Having decided to buy a property in Cyprus, you now need to take action on those dreams and get the ball rolling. But what’s your next step? Here we explain the buying process and what to expect.
Estate agents in Cyprus
There are hundreds of estate agents across Cyprus, from Peyla and Paphos in the east to Larnaca and Limassol in the west, as well as Ayia Napa and the capital Nicosia. Many will be geared towards British buyers and will speak English.
All will have a mind-boggling portfolio of properties to show you. With that in mind, it’s important to focus on what you really want. That includes sticking to your budget and your chosen location. Having said that, there should be place for spontaneity in your property viewing too.
With the pound-euro rate moving rapidly, you need to protect your budget. Read the Property Buyer’s Guide to Currency.
A good start will be to view Rightmove. With more than 11,000 properties on its books to suit all tastes and budgets, it will give you a clear idea of what is available here.
Estate agent associations
For peace of mind, check that your chosen estate agent is licensed and regulated. Are they members of the International Real Estate Federation FIABCI, or the Cyprus Real Estate Agents Association (CREAA)? They should be licensed as a Real Estate Agency and ideally registered in the Council of Cyprus Real Estate Agents, which is governed under Cypriot Law.
Check that your chosen estate agent is licensed and regulated.
You can check on an estate agent’s registration simply by asking for their registration number and checking it on the website.
You’ll find that most genuine and regulated agents are members of the CREAA. This organisation is one of the most pro-active on the island in monitoring those that are operating illegally as ‘consultants’ or as ‘property finders’. As a member of the CREAA, estate agent members must have indemnity insurance.
Once you have decided on a location and estate agent, ensure they show you as many different properties as possible to get a good feel for the area. Another
If you’re considering renovations, ask the estate agent for their thoughts on the additional cost. Certainly they should be able to recommend reputable local tradespeople.
When viewing properties don’t be afraid to ask as many questions as you like. In Cyprus that might include: what are water shortages like in the summer? Does the property have a regular supply of electricity? Does the property have any loans or debts on it? What are the restrictions on renting out the property?
Employ a lawyer
Finding an independent English-speaking lawyer who is a member of the Cyprus Bar Association should be at the top of your to-do list. In the long run, your lawyer could save you plenty of money. Certainly they will guide you through the legal aspects of buying and selling property in Cyprus, and help you do so safely. GOV.UK publishes a useful list of List of English-speaking lawyers in Cyprus.
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Contact Smart Currency Exchange. As experts, dedicated to the overseas property market, they can help you set your budget. If the pound-euro exchange rate moves against you now, you might not be able to afford to complete, and could lose your deposit.
The Buying Process
Having viewed the property and being absolutely sure you want to buy it, it’s time to put in a bid. Once accepted, the agent will take the property off the market, usually for one month. You may be asked to sign a reservation agreement, which shows your commitment to buy the property, and put down a small deposit. Consult your lawyer before signing anything or sending the money. It might be a few thousand euros, or a small percentage of the property’s value, but you will need to know under what circumstances you will get it repaid if the deal falls through. Ideally, this deposit will be held in a neutral account.
During this period your lawyer will checks the relevant paperwork and conduct various searches. One of the most important will be about ownership and title deeds, which has been been a vexed issue in Cyprus. You need to know that the vendor is the rightful owner of the property.
They will look to see if there are any debts/loans on the property, and any exemptions that may hinder the property sale. This has also been a common problem in recent years. If it is a new property, your lawyer will be check the correct planning permissions have been obtained from the local authorities.
Your lawyer should ensure the sale contract is deposited with the Lands Office. In the case of a new development where deeds won’t be issued until the property is completed, the sale of contract should reflect that the property is protected until a separate title deed is issued.
Provided no issues arise from the legal searches, your lawyer will draft a property sales contract.
Provided no issues arise from the legal searches, your lawyer will draft a property sales contract. Next, they will ensure it is approved by all parties in the transaction. This will need to be stamped and registered by the Lands Office.
The reason for this is two-fold. Firstly it prevents the seller from selling the property to anyone else. Secondly it prevents them from using the property as collateral to gain a mortgage or loan. The Specific Performance Law, as it is known, also protects the buyer before the deeds are formalised in their name.
At the same time, you will need to transfer a proportion of the agreed property price. You can also pay for the utilities to be connected at this stage if necessary. During this time it is vital to protect your budget from currency movements. If you do not, you could find that adverse exchange rate changes leave the property costing you thousands more when you come to complete. During the past two years, in nearly 60% of the time the pound lost its value over the course of the following month.
Your lawyer will also issue a request to the Council of Ministers for Cyprus, for the entire property acquisition. This is in relation to character references, to ensure you don’t you won’t have any legal issues and aren’t on Interpol’s wanted lists. They will also prepare an application for the reduced VAT rate of 5%. When this is approved, you will transfer the final balance of the sales price. All this is usually completed within one month.
The final stage involves obtaining the Title Deeds from the Regional Land Chamber in the presence of the seller and buyer. You must obtain a receipt proving the registration fee and registration of property tax have been paid.
During this final stage, the Title Deeds transfer fee will have to be paid. Once in receipt of them you are the owner of the property.
You can now apply to the likes of the water and electricity authorities to transfer the utilities into your name.
Find a reputable building inspector when you start this process, just as you would an estate agent, lawyer or currency specialist. It could save you a lot of money going forward. A building survey isn’t a legal requirement here but nor is it in the UK, where you wouldn’t dream of not having one conducted.
Your lawyer should be able to recommend a registered surveyor, who should be a member of the Cyprus Scientific and Technical Chamber (ETEK), and a member of the Royal Institute of Chartered Surveyors.
In addition to the agreed sales price on the property, you need to factor these extra costs into your budget. Ideally, you need to budget up to 15% of the purchase price to ensure all fees and taxes are covered.
Land Registry Fees: usually handled by your lawyer, these are tend to be minimal.
Legal Fees: when using a lawyer for the conveyancing of the property and paperwork with local authorities, you need to set aside about 1% of the property price.
Local Property Tax: this is payable to municipalities and communities. The tax is calculated on the Land Register’s assessment of the value of the property in 2013.
Property Transfer Fees: no property fees are payable if VAT was paid on the purchase price of the property. Property transfer fees are halved to 50% if VAT was not paid. But if the Land Register office considers the price on the contract is undervalued and not in line with the market value of the property, the full property transfer fee may be levied.
Stamp Duty: this is calculated on the value of the purchase agreement and currently set at the following rate: €0 to €5,000 – zero; €5,001 to €170,000 – 0.15% greater than €170,000 – 0.2%.
Value Added Tax: VAT, as of 2018, is charged at 19% on the first property purchase. A reduced rate of 5% is charged on the first 200 sqm of the property to be used as the buyer’s primary and permanent residence for ten years. VAT is charged at 19% for the remaining square metreage.
Sales Agent’s fees: usually split evenly between the buyer and seller. These can be anything from 2 to 5% of the sales price.
Inheritance and Immovable Property Taxes: there is no inheritance tax on property in Cyprus and the Immovable Property Tax payable to the Tax Department was axed in 2017.
Property Insurance: If you want credit from a Cypriot bank, you will need to obtain property insurance. Nevertheless, it is one of the ‘hidden fees’ that is forgotten about by purchasers when they get the property in their name. You can shop around for property insurance as you would do in the UK.
One way you can save a few euros is buy negotiating for a lower price on your property. Read our guide, How to Negotiate Abroad, for essential tips on how get a better house for your money.