Outlook: Cyprus Property

• There are plenty of reasons to come to Cyprus. The climate, the beaches, the hospitality and the great business opportunities. Cyprus has evolved into a leading business centre, thanks to its strategic location, the sophisticated infrastructure, the highly-educated workforce, the favourable tax system, and the modern banking and insurance network. Cyprus today is a modern democratic nation with a thriving economy and a role as the easternmost trading post of the European Union.
  
  
• The government of Cyprus has initiated a New Industrial Policy to attract and develop new high-tech industries, to technologically upgrade traditional local industries, and to attract foreign investment. Cyprus' entry into the European Union has brought about major changes in the property and immigration laws and the freedom of movement required between EU member states has made it easier for EU citizens to live, work and obtain property on the island of Aphrodite.
  
  
• A 2003 reform brought the island into the line with EU and OECD requirements, whilst also ensuring that Cyprus remains attractive to outside investors. The uniform corporate tax rate of 10%, for example, is the lowest in the EU, while Cyprus has entered into Double Tax agreements with 40 countries. In view of Cyprus's membership of the European Union, it is also important to note that the country is a net contributor to the EU, and fulfils the Maastricht criteria. The Cyprus pound joined the Exchange Rate Mechanism 11 on 29 th April 2005 and the government has declared its intention to join the Euro zone in January 2008.
  
  
• Despite the upturn in fortunes presented by Cyprus joining the EU in 2004 – capital growth has been 30 per cent since – Cyprus property prices remain considerably lower than in France or Spain. A three-bed detached villa with a pool currently costs around CYP250,000 in a quality location, which would probably only stretch to a large two-bedroom apartment in the south of France. It is worth reminding that property prices on Cyprus Prices rose by 15% in 2005, this year the same increase in prices is expected. According to the Cyprus land registry, 12,000 British people, constituting 1.5% of the population, already own homes on the island – the same proportion of Brits who own properties in France.
  
  
• The island's EU accession saw the remaining property-purchase restrictions on foreigners lifted. Deposit levels have fallen to a low 15 -20  per cent in some areas, subject to status, which is likely to be more the norm next year, and Swiss franc mortgages are available with rates of just 3.25 per cent, making borrowing more affordable even before the country's 2008 entry to the Euro.
  
  
• Sunday Times review on Cyprus Property: “One of the largest islands in the Mediterranean is already moving upmarket – and the government believes that “residential tourism” will provide the best way forward”.
  

The underlining facts:

• Stable sustained growth in the property market for the last 30 years.
• Capital growth minimum 5 - 8% a year.
• Introduction of Euro in March 2008 will cause prices to rise, as will the introduction of VAT on land.
• 10% of VAT paid on property will be reclaimable, if the property will be used as a permanent residence.
• Interest rates are liable to fall with the introduction of the EURO, making finance cheaper.
• Cyprus is strategically located at the far eastern corner of Europe (similar to Eire on the western side) it should benefit from its location in a similar way in the future.