Buy to Rent Investments
For many people, buy to let property investments can be lucrative. However, there are several reasons why buy to let is especially popular in Cyprus, and across the Mediterranean.
Cyprus remains a hugely welcoming tourist destination, with an average rate of tourist arrival in the country of around 87,300 per month. That is reflective of the period between 1990 and 2020. Therefore, once travel restrictions raise, there are no indications this is likely to alter in the negative.
We must therefore consider the following as ‘beyond the pandemic’. Cyprus is not going to disappear – and neither is the fantastic sunshine and climate.
If you are considering buying to let in Cyprus, here are a few points you may wish to consider. With 2021 looming into view, buying to rent may be a promising option for summers to come.
Gross Returns are Healthy
Investors in Cyprus can expect, above average, healthy returns in terms of gross capital. Focusing purely on the district of Limassol, current rates for gross return on investment average out at between 4.74% and 5.6%.
Therefore, even if you are investing in a buy to let for a short period, you can expect healthy profits. It may be arguable this is as a result of Cyprus’ extremely competitive climate, and its ongoing status as a holiday hotspot. Even during the uncertainties of 2020, tourism statistics show interest waned only a little due to restrictions.
Rental Income Tax is Very Affordable
We will cover tax in Cyprus – Limassol in particular – shortly. However, in terms of general rental income, you can expect only to lose a small fraction of your revenue.
As of the time of writing, all properties making rental income must pay tax after at least €19,500 revenue. Anything less than this threshold will not be subject to such rates.
There is also the reassurance that tax rates in Cyprus remain progressive. What’s more, expenses are deductible, too, from any gross you make.
Capital Gains are Worth Considering
Capital gains rates in Cyprus are particularly attractive for investors. At the time of publication, investors may face taxes of 20% on capital gains from property sales.
However, tax rules in Cyprus state that there is an upper exemption of €85,340, providing that you have owned and lived at the property for five years. As this is not always the case for international investors, this may not apply to you. However, it is a tax break worth considering.
Crime Rates are Low
From the perspective of renters and holidaymakers in Cyprus, the island remains one of the safest places to live in Southern Europe.
Statistics indicate that, over the years, crime rates are declining. It is, for example, recorded that the crime rate currently sits at around 28.7% – considered at the ‘low’ end of the scale.
Therefore, interest in rental properties is likely to remain healthy. Holidaymakers, not just local people, will be looking for places to stay where they can be sure the crime rate is low. Cyprus is well-known for its safety, meaning you could be overseeing bankable investments.
Many people will likely visit Cyprus purely for the sunshine and the excellent climate. At the height of July, the average ‘high’ temperature in Limassol is likely to be around 31 degrees Celsius, with lows of 23.
Limassol, as a representative example, only receives around 40-days of rainfall per year on average. The UK, as a whole, on average, receives 133 days of precipitation.
Therefore, it is not difficult to see why uptake in rental properties is likely to remain steady. Even during February, Limassol expects a low-temperature average of 8 degrees Celsius. It is amongst the warmest in the country at this time.
The Housing Market is Recovering
Cyprus’ housing market has seen several ups and downs over the years. However, pre-pandemic, the market was recovering, and potentially even expanding.
For example, based on figures from 2019, house pricing in Limassol rose by around 2.4%. Even better, however, is the news that apartment prices in the district grew by 7.6%. It is the largest apartment price increase for the period for any of Cyprus’ major districts.
As a result of travel restrictions following the COVID-19 pandemic, market interest fell. However, this is likely to be temporary, as indicated by pre-pandemic interest.
Therefore, it may be prudent to invest in property sooner, rather than later, ahead of pandemic restrictions lifting in the future.
Residential Tax is Simple to Understand
Tax in Cyprus is famously easy to understand. It is capped at a maximum of 35%, meaning that residents will not expect to pay above a certain amount.
This statistic in itself may be of interest to investors hoping to live in Cyprus, too. Preferential tax for residents, as well as the capital gains threshold listed above, may work in investors’ favours should they wish to live on the island, too.
Inheritance Tax in Cyprus
Inheritance tax is null and void in Cyprus. Any investments you make on the island will pass to your next of kin without any duties.
Investors may wish to purchase property on the island for this purpose alone. There are few nations which eradicate inheritance tax. This tax will typically apply to any assets or investments you leave in wills to your next of kin should you pass away.
Therefore, many potential investors may see this is an extra security measure in uncertain times.
Attractive Legal Practices
A primary reason why investors head to Cyprus at all is for its progressive legal system. There are laws and statutes mainly geared towards protecting investments.
For example, the CIPA, or Cyprus Investment Promotion Agency, exists purely to increase investment interest in the country. CIPA operates by streamlining and modernising laws in the country to help investors and their portfolios grow.
However, it is worth considering that Cyprus remains a European Union member state. Therefore, any laws and statutes applicable to other members will apply here, too. However, it is arguable that the EU offers multiple freedoms compared with the alternative.
It is also arguably easier to attract more renter interest than ever in Southern Cyprus thanks to its flexible connectivity.
Cyprus benefits from two airports which connect flights globally – and what’s more, Limassol itself has a seaport, meaning it is easy for tourism interest to flow in and out of the country through multiple infrastructural points.
Mathematically, this means that opportunities for investors to find renters will only increase. The more avenues there are into Cyprus, the greater the chance of making money will increase, too.
Cyprus’ multiple international connections and transport links make it a fast-moving, progressive hotbed for property investment opportunities.
European Monetary Union
Cyprus is a member of the EMU or the European Monetary Union. Alongside their membership of the European Union, this means that investment money can easily travel in and out of the broader market.
Therefore, investments receive added protection. It also means that parties within the EU can benefit from added transparency and clarity from investment to investment.
Is It Worth Investing in Cyprus Now?
Buy to rent investments can be a lucrative mode of income, passively, for many people. It is a system which garners larger returns reliant on the area in question, its infrastructure, and its financial stability.
Low tax rates and simple tax systems in Cyprus likely make it appealing to property investors. Housing markets, too, show clear signs of recovery in recent years.
Cyprus remains a progressive, investment-friendly country. Limassol, as observed, is likely to continue evolving as far as apartment and house prices are concerned. With low crime statistics and gorgeous weather, Cyprus has long been popular with ex-patriots.
With tax reliefs and investor-friendly practices available to take advantage of across Cyprus, there may not be a better time to consider buying to let on the island. Consider Limassol, in particular, but do also keep in mind that the districts of Paphos, Ayia Napa and Protaras are also likely to garner interest from holidaymakers looking to move away for good.