Changes made to property law in an aim to stimulate sales
Changes to property law on Cyprus that take effect this month means that fees will be reduced on property transfers for the next six months.
In a move aimed at stimulating sales on the Mediterranean island the reduction will only apply to the first sale of a property where the contract is dated and deposited within the timeframe.
It means that those who pay VAT on their house purchase will now not be liable for transfer fees and for those who do not pay VAT on their purchase, property transfer fees will be reduced by 50%, as long as they are within this window of opportunity.
‘This should inject some life into the Cyprus property market as buyers who have been waiting in the wings should now be happy to purchase,’ said Richard Way, of the Overseas Guides Company.
He also pointed out that there are also provisions in the law to prevent abuse of the tax break and to stop buyers withdrawing contracts of sale deposited at the Land Registry and then altering dates before re-submitting.
‘Any such wrong doing is likely to be met with the full force of the Cypriot law,’ he added.
Property Transfer Fees are based on the Land Registry’s assessment of the market value of a property at its date of purchase. However, using its discretion to reassess the amount of Transfer Fees payable, the Land Registry relies on its own historical data in a way that cancels out any transfer tax benefit of a bargain buy, which can result in double the expected amount being levied.
Property prices in Cyprus have been muted in 2011 with the Royal Institution of Chartered Surveyors Cyprus Property Index showing that foreign buyers in particular have deserted the market. This led to a low number of transactions and in turn resulted in fewer local people entering the market.
Average residential prices for both houses and flats fell by 1% and 2.7% respectively in the second quarter of 2011, with the biggest drop for both taking place in Larnaca where prices were down 3.2% for houses and 7.2% for flats.
Values of retail properties fell by an average of 4.4%, whilst those of offices and warehouses fell by 2.2% and 1.7% respectively.
Compared to the fourth quarter of 2009, prices dropped by 15.1% for apartments, 9.9% for houses, 12.2% for retail, 9.0% for office, and 6.4% for warehouses.
The RICS data also shows that across Cyprus, rental values for apartments fell by 3.1%, for retail units 4.1%, for warehouses 5.4%, and offices 2.0%. In contrast, rents for houses rose by 1.3%.
Compared to the fourth quarter of 2009, rents dropped by 11.6% for apartments, 12.4% for houses, 13.2% for retail, 7.2% for offices, and 8.8% for warehouses.