Market in Depth

Confidence is returning to Cyprus' housing market

Lalaine C. Delmendo | August 11, 2019

There have been eight long years of house price falls. Now Cyprus' housing market is gaining momentum, with both sales transactions and construction activity rising strongly.

During the year to Q1 2019, the nationwide residential property price index rose by 4.3% (2.9% inflation-adjusted), its tenth consecutive quarter of y-o-y growth, according to the Cyprus Statistical Service (CYSTAT). In fact, it was the biggest annual rise since Q2 2008.

On a quarterly basis, residential property prices increased 0.8% (0.9% inflation-adjusted) in Q1 2019.

By district, during 2018:
  • Nicosia, Cyprus' capital, apartment prices rose by 1.2%, and house prices increased by 0.5% from a year earlier.
  • In Limassol, apartment prices rose by 8.6%, while house prices increased by 1.6%.
  • In Larnaca, apartment and house prices rose by 2.7% and 1.1%, respectively.
  • In Paphos, apartment prices rose by a robust 5.3%, while house prices fell 2%.
  • In Famagusta, apartment and house prices rose by 4.9% and 4.4%, respectively.

During the first half of 2019, property sales in Cyprus rose by 24.4% to 5,560 units from a year earlier, following annual rises of 5.8% in 2018, 23.7% in 2017, 42.6% in 2016, 9.4% in 2015 and 20.2% in 2014, based on figures from the Department of Lands & Surveys.

Likewise, the number of dwelling permits soared 38.4% y-o-y to 2,481 units during the first four months of 2019, according to the Statistical Service of Cyprus.

This across-the-board housing market improvement is partly driven by Cyprus' robust economic growth over the past three years. In 2018, the economy expanded by 3.9%, following growth rates of 4.8% in 2016 and 4.5% in 2017, according to the Statistical Service of Cyprus. However, economic growth is projected to slow to 2.9% this year and to 2.6% in 2020, amidst slowing tourism and escalating trade tensions globally, according to the European Commission.

Despite this, the housing market is expected to continue to improve in the coming months, thanks to strong demand and improvements in the banking system.

Cyprus house prices

The Cyprus real estate market has historically been divided into the major urban centres of Nicosia, Limassol and Larnaca (primarily driven by local demand); and the seaside resort areas of Paphos and Famagusta, which are mostly driven by foreign demand. The economic decline of recent years affected both areas.

Foreigners can buy one home in Cyprus, and are entitled to hold land freehold, but there is a maximum limit on land ownership of 3 donums (4,014 sq. m.).

Analysis of Cyprus Residential Property Market »

Rental Yields

Rental returns in Cyprus are reasonable, while property is inexpensive

Property prices. Property is not expensive in Cyprus, with prices around €1,600-3,4000 per square metre (sq. m.). Smaller properties cost rather more per sq. m. than larger properties.

Property rents. Apartments of 120 sq. m. cost around €700-€800 per month to rent in Larnaca and Nicosia, and probably more in Limassol, though this year we were not able to find enough properties to bring you reliable figures.

If you are buying specifically with a view to renting out your property, very small apartments in Nicosia appear to give you higher yields.

Property returns. Cyprus has not traditionally been a great location to be a landlord, because of moderate rental returns. But while gross rental yields in Cyprus have remained steady over the years, they have fallen almost everywhere else as a result of the asset-inflationary effects of low interest rates. Result: Cyprus now looks comparatively attractive as a place where buying prices are low, so that capital gains on property are conceivable. However, it is always extremely hard to forecast which locations international buyers will seize upon as attractive. 

Rental returns (yields) on property in Cyprus are around 4.7% to 5.6%.

Property buying costs. Round trip transaction costs on the purchase of old residential property in Cyprus are moderate, but VAT on new properties is high. See our Cyprus residential property Buying-Guide and Cyprus property transaction costs compared to the rest of Europe.

Buyers should beware serious problems with property titles in Cyprus, an issue still ongoing.

Read Rental Yields »

Taxes and Costs

Rental income tax is low to moderate in Cyprus

Rental Income: Rental income exceeding €19,500 is taxed at progressive rates. Standard deductions for income-generating expenses are deductible from the gross income.

Capital Gains: Capital gains realized from the sale of immovable property are taxed at 20%, with a lifetime exemption of 85,430 if the property was owner-occupied for at least 5 years.

Inheritance: There are no inheritance taxes or estate duties in Cyprus.

Residents: Residents are taxed on their worldwide income at progressive rates, from 0% to 35%.

Read Taxes and Costs »

Buying Guide

Total transaction costs can be high

Total roundtrip transaction costs range from 7.60% to 16% of the purchase price. The buyer pays around of 4.60% to 11%, whereas the seller pays 3% to 5% for the agent’s commission.

The transfer tax rate ranges from 3% to 8%, depending on the purchase price of the property. If the property is in joint names, the property value is halved, leading to lower transfer fees.

Read Buying Guide »

Landlord and Tenant

Cypriot laws are pro-tenant

Cyprus beachfront propertiesRent Control: The rental market can be divided into two broad categories: Houses controlled by the Rent Control Law (1983), and the free market.

Foreigners are not covered by the provisions of the Rent Control Law, except the non-Citizen wife of a citizen of the Republic, and legal entities controlled by non-residents.

Tenant Eviction: Eviction of tenants is relatively difficult, especially in the case of ‘statutory tenants’ protected by the Rent Control Law. It takes an average of 360 days to evict a tenant.

Read Landlord and Tenant »


Economic growth strengthens; unemployment falling

Cyprus’ economy remains strong, registering a solid growth of 3.9% in 2018, driven by strong domestic demand and favourable external demand for Cypriot exports, according to the Statistical Service of Cyprus. In Q1 2019, the economy expanded by 3.4% from a year earlier, down from an average growth of 3.8% in the previous three quarters.

Economic growth is projected to slow to 2.9% this year and to 2.6% in 2020, amidst slowing tourism and escalating trade tensions globally, according to the European Commission. Tourist arrivals fell by 1.1% y-o-y in the first five months of 2019, in contrast to a 7.8% growth last year.

Cyprus gdp inflation

“Consumer sentiment has deteriorated over the first half of 2019 and business confidence has steadied, suggesting that growth could be less buoyant in the months to come,” said European Commission. “Private consumption is nevertheless expected to remain resilient, given positive labour market developments.”

Cyprus’ economy contracted about 2% in 2009, mainly due to the adverse impact of the global crisis. After registering anaemic growth rates of 1.3% in 2010 and 0.4% in 2011, the economy shrank again by 2.9% in 2012. The economy remained depressed in the following years, with a huge 5.8% contraction in 2013, and a 1.3% contraction in 2014, based on IMF figures. The economy recovered in 2015 with GDP growth of 2%. Economic growth accelerated further, with GDP growth of 4.8% in 2016 and 4.5% in 2017.

Cyprus recorded a public budget deficit of 4.8% of GDP in 2018, in sharp contrast to a surplus of 1.8% of GDP in 2017 and 0.3% of GDP in 2016, according to the Statistical Service of Cyprus.

Gross public debt widened to 102.5% of GDP in 2018, from 95.8% of GDP in the previous year, according to Eurostat. However, gross debt is expected to fall gradually to 101% of GDP this year and to 94.3% of GDP in 2020, according to the International Monetary Fund (IMF).

Inflation was -0.3% in July 2019, down from 2.3% in the same period last year, according to the Statistical Service of Cyprus. It was the second straight month of decline and the lowest level in 16 months.

Unemployment fell to 6.5% in June 2019, down from 8.3% a year earlier, according to Eurostat - the lowest unemployment level in eight years. From an average of just 4.8% from 2000 to 2011, unemployment had surged to an average of 13% from 2012 to 2018, according to the IMF.

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