Renting Out Your Villa ?
Think Again Very Carefully !!!!
If, when you get your property, you are planning to offset the running costs by letting it to holiday makers, read on. We have all seen estate agents' literature suggesting that apartments or villas have 'great letting potential'. Unfortunately, in North Cyprus, this is rarely the case and buyers should be wary of investing in a property with the intention of generating an income from holiday letting.
My first visit to North Cyprus was over 20 years ago and I have owned my present house for seven years. Until three or four years ago, it would have been fair to say that an individual villa with a good sized garden and private pool could be let to holiday visitors pretty much continuously for six months, from May to October. However, two important things have happened to change all that. Firstly came the frenzy to buy in North Cyprus based on the fallacious belief that a settlement was imminent and property values would escalate. This caused the building explosion, which led to a huge increase in the number of villas competing for a share of the letting cake. Secondly, the construction boom and destruction of the environment led directly to a massive decrease in the number of tourists and therefore a big reduction in the size of the cake itself.
Such tourists that do still come can afford to be much more selective. Recently built villas surrounded by similar ones, small plots, little or no privacy, shared or communal pools, nearby construction work, are all 'negatives' and the more negatives, the less interest from holiday makers. The only way for the owner of a villa with one or more negatives to compete is on price but as villa rental rates in North Cyprus are already amongst the lowest in Europe, there is a limit to how much rates can be reduced. Even well established villas with every amenity have barely changed their tariffs for years. The usual overheads (electricity, water, laundry, welcome packs, airport transfers etc.) are roughly the same, regardless of the status of the property and the rent being charged so, the lower the tariff, the greater the percentage the overheads will be to your gross income.
If you are contemplating buying a new villa or apartment and renting it out for part of the year, then unless you have something very special and individual to offer, it would be wise to assume that you will get few bookings and at a lower rate than you had hoped for. It is difficult to rent out a private villa or apartment anywhere, without using an agent and in North Cyprus, it is almost impossible, as your occupancy levels and tariff will not justify private advertising. There is one well established agent in England which uses press advertising and charges introductory commission of 12.5%; in North Cyprus, there are two or three agents which rely principally on internet searches and typically charge 15% of gross income. There may also be a fixed charge to have your property included on the agent's web site.
If you still feel that bringing desperately needed tourists to North Cyprus is worth considering, the 'government' has another deterrent waiting for you. Under a little known law, passed in 1982 but never implemented, the state is empowered to take 10% of your gross income. It describes this as an income tax but no tax return is involved and no invoice or other demand is issued. There is no 'nil rate' band and you are not able to offset your expenses such as airport transfer costs, welcome packs and crucially, agents' commissions, so you are expected to pay 10% of money that you never see. The law was rediscovered recently and the government has really got its teeth into it. The attraction is that most villa owners are western Europeans who, unlike the local people, are likely to pay up without a whimper.
Arrangements for payment of the 'tax' are as outrageous as the tax itself: the owner of the property is expected to go in person to the tax office before the 15th day of every month and pay 10% of all gross income in the preceding month; this will be difficult if you are not resident at the time (as is likely to be the case if you are letting out your home) but if they do not do so, a 'fine' is added every month that the tax remains outstanding. After that, the owners "will be liable to legal action". Once a villa owner has been identified, they are placed on the police computer and are threatened with arrest on entering or leaving the country, if tax is outstanding.
Is it any wonder that the tourist trade continues to decline? Are you sure that you really want to buy a property here?
RM
Taken from: trncpropertywarning.freewebsites
