Over the past eight years, the property market in Cyprus has experienced unprecedented interest from overseas buyers, with many securing themselves a little slice of the island. The buying process is simple and offers many incentives to purchasers in the form of tax breaks, low costs, and a high standard of living – not to mention excellent value homes.

Cyprus has been a member of the European Union since 1 May 2004 – and a British colony for more than 80 years – and its property system doesn’t differ too much from that of the UK. The land registry system is based on British standards and is reckoned to be one of the most sophisticated in the world.

Probably the most significant difference is that non-Cypriots have to seek permission to buy property from the Cyprus Council of Ministers by written application. This must be submitted by the purchaser after the agreement has been signed. Fortunately, this application is, in effect, a formality and permission is granted to all bona fide purchasers. In the meantime, you can take possession of your property without restriction.

While buying property in the Republic of Cyprus is very popular with British investors, and there are no obvious pitfalls to the system, it is always advisable to seek proper legal advice from a fully qualified specialist.

WARNING: THERE ARE TWO DISTINCT PARTS OF CYPRUS

Increasingly, we are seeing property for sale in the north of Cyprus but, for practical purposes, this buying guide only covers property purchases in the Republic of Cyprus (the south of the island). This guide cannot recommend buying property in the north of Cyprus without first seeking thorough, independent legal advice.

The north of Cyprus and its government are not recognised internationally, either as an independent state or as a territory of Turkey. The north remains under UN sanctions and is considered an illegally occupied territory.

Anyone who buys a property in northern Cyprus runs the risk of ending up with either a property that was owned by a Greek Cypriot, or a property built on land that was owned by a Greek Cypriot before the divide in 1974. In this case, should reconciliation ever take place, the former Greek Cypriot owner will be entitled to compensation, most likely at current market prices (estimated to be double the price that properties in northern Cyprus are currently being sold for). If compensation cannot be paid, the property may well simply be handed back to the previous owner.

The only way that you can be absolutely certain of the title of your property in northern Cyprus is to buy land or property that was registered as belonging to a non-Greek Cypriot prior to the upheaval of 1974.
 
Always seek professional legal advice before making a purchase as you could otherwise run the risk of losing your property.

STEP 1

Calculating your budget

Do your sums and work out exactly what you can afford to spend on a property. Put a realistic ceiling on your spending and do not exceed it. As well as the price of the property itself, you will need to bear in mind the following:

One-off costs

• Legal/solicitors’ fees: approximately C£1,000 (£1,100) payable on the signing of the contract.

• Land registry/transfer fees: These are based on the value of the property at the time of purchase. They are calculated as follows: Property value - Up to C£50,000, tax is 3%; C£50,001 to C£100,000, tax is 5%; C£100,001 plus, tax is 8%.

• These fees are due at the time of issue of the title deeds. If you are a couple, each individual is charged the transfer fee for 50% of the property value. For any property with a value exceeding C£50,000, this will provide a welcome and substantial saving.
  

• Stamp duty: This is levied at the rate of C£1.5 per C£1,000 of the value up to C£100,000, and at C£2 per thousand thereafter. Stamp duty is payable on signing the contract.
  

• VAT: Since Cyprus’s accession to the EU, VAT must be paid when buying new-build property (unless an application for a town permit was filed by the developer before the accession – your lawyer can check this for you).There are two rates: 5% for the first purchase of residence by permanent residents of Cyprus; 15% for any other purchase. Land can be acquired VAT-free until 2007.

You should set aside approximately 11% of the purchase price for associated costs – you will, more than likely, get some change from this, but it’s better to be safe than sorry.

Ongoing costs

Don’t forget that once you own a home you will also have to pay:

Local taxes. In Cyprus these take two main forms: immovable property tax is an annual tax based on the market value of your home. This usually totals between C£50 and C£100 per annum; municipal taxes are the rough equivalent of council tax, are paid to the local authority and cover services such as street lighting. They usually cost between C£50 and C£150 per annum per unit).

• Insurance
• Maintenance costs (utilities, repairs)
• If buying an apartment within a managed block, there may be a service charge.

STEP 2

Finding an agent

Using a reliable, professional and straight-talking agent is one of the best ways to ensure that your property purchase goes smoothly. Be prepared to put time and effort into researching your options as it’s one of the most important decisions you’ll make.

You should bear in mind that in Cyprus many developers market their products without using agents but, while this could save you paying agency fees, you may find the service a little less personal.

Agents and developers can be based either in the UK or in the destination country – many will have offices in both. It is always best to use someone who has been personally recommended to you by an acquaintance but, failing that, the most important factors for you to consider are:

• That you feel comfortable asking the agent or developer questions.
• That your queries are answered in a clear manner and that technical matters are explained comprehensively.
• That you feel that your agent is readily contactable by either phone or email to provide you with feedback.

You may also want to:

• Seek testimonials from previous clients.
• Ask your solicitor for an independent recommendation.
• Check that the agent/developer is a member of FOPDAC (Federation of Overseas Property Developers,Agents and Consultants) – a self-regulating body in which the members adhere to a strict and admirable code of ethics.

STEP 3

Finding a property

In order to save you and your agent a lot of legwork, time and money, it is best to have a good idea of the sort of property you want to buy before you start house hunting in earnest. Establish what you will be using the property for and consider what would best suit this use. If you have children, you will probably want something with plenty of space, a secure garden or perhaps a communal pool. If you are going to be regularly travelling to and from your new home, it will need to be close to an airport. Ask yourself the following questions:

• How many bedrooms do we require?
• What other amenities do we need? Local shops? A pool? A golf course?
• Do we want a new property, or an older one that needs renovation?
• Do we want an apartment or a house?
• Do we want to be near the sea, close to a city, or in the countryside?
• Do we want a garden?

Do some research: read some property magazines; attend an overseas property exhibition and chat to the exhibitors; trawl through a few internet sites and see what’s available or even pay a visit to Cyprus and have a look around.All these will give you a firmer idea of what you want, saving you time and money in the long term.

Inspection trips

Many agents will be more than happy to offer you the opportunity to go on an inspection trip, which involves travelling to Cyprus and viewing properties they think may be of interest to you.

Basically, you will be offered subsidised flights and accommodation in return for a few days being escorted around local properties by a commission-based sales rep.

Inspection trips have had bad press in the past, with accusations of pushiness and aggressive sales techniques levied at the staff. Don’t let this put you off though; in actual fact they are a genuinely helpful part of the buying process, allowing you to spend a concentrated period of time actually seeing potential properties in the flesh.

Though the days of the hard sell are long gone, remember that your guide’s pay cheque is dependent on your buying a property from their company. Don’t get carried away just because other members of your group have bought a property. Wait until you find something that is suitable and discuss it with any relevant parties carefully.

Equally, don’t treat the inspection trip as a cheap holiday. These guys mean business, and as such they will expect you to as well. You should only go on an inspection trip when you are in a position to place a deposit.

STEP 4

Reserving your property

Once you have found the property that you want to buy, you should get in touch with your lawyer. In Cyprus, it is normal to sign a preliminary contract and hand over a fee (normally C£1,000 or C£2,000) in order to reserve the property. However, common sense dictates that you should never sign a document without first getting it looked at by an independent legal expert.

Many lawyers dealing with overseas purchases have a 24-hour fax back service so they can check anything you might need to sign before you do so, even if you are in Cyprus at the time.

STEP 5

The contract

Once you have reserved your property, the main contract will be drawn up in writing. This should include:

• The full name of the legal owners of the property you’re purchasing.
• The full name of the party/parties buying the property. Ensure you pay careful attention to this as the ownership of the property can seriously affect tax liability. As ever, it’s probably best to seek expert advice on this issue.
• A full description of the property including any rights you have to the communal areas.
• If you are buying off-plan (i.e. if you are buying a property that has not yet been built) the contract should include a clause stating that your money will be returned in the event of the builder going bust and not completing your property.
• Details of the title deeds. Your lawyer will run special checks to ensure the person selling the property to you is, in fact, legally entitled to sell it.
• The full purchase price and/or details of payment instalments.
• Any special conditions (for example, vacant possession).
• Details of any licences or planning permissions needed.
• Signatures (but not just yet!).

STEP 6

Mortgages 

There are a variety of ways in which you can fund your Cypriot property purchase.

Obviously, if you plan to move over there permanently, the chances are that you will be selling your UK home in order to buy the property outright.

Another option is to remortgage your UK property and use the equity you take out to buy your overseas one. This finance method has the advantage of being very cheap as it costs very little – if anything – to remortgage. The drawback of this method, however, is that your UK property is at risk if you fail to keep up repayments. It’s also worth bearing in mind the exchange rate, which will alter the price of your monthly mortgage payments.

Alternatively, you could take out a mortgage on your Cypriot property. There are a variety of financing schemes available for non-Cypriots as all commercial banks on the island are now authorised to offer mortgage facilities. The amount you can borrow usually ranges from between 60% and 80% of the value of the property you’re buying.

If you are under the age of 65, repayment periods can usually be up to 25 years. At the time of writing, the base interest rate at the Central Bank of Cyprus was 5.5% – higher than that of the UK.

STEP 7

Survey 

If you are buying a resale property, you should commission a survey first. In Cyprus, a survey works in much the same way as in the UK. Your lawyer will be able to recommend a local surveyor; alternatively, you could find one through the Royal Institute of Chartered Surveyors (RICS).

Your surveyor will appraise the property you wish to buy and draw up a detailed report outlining its condition and any work that might need doing in the future. If the outcome of a survey is negative (for example, the roof needs replacing) you can ask the vendor to lower the price of the property accordingly.

Do bear in mind that while local Cypriot surveyors may offer cheaper prices, the report they produce will not be in the same format as those you are used to. There may also be an extra fee charged for translation.

In general, survey fees are comparable to those in the UK and are dependent on the size of the plot and value of the property.

STEP 8

Completion of the sale

This is an extremely busy time for your lawyer, who will be obtaining the necessary permissions for you, ensuring that the property is free of any possible debts and that any required planning permissions have been obtained.

When your lawyer is satisfied that everything is in order, you will need to sign the contract and pay your agreed deposit (this is usually between 20% and 30% of the purchase price for new-build, and around 10% for resale property). To do this, you will either need to travel to Cyprus yourself, or give someone power of attorney in order that they can legally sign the contract on your behalf. Which one of these options you choose depends entirely on your personal circumstances. You may wish to appoint an attorney if you only have limited holiday entitlement each year and you would prefer to use those days enjoying a holiday, rather than signing contracts. Alternatively, you may jump at the opportunity to enjoy a few days of Cypriot sunshine! If you choose the former option, your lawyer will arrange power of attorney for you and costs will be comparable to those that you would have incurred had you decided to make the journey yourself.

STEP 9

Title services

Once the contract has been signed, it should be sent to and registered at the district land registry (again, your lawyer will take care of this process for you).

It should reach the land registry no more than 60 days after the date on the contract. This procedure protects your rights of ownership until you are issued with the title deeds, as once held by the land registry the contract cannot be withdrawn by anyone except you and therefore your property cannot be re-sold or re-leased by a fraudulent seller.

During registration, the value of the property is evaluated to check that all taxes due will be paid on an appropriate scale. This is intended to deter under-declaration of property values for the purposes of tax evasion; it is unlikely that any amendments will be made to a bona fide purchase.

The land registry will transfer the freehold (or lease) of the property to your name and will issue you with the title deeds.

Once the contract is signed you will also need to make your application to the Council of Ministers for permission as a non-Cypriot to acquire immovable property. This can cost between C£100 and C£200, but is often included in your lawyer’s fees as he will usually deal with the application. You must provide a copy of the contract, plus character and bank references.

The procedure can take 12 months, but as mentioned previously, it’s a mere formality and you can take possession of your property without restriction in the meantime.

Still not convinced? You can also take comfort in the following:

• If permission is denied, you can re-apply.
• If permission is denied, you have 17 years in which to sell the property.
• No UK citizen has been denied approval!

STEP 10

Taxes

As mentioned in the first step, you will be required to pay solicitors’ fees, land registry/transfer fees, stamp duty and sometimes VAT when buying a property in Cyprus.

In addition to these, you will need to consider your financial position with regard to other taxes that may affect you in the long term as the owner of a property in Cyprus. Fortunately, Cyprus is known for having a low tax regime, but you need to bear in mind the following:

Capital gains tax: This is the tax you will pay when you come to sell your property. The tax bill is worked out according to how much the value of your property has increased while you have owned it (i.e. how much profit you will make when you come to sell). This is currently levied at 20% but if you are selling for the first time each person on the contract is entitled to C£10,000 free of tax.

Inheritance tax: There is no inheritance tax in Cyprus. While this provides the opportunity for substantial tax savings, you do need to make sure that you won’t be charged UK inheritance taxes on the property.

A tax advisor will be able to let you know the best way to avoid UK inheritance tax, potentially saving you a fortune in unnecessary taxes in the process. Always make sure you seek this advice before buying the property, as any amendments to the title deeds might be liable to a hefty charge and tax.

Income tax: This is discussed in the ‘Living & Working' section of this guide, which can be accessed via the toolbar at the top of this page.

And finally, as long as all documentation and contracts are drawn up in English and all professional persons connected with the house-buying process have English titles, things should be straightforward. Thankfully, you do not need any foreign language skills to buy a property in Cyprus. And please note – while Cyprus-to-sterling conversions were correct at time of writing, the exchange rate can change on a daily basis.