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Cyprus property market analysis

Some Cyprus property developers and agents will tell you that if you buy off-plan and then sell it when finished, you will double your investment. Although this was true some years ago, the Cyprus property market has cooled down considerably in recent times.

Factors affecting the Cyprus property market

There are a number of factors affecting Cyprus’ position in the international property market. Some of these are due to external influences, others are due to home grown issues.

• Cyprus’ competitive position is adversely affected by the high cost of air fares. The Free Skies Agreement could change this situation considerably, when low-cost point-to-point airlines are allowed to fly directly to the island.

• External events, such as conflicts in the Middle East and terrorist attacks, reduce tourist numbers; this has a knock-on effect on property sales.

• Upgrades to Paphos and Larnaca airports are in progress. Once completed, both airports should be able to handle more flights thereby increasing the number of visitors to the island.

• Much of the property built for foreign buyers tends to be uninspiring in design with very basic fixtures, fittings and finishes. In a recent article, a leading firm of charted surveyors bemoaned the fact that the quality of property bought by overseas investors was in decline and expressed concern over the long-term viability of the companies involved.

• Many of the more popular areas of the island are littered with property development, much of which is owned by foreigners. As well as creating expatriate ghettos and denuding parts of the island of its natural beauty, the volume and pace of construction places heavy demands on the infrastructure and resources of the island. In some places, over-development results in frequent cuts in the supply of electricity and water.

• Other home grown issues include:

  • Unacceptable bureaucratic delays in issuing Title Deeds;

  • Antiquated laws that provide property buyers with little or no protection;

  • Abuse of the law by property developers;

  • Lawyers acting in ways that would result in them being struck off in other EU countries.

Cyprus property market performance

In spite of the many negative factors that depress the property market, the Home Price Index has performed quite well over the past three years:

In 2005, the index rose by 2.48%.

In 2006, the index rose by 5.87%.

In 2007, the index rose by 16.13%

These figures equate to an approximate annual growth of 9.77%. But since Cyprus' accession to the EU in May 2004, VAT has been imposed on the sale of all new property at the rate of 15% - and this will account for some of the rises in recent years.

(The Home Price Index sample averages between 400-500 homes sales each month and around 1,000-1,200 new listings every month. It is produced on behalf of BuySellCyprus.com using a methodology provided by Stelios Platis and Marios Nerouppos Cyprus International Institute of Management).

Home Price Index figures for 2008 have yet to be published.