Property Buying Tips

According to the 2011 census, there are nearly 170,000 expats living in Cyprus and many will have purchased their property without too many problems. However, there are enough horror-stories and scams from unscrupulous agents and developers taking advantage of unwary expats, that it is worth being very careful when buying property in any overseas market.

Follow these top-ten tips and you should hopefully minimise the risks of a costly mistake.

1 – Avoid the Turkish controlled part of the Island

Cyprus was divided between the Greek Cypriots on the south and west of the Island and Turkish Cypriots in the north-east back in 1974. This forced division of the island led to 180,000 Greek Cypriots abandoning homes in the Turkish-controlled north-east, and Turkish people moving into them. This part of the island is known as the Turkish Republic of Northern Cyprus and is not recognized by the United Nations, European Union or any government apart from Turkey.

Escape to the Sun does not advise buyers to look for homes in the Turkish controlled north-east Cyprus as there may well be future disputes over ownership and the right of the current owner to sell the property

2 – Use an independent lawyer

A good independent legal representative is essential to guide you through the purchase process and to ensure you avoid the many common pitfalls. Look for established firms with good reputations that are professionally registered with the Cyprus Bar Association and, if required, speak English.It is a good idea find your lawyer and to agree fees in advance of any purchase. Be very careful about using a legal representative that has been introduced by the seller, the seller’s agent or the property developer.

A good lawyer will check that there are no debts outstanding on the land/property, the necessary planning permissions and licenses are in place, there is clean title, your property developer is of a strong financial standing and any deposits/staged payments are secure and that you adhere to important deadlines…amongst many other things.

The British High Commission in Nicosia provide a list of lawyers in Cyprus.

Do not skimp on this stage as this may cost you significantly more in the long-run.

3 – Ensure the property has a clean Title Deed

Historically, the authorities in Cyprus have been very slow issuing Title Deeds and this has been known to take over ten years. This gap in buying the property but not being in possession of the Title Deed has led to some abuse in the market. Issues have arisen such as agents and developers selling property they don’t own to not being able to sell the property in the future without the permission of the previous owner. Thankfully, Title Deeds are issued quicker today but there may well be an overhang from previously bought properties without a clean title. Ask early about this point and if ‘no title deed, then no sale’.

4 – Stick to licensed agents

All agents operating in Cyprus must be regulated by law and licensed by the Estate Agents Registration Council, with their legal obligations set out by law.Look for agents that are a member of the Cyprus Real Estate Agents’ Association (CREEA) or the Association of International Property Professionals (AIPP).

If your agent is not regulated, it is likely that they are promoting time-shares or unmarketable property which may prove to be a bad investment. In addition, if things go wrong, you will have no recourse.

5 – Understand the buying costs

It is safer to assume that the quoted property price does not include any taxes and fees payable though it is worth checking on this point at outset.

Fee Rate Description
IVA (VAT) 5% to 19% VAT only applies on the sale of new properties.

The standard rate of VAT is 19% however a reduced rate of 5% applies to first time buyers where the home is to be used as their main residence.

Stamp Duty 0% to 0.2% The rate payable depends on the purchase price. The charge is subject to a maximum of €20,000.
Real Estate Transfer Fees 3% to 8% Payable on transfer of title deed. The rate applicable depends on the purchase price of the property per person. The fee is tiered at 3% up to €85,000, 5% from €85,000 to €170,000 and 8% for the property value over €170,000. Where a property is bought between multiple owners, the fee is based on the asset each owner purchases. These fees are not payable on properties where VAT has been paid. The above fees are also currently subject to a 50% reduction.
Legal Fees 1% to 2% Legal fees dependent on the size and complexity of the purchase.
Surveyor Fees Up to 1% Depending on the complexity of the survey and report.

Estate agent fees are typically in the region of 3% to 5% but these costs are borne by the seller. There are no estate agent fees for the buyer.

Overall, for a resale property, typical taxes will be in the region of 4% which is very low by UK and EU standards. However, it is a new build where VAT can add a whopping 19% that costs can really accrue. Developers will be open to negotiation on these costs.

In terms of buying the property, there is a small advantage in buying a property on a joint-life basis as the Real Estate Transfer Fees apply per person. This can save you approximately 1% on the purchase price which can be material for more expensive properties.

These rates are subject to change but were correct as at January 2017.

6 – Use a currency exchange expert

Using your bank to transfer money into Euros may be convenient and familiar but there is likely to be a hidden cost of 3%-5% of the amount transferred. This is a lot of money when you are buying property.A specialist will not only get you the keenest rate but also can provide options to lock-in a rate, provide a guarantee for future transfers or monitor the market for you to lock-into favourable exchange rate positions. If you are on a budget, it is advisable to protect yourself against fluctuations in the exchange rate. You don’t want to be in an unfortunate situation where you pay a deposit, or where staged payments are required, and the exchange rate moves against you.

Ensure your currency broker is registered with the Financial Conduct Authority (FCA) and you will have the same financial protection as if you have used your bank. Also, never wire money direct to the agent, developer or seller but to your lawyer who should hold your funds in an escrow-type arrangement.

7 – Don’t forget to negotiate

The financial crisis has left a supply overhang and most developers are keen to offload stock. As such, don’t be afraid to negotiate hard – it is expected in this part of the world.You may want to discuss if facilities as air-con, quality fixtures and finishing, white goods, central heating, swimming pool are also included. Don’t be swayed by what you see in the plush show-home.

Once you’ve agreed exactly what is included and the quality, you can start negotiating on the price.

Remember; if you don’t ask – you don’t get!

8 – Buying off-plan

Many expats buy property off-plan due to the attractive pricing, modern designs and construction and access to luxury developments. When buying off-plan, it is critical that you use an independent lawyer who will ensure that the developer is financially strong, the land is owned by the developer outright, the development has the required permits and licenses, any payments you make are protected and any future releases of your capital is only on the condition that the property has been delivered to the required quality. Only release the final tranche of payment once the final snagging point has been fixed, fixtures and fittings have been delivered to the required standard and a Certificate of Final Approval has been obtained. Ideally, these final points should be validated by an Independent Surveyor that is registered with ETEK (Cyprus Scientific and Technical Chamber) and or RICS (Royal Institution of Chartered Surveyors).

9 – Rental restrictions

Cyprus has strict laws regarding non-residents renting their property on a short-term or holiday basis. If you are looking to rent out your property on a commercial basis, ensure your legal representative is aware and that the necessary authorisations can be received.

10 – What is your exit strategy?

As the excitement of buying an overseas property and the prospect of moving into your new home builds, it can be difficult to think through what is your exit strategy for this property? For instance, is it marketable? Does it have the required licenses/deeds? Is there likely to development around your property potentially obstructing your beautiful unencumbered views of the Mediterranean?The other good news is that there is no Inheritance Tax in Cyprus though this could change in the future. Additionally, depending on your tax status, you may also be subject to Inheritance Tax on your worldwide assets in your home country.

However, there are strict laws in Cyprus that determine on how your assets are distributed to your estate on death. Whilst the UK remains in the EU, it is possible to elect to choose the inheritance laws of your home country. How long this position will last is currently unknown.

To avoid very costly and time-consuming probate laws in two different countries, it is sensible that you have a will that applies equally in Cyprus and your home country. Having two separate wills could invalidate both. It is recommended that you have a will and your legal representative should be able to provide detailed guidance in this area.

Cyprus Property Buying Guide

Cyprus Property Buying Guide

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