Real estate in Cyprus – 2016 the year in review
2016 was an important and fruitful year for the real estate sector in Cyprus. The volume of sales, as indicated by the Lands and Surveys Dept., rose by 30-35% compared to 2015. Property prices based on the two main indexes, (Central Bank of Cyprus and RICS), indicate a stabilisation trend with some sectors showing a slight increase and some a slight decrease. Important steps in the right direction have been taken regarding property taxes:
- The Immovable Property Tax, (IPT), was decreased to a quarter of that of 2015 and is abolished altogether as of 2017;
- The Immovable Property Fee, imposed by municipalities and villages, will continue to apply, based on 1980 valuations;
- The transfer fee coefficient, which had been reduced by 50% in the middle of 2015, ending on 31/12/2016, is now a constant incentive. We’ll always be paying transfer fees but at 50% lower than those we were paying in 2014 or earlier. This is yet another important incentive for buyers;
- Regrettably, the zero capital gains tax incentive ended on 31/12/2106 and it seems that it will not be renewed. If someone had bought a property at the launch of the incentive in the middle of 2015 until 31/12/2016, he will not pay a capital gains tax no matter when the property is sold in the future. Those who buy property as of 1/1/2017 will pay the normal rate of 20% capital gains tax on profit from a future sale of the property.
Public auctions organised by banks were launched in June 2016 and are held on a daily basis in specific locations in every district. As forecast, the procedure did not yield the results expected. Very few properties were sold through these auctions. The auctions rather served as a wake-up call to owners in danger of losing their properties to approach banks for a restructuring.
Interest from foreign buyers, to secure either Cypriot passports or a permanent residence permit, continued on an upward trend in 2016. What is not known is for how much longer the European Union will allow us to attract investors through this practice. A calculated guess would be for another couple of years. What cannot be underestimated is the fact that funds through this procedure were a kiss of life for the economy of the island, the real estate sector and certain land development companies. Limassol had the lion’s share of these funds, while Paphos and Larnaca benefited significantly as well.
The 2016 leasing law, covering properties among other assets is now in force. Interested parties, like banks, are yet to take advantage of beneficial clauses of the law due to the Central Bank’s delay to issue directives and clarifications to render it functional.
Wrapping up the 2016 review, the positive trends will continue into 2017, something which should help see sales volume increase to reach the 10,000-12,000 annual sales target. Property prices are also expected to gradually rise. It needs to be pointed out that our projections do not take into account any developments with the Cyprus problem.