There are plenty of other reasons to invest in Cyprus too tourism is booming, demand for rental properties still outstrips supply, and the island is also a tax haven.
Better still, the property market remains healthy, thanks to strong demand from both foreign investors and locals, says Stuart Law, managing director of investment specialists Assetz. Investors enjoyed capital growth of around 15 per cent during the past 12 months, and with typical rental yields at around 8 per cent, potential returns look highly promising.
Cyprus is set to join the euro in 2008, and this could make it an even more attractive investment. It will have to cut interest rates from the current 5.5 per cent to much lower euro rates, making borrowing cheaper, and further strengthening the property market.
Peter Foster at Conti Financial Services says Cyprus has enjoyed annual growth of up to 20 per cent for the last five years, and although this has slowed slightly, the future remains positive.
Another attraction is that lenders will take rental income into account when deciding how much you can borrow. Cypriot banks are champing at the bit for foreign investors business, competing against each other and relaxing their affordability criteria.
Cypriot law is based on English law, but watch out for hidden traps. Banks require property title deeds as security against a loan, but they can be difficult to get your hands on. It can take up to two years to register a property in Cyprus.
If you can’t get the title deed, a local bank might still grant you a mortgage for an additional fee of 1.8 per cent of the mortgage value. But you must find a good local solicitor to check the property has been properly registered, he recommends.
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