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| Cyprus Local Reference INFOrmation
Information (particularly relevant to UK investors) on the possible financial benefits gained from buying development property in Cyprus - either on- or off-plan - for investment purposes.
Cyprus has a beneficial tax regime for residents and retirees, which makes it an attractive option for those wishing to invest in buy to let properties. Amongst the benefits for a UK buyer of investing in Cyprus property are:
Buy-to-Let InvestmentsThe Buy-to-Let market has matured over the last ten to fifteen years. In 2003 the average sized portfolio included three to four properties, but now the portfolio average is 11.8 properties worth £1.45 million. This figure is expected to grow to 12.2 properties, worth £1.52 million over 2006. More than three quarters of all Buy-to-Let investors are investing for the long-term. More than a quarter of these investors are aged between 25 and 35 but those between 35 and 45 account for 37% of the market. The attraction for the current Buy-to-Let investor (particularly those in the UK), is the tax advantages of Cyprus. When these investors choose to retire or acquire tax status in Cyprus, their situation changes dramatically. Upon attainment of Cypriot tax residency and domicile, the tax treaty of Capital Gains Tax (CGT) is hugely advantageous. With their new Cyprus tax status, the Buy-to-Let investor, with tax planning, can reduce their CGT liability. Their UK Buy-to-Let investments become "foreign investments' and therefore exempt for CGT. Expected returns of Buy-to-LetCyprus net rentals returns vary between 4.5% and 11% per annum. The average rental net return in Britain today maintains around the 3% to 4% mark, and capital appreciation may match this, however there is the likelihood that there will be a static capital value for the next three to five years. Capital appreciation in Cyprus is still in double figures, expecting to show 10% to 17.5% especially with off-plan projects. As a bench mark, the net rents should be financing at a maximum 65% gearing, assuring any mortgage commitments will be self-financing. Off-Plan Investment MarketThere are large numbers of investments in Cyprus that receive a very good return in the off-plan-build market environment. Generally the "buyers" tend to be impulsive and demand that the properties are completed, so they can actually see the properties and therefore the prices are reflected by this. Accordingly the investor who is prepared to buy off-plan, is offered the opportunity to make an excellent capital return by selling the property just before the property is completed. However the investor has to be aware that the "investment" needs to be in the right area and that the property is a viable project that will be easily sold to release the capital appreciation. The project has to be carefully selected to ensure that the investor has full local knowledge. There are any number of potential opportunities promising huge returns, with many promoters offering "as if by magic" returns on investments. Sadly many of these fail. Of course, there are portfolios making good returns, but like anything these have only been created by investments that have been vetted and chosen prudently. The Buy-to-Let investor is best advised to use a reliable Buy-to-Let specialist, and one who runs a rather conservative operation. The specialist should first ensure that it has a detailed contact with the client, thus gaining the full the picture of the client's needs and then identifying for the client the best possible investment scenario. For example, one of the ways to help to build a true picture of successful investments is that the specialist will take the details of an apartment off-plan investment, and compare completed properties in the same area and type, ensuring that special notice is paid to the current market value, and so on. They will then encourage the client do the same, to gain independent confidence. There are many web listings to compare the current real asking prices, so the process is not terribly complex or time consuming, but well worth the effort. The process of buying a property is different in every country. It is essential that you become completely versed in the house buying process in Cyprus before you make any offers or sign any contracts. Checklist(Note: this is not an exhaustive list)
Cautionary noteEach country has its own rules in the way it handles foreign purchase of its properties. Please seek independent legal advice before purchasing any property. Information supplied by Alan O'Garra
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