the high season
Buy To Let - long term local lets :
• 2 bed apartment – CYP£350 - 400 per month
• 3 bed apartment – CYP£400 - 450 per month
• 2 bed villa with pool – CYP£600 per month
• 3 bed villa with pool – CYP£1000 per month
Detached villas with private swimming pools will have a higher rental that a detached villa with a shared pool.
IMPORTANT: The contents of this report have been compiled in good faith by Cyprusxyz to provide assistance to investors, but do not constitute investment advice or recommendations. Investors should not rely upon the information given in order to choose types or routes of investment but should make their own independent enquiries before making choices. Cyprusxyz has taken reasonable care in researching and presenting the information herein but makes no representations as to its accuracy and accepts no liability for actions taken or not taken as a result.
