Strong Cyprus housing market attracts Britons
UK buyers still flock to the Med despite horror stories of land claims affecting purchases. Julian Knight reports
Sunday 21 November 2010
It's easy to see why Cyprus has been one of the most popular locations for Britons to have a holiday home over recent decades.
English is spoken widely across the island; the sun shines bright and warm right into November and beyond and the two major airports have regular flights to the UK, only four and a half hours away.
"People feel it's a real home away from home. They love the weather, of course, low crime, as well as the fact that English is spoken fluently everywhere and they even drive on the left," said Eileen Hardy, a director of Paphos-based estate agency Hardy Estates (hardyestatescyprus.com).
But there have been spoilers to this island idyll set in the shimmering eastern Mediterranean. Firstly, there was the legacy of the island's painful division between the Greek south and the Turkish north. Displaced Greek Cypriots have a claim on land – which has been upheld in the UK courts – in the north of the island which has been subsequently resold to British buyers. In one case, the British buyers has been forced off the land and out of the dream holiday villa they thought was theirs. Whatever the rights and wrongs of such situations, the property business on the whole island has suffered reputational damage.
"We don't have the same situation here in the south as in the north, but buyers have to be aware of certain land ownership issues," says Ms Hardy. "Every bit of land is registered – as a legacy of the British. But when you buy a new-build property in particular you can be waiting a long time – sometimes several years – to get your hands on the title deeds. The development has to be completed before the title deeds can be applied for. If the developer has mortgaged the land, then that has to be paid off before the deeds are available. In most cases, there's no problem but you have to do your homework."
Usually, the problem of title deeds can be avoided by buying a second-hand property rather than a new build, Ms Hardy says. However, even in this instance there are some homes which have been standing for 10 or 20 years yet still don't have a title deed.
"If you are considering buying property in Cyprus, the key is to get the correct legal advice. Fortunately, documents should be in English," said Rob Wilson, the overseas property director at Rightmove.co.uk. "Don't go with the lawyer the seller suggests or the developer – source your own. Check out the Association of International Property Professionals to find a suitable lawyer."
On top of such knotty legal problem came the credit crunch, subsequent global recession and the pound's crash against the euro which hit the buying power of all those Britons. This hit the Cypriot property market for six. "If you bought three or four years ago, you'd be very lucky to make your money back selling now," Ms Hardy said.
However, Cyprus is on the way back. Ms Hardy reports activity comfortably up on last year. Developers are building again in a still sparsely populated island. At a top-end development, Aphrodite Hills, near Paphos in the beautiful south-west coastal area of the island, the sales manager, Yiannos Panayides, says they have reported a return in buyers from the UK, making up 60 per cent of the total purchasers, with Russians the next biggest group making up 30 per cent of new home buyers.
The resort, owned by Lanitis Development and Marfin Laiki Bank, the second biggest bank in Cyprus, is selling 44 villas and apartments to be completed in 2012. The Alexander Heights has stunning sea views and nestles next to the resort's 18-hole PGA championship golf course and within a short walk of the on-site tennis academy. The villas all have pools, extra basement space, underfloor heating, smart home technology and landscaped gardens. Prices start at ¤1.09m (£925,000). Apartments have terraces or gardens and prices start at ¤598,500 for two bedrooms. Owners get a free two-year membership of the golf and tennis clubs, which can be transferred to guests. In addition, owners get a 10 per cent discount on the site shop and the wide range of site restaurants. The jewel in the crown of the resort is the spa with massage and facial treatments as well an extensive infinity pool. In 2008 it scooped the the European spa of the year award at the Professional Beauty awards. Lanitis's links to Marfin Laiki bank mean that financing a purchase can be relatively straightforward, with mortgage rates not too dissimilar to those in Britain. "Mortgages are available at a loan to value of 75 per cent at a euro base rate plus 3.75 per cent [equivalent to 4.75 per cent]. Most buyers take this option," Mr Panayides said.
However, elsewhere on the island financing may not be so clear cut. The reason? Those title deeds again. "The property may look perfect but you really have to check out the deeds situation, as without them, or the bank having a relationship with the developer, it may be difficult to get a home loan," Mr Panayides says.
Purchasing a property in Cyprus also comes with some tax nasties. An initial property transfer fee of 8 per cent is payable by purchasers – like stamp duty – and on resale there is 20 per cent capital gains tax to pay on profits (but with a generous tax-free allowance) as well as estate agency fees typically round the 5 per cent mark. But if you are looking for a year-round holiday destination to attract rental income, then Cyprus is well placed.
"We have sun most of the year, and on average in our resort villas we have 20 weeks a year full occupancy of rental villas. Many owners rent out in high season (May to October), earning the most cash and then stay there during other times with the weather fine deep into the year. You can understand why," Mr Panayides said.
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