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Performance of housing returns in Cyprus

By Antonis Loizou

The local Royal Institution of Chartered Surveyors Cyprus branch provides its own statistics on real estate returns and prices every quarter.

The most recent data indicates returns on residential apartments of 120sq.m rates are: Larnaca 4.13%, Limassol 5.29% and Nicosia 4.01% while the annual returns for across the island are: 2014 – 3.80%, 2015 – 3.90%, 2019 – 4.0% and 2017 – 5.00% (estimated)

Returns (or yields), as we locally interpret them, is the (gross) income received per annum compared to the property’s market value.

The returns do not reflect non-payment of rent, property taxes, voids, common expenses etc., and this is rather incorrect. So, if one wanted to compare the local returns to those internationally adopted, one ought to reduce Cyprus local returns by around 10%-15% – i.e. the net income from a property, based as a percentage on its value.

Based on the published global property guide, Cyprus does not appear to be in the lower scale for having a good return, and as such we report:

The quoted gross yield figures are based on the average yields for 120-sq.m apartment units

Long-term ratings are based on many factors, including: gross rental yield; income tax and capital gains tax; round-trip transaction costs; potential landlord/tenant problems; long-term GDP growth; potential over-supply and affordability; long-term appeal to investors.

We must say that, in terms of returns, Limassol, based on the publication, is doing well – but on the lower end rather than on the top end of apartment prices. There is indeed an upsurge in demand, and rental levels in all towns (especially in Limassol) are on the up.

Any gross return on residential units showing around (+) 4% is good in our opinion, and even with a net return (prior to tax) of 3.5%, bearing in mind the positive trend and the optimistic outlook for the building industry that has just started to revive (albeit, in general, at a low pace).

Our own favourite investment is, of course, “villas to let” in the Paralimni/Famagusta region – mainly three-bed units and in close proximity to the sea (see our previous article on the subject) showing returns in excess of 8%, even after the 20%-25% letting fees and maintenance are deducted (add to the picture also tax avoidance and abolition of property tax).

For those who want to venture into a higher amount of investment in the residential buy-to-let sector, there appear to be good opportunities via the banks’ foreclosures. Whole blocks of apartments (even semi-complete) are on offer.

Recently, we also discovered, amongst other developments, a most interesting project in Pyla – with good quality houses, equipped with pools, etc. and other facilities – and thus ideal for a buy-to-let investment.

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Let’s hope this state of affairs will continue at least for the next two to three years, which will provide another boost to the local building industry.
Having said that, the villas-to-let option comes as the result of the booming tourist industry and high occupancy, which is itself the consequence of the Egypt/Turkey state of the market. Once these markets start to revive, the villas-to-let option may no longer be as attractive.

Antonis Loizou & Associates LTD Property Valuers & Property Consultants, www. aloizou.com.cy, nicosia@aloizou.com.cy

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