ECONOMY

Property market robust in Cyprus

The real estate sector in Cyprus continues its ascent, thanks to the satisfactory growth rate of the local economy combined with the rise in employment in the service sector, the influx of foreign investments and the development of new industrial sectors. The commercial property domain has recently shown great momentum, with demand and supply increasing by 15 percent annually, while the housing market shows consolidating trends, mainly due to the great supply of newly built apartments as well as an influx of organized construction in the island’s housing market. The rising demand and the investment of capital in the Cypriot real estate market leads to the modernization of the properties supplied in both age and quality of construction. Also in the works are new types of property use once foreign to Cyprus, such as shopping centers, business and technology parks and storage units. The capital The commercial market’s interest focuses on Nicosia, where the property market does not depend on tourism, mainly due to its geographical location. It is also the country’s administrative and financial center, hosting companies and retail chains, consequently affecting the property market. The supply-demand relation for commercial properties is balanced and the ratio of available spaces against all properties is a low 8 percent. In the office market, the ratio is even lower, estimated at 4 percent, although rentals have dropped by 15 percent compared to five years ago. Office space rentals in the capital range between 10.5 and 12.5 euros per square meter while sale prices range from 1,600 to 1,800 euros per square meter. Net returns from offices come to 6-7.5 percent. Retailing is today the most dynamic sector of the Cypriot market, showing rapid growth because of new shopping centers. Many international chains open stores in Cyprus while Greek ones also make the short trip. In Nicosia city center, the retail market remains strong, although the traffic problem and the lack of parking spaces contribute in developing new markets in the city’s suburbs. Beyond Nicosia, commercial developments are to be found in Limassol, Larnaca and Paphos at a wide range of prices. Compared to other European countries, the retail market in Cyprus is quite underdeveloped, mainly due to town planning restrictions and the lack of the appropriate properties. This is why the first modern shopping center in Cyprus – the Shacolas Park which covers a surface of 28,000 square meters – will only begin operating in 2007. The dominant trend is for developing large commercial spaces and supermarkets in the suburbs of the main cities, owing to the lack of supply in the high streets. Housing market The construction of new houses in Cyprus is slowing down as the recent growth has led to an oversupply of apartments and maisonettes. This slowdown also affects organized construction, which in recent years has become obvious in Nicosia and its suburbs. The oversupply exerts pressures on prices of newly built houses, which, according to official data, have dropped by 2.3 percent annually after four years of continuous rise. Still, Cypriot market experts appear optimistic, putting their hopes largely on Northern European pensioners, who are retiring in increasing numbers on the island.. Most demand has recently focused on apartments. In Nicosia sale prices range between 1,220 and 2,100 euros per square meter – inexpensive compared to Athens. Larnaca, where the country’s main airport is located, is even cheaper, with prices from 950 to 1,740 euros per square meter. However in the more touristic cities of Limassol and Paphos prices can reach as high as 4,350 euros per sq.m. and 5,570 euros per sq.m., respectively. Property tax has been imposed on the market value of each property since January 1980. Property owners are taxed on January 1 of every year and pay the tax on September 30. A potential buyer should be aware of the tax system, particularly the property transfer tax. This is calculated according to the market value of the transferred property on the day of the transaction, as determined by the local town planning authority. If this estimate does not satisfy the buyer or the seller a new, more detailed one can be requested. In case a share of a property is transferred, then the tax is calculated based on the market value of the share. If the transfer is for a leased property, then 5 percent of the rent’s value is paid without calculating the market value of the property. The tax depends on the market value and ranges between 3 and 8 percent of that value. When a property is transferred from spouse to spouse, the transfer tax is 8 percent, while from parents to children it is 4 percent. Relatives with three degrees of separation must pay a transfer tax of 8 percent for property. Council tax is also levied on each property. This tax ranges from 52 to 174 euros per year.