Potential pitfalls of buying property in Cyprus
Buying property in Cyprus as a foreigner is generally safe. However, buyers need to be aware of potential financial and legal risks, as well as some location and property type-related risks.
With the right guidance and experts, you can successfully navigate any potential pitfalls of buying property in Cyprus.
Legal pitfalls
Buying property in Cyprus is a complex legal contract with large sums of money at stake. For British buyers, Brexit has made certain matters more complex too. These can have a major impact on your enjoyment of the property or its investment potential – perhaps both. For just one example, non-EU citizens cannot live there full time without a visa.
It is crucial to employ an independent lawyer who understands these matters. While the real estate agent or developer may recommend their in-house legal services, you need a lawyer who prioritises your interests.
Choose a firm specialising in property law. If they offer associated legal services, such as visas, inheritance or planning, that could be beneficial too. Consult a lawyer early in the process to navigate potential issues related to rentals, renovations, or other specific plans.
Tax pitfalls and hidden costs
One common pitfall when buying property in Cyprus is failing to account for buying fees, leading to an unexpected bill at completion. Budget for around 10% of the property value to cover all associated buying fees.
In particular, for new build property watch out for the differences between the 19% VAT normally payable and the 5% VAT rate payable for certain properties. [LINK to buying costs page]
Financial pitfalls – currency risk and your budget
As an international buyer, you should mitigate the financial risks associated with currency fluctuations when purchasing property in Cyprus. Simply Google “Swiss franc mortgages in Cyprus” to see the pitfalls that some buyers fall into.
The property buying process can take several months, during which the exchange rate between your local currency and the euro can fluctuate. The property’s price in euros remains constant during this period, but its value in your local currency may vary. For example, a 5% drop in the value of the pound or dollar against the euro means the property will now cost 5% more in pounds or dollars. This could result in a significant last-minute additional cost that you may not be prepared for.
To mitigate this risk, consult a currency exchange specialist. They can help you understand your budget in euros and prepare for exchange rate fluctuations via a forward contract. This fixes an exchange rate for the period of the buying process, eliminating the risk of unexpected extra costs at completion.
Property pitfalls and surveys in Cyprus
International buyers who are used to getting a pre-purchase structural survey in their own country can do the same in Cyprus. This is an area with severe weather and the occasional earthquake, so modern building practices are ideal, even with adjustments for older properties.
The Royal Institution for Chartered Surveyors (RICS) operates in Cyprus, making finding a reliable surveyor easy. If you wish to commission a survey, discuss it with your independent lawyer early so they can include it in your contract.
Off-plan pitfalls to avoid
While the Cypriot property industry has been made significantly safer in recent years, buying off-plan properties can still present potential pitfalls:
Construction delays and unpredictability. Delays in the building process can arise due to a variety of factors, such as poor weather, a lack of builders or materials, or unexpected complications such as a pandemic.
Payments in advance. Buyers pay a deposit ranging from 10% to 30% of the property’s value, followed by additional payments as construction progresses. There can be a long delay between paying and moving in.
Falling prices. While prices normally rise over time, they can fall and buyers find themselves in a position of negative equity.
Potential disappointment. The finished property may not meet your expectations.
Under Cypriot law, you may have the right to claim damages and hold the developers or builders accountable. Consulting your legal advisor and real estate agent about these potential issues early in the process is highly recommended if you’re considering buying an off-plan property.
How to protect your investment
If you’re buying a property in Cyprus, you’ll want the property to remain an asset to you, regardless of whether you’re living there permanently or not.
We recommend you put together a team of professionals to help you through the property acquisition process. They should include an independent lawyer, an estate agent and a currency specialist. You may also wish to seek the advice of a mortgage broker/specialist, a property surveyor, a buyer’s agent and possibly a property management company if you plan to be an absentee owner.