Cyprus Property Funds, SIPP, REIT, SSAS

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Cyprus Property Funds, SIPP, REIT, SSAS

Information relevant specifically to UK nationals: UK regulated & authorised Cyprus Property Funds, SIPP, REIT, SSAS.

Property Investment in Southern Cyprus

Southern Cyprus has a range of property investment opportunities due to its strong economy, strong tourism, EU membership and its imminent joining of the Euro in 2008.

Cyprus is more advanced in this economic cycle than many of the newer potential entrants to the EU and has been strongly placed for decades in the international economy due to its low taxation regime and its excellent banking system.

Cyprus law is based upon UK law and there is a strong UK military presence on the island that gives it stability. A significant proportion of the island speaks English as a second language and the country has over 320 days of sunshine per year.

The island is relatively well off, in particular the middle classes who themselves purchase CYP 250,000 to CYP 1 million villas as weekend holiday homes. At the same time the economy is being boosted by lower end labour prices being held down by significant immigration from the new EU accession states, which in turn are helping profits and the economy as a whole.

A significant proportion of the island speaks English as a second language and the country has over 320 days of sunshine per year.

Property Investment Funds

Property investment regulated funds (Property Unit Trusts) launched in Cyprus May 2006.

The wider property investment opportunities (presented by diversified property investment funds) are relevant to professional real estate investors. In addition, SIPP and SSAS pension funds can invest in residential property via property funds.

A risk exists for the average pension fund in purchasing property directly, due to the low borrowing (33 percent LTV, typically) proposed under the A-Day reforms, and the typically low average value of most investors' pension fund. It is impossible for the average investor to buy a diversified portfolio of property with such limited lending.

Rather than invest in one or two properties directly, the spread of investments via a number of diversified property funds with an entry level from just CYP 5000 each, provides the investor better risk diversification.

Benefits of property investment funds:

• Invest from just CYP 5,000 for SIPP/SSAS investors (CYP 25,000 for private equity investors)
• Residential property funds and commercial property funds available
• Zero tax in most cases for UK SIPP/SSAS investors on UK property funds that are not deemed to be trading (subject to change)
• Higher gearing levels similar to those used by professional property investors. Higher gearing increases risk but also increases the potential for large returns
• Investment by some of the funds in more entrepreneurial property structures and ventures delivering greater potential returns along with the accompanying risk - including developer funding, obtaining planning permission on land and development
• Risk management using the latest interest rate hedging tools and the latest property derivatives market in selected funds
• Access to overseas property markets otherwise out of reach to many investors for knowledge, finance or time reasons
• Performance related fees meaning that the funds have low fee structures unless they perform well

These funds are designed to satisfy the needs of property investors recognising the value, and associated risk, of geared property investment. Unlike normal Unit Trusts with little or no borrowing, there a number of geared funds that emulate direct property investment in terms of borrowing but combined with sophisticated strategies for risk management, a highly experienced team of property consultants and, of course, a large and diversified portfolio.

The funds are designed to attract zero taxation for tax-exempt investors such as SIPPs and SSASs, where possible, and are also attractively wrapped as a Limited Partnership for private equity and corporate onshore and offshore investors.

Should the funds be confirmed as suitable for investment needs by a regulated adviser, they will be of interest to existing buy-to-let investors looking for diversification, high-net-worth or sophisticated investors (and their wealth managers) looking for hands-off property investments and institutional investors seeking more entrepreneurial funds as part of their investment strategy.

• Funds for SIPP or SSAS investors
• Funds for High-Net Worth / Sophisticated Investors
• Property Joint Ventures
• Property Syndicates
• Property REITs - Real Estate Investment Trusts

The new Cyprus Unit Trusts have opportunities across a spectrum of property types, most of which are underpinned by rental contracts, potential contracts or strong local demand. These include office buildings intended for government department rental, local let apartments for young families in a large town with almost no voids and an undersupply of non-tourist accommodation, student apartments with the potential for government leases and finally the top new planned Marina and golf course locations for holiday company guaranteed rentals on custom designed blocks of villas and apartments.

Further Information

• See the AngloINFO INFOrmation Page on Buy-to-Let and Investment Property in Cyprus

Information supplied by Alan O'Garra
O'Garra Ltd, City House, 6 Karaiskakis Street, 3rd Floor, PO Box 53284, 3301 Limassol
Tel: + 357 25 33 39 26, e-mail, website: www.ogarra.co.uk
Copyright © 2005 Alan O'Garra All Rights Reserved