What is happening in the Cyprus real estate market in 2023?

The state of the real estate market in Cyprus

Alexander Kosovsky, a real estate specialist from Astons, shares his observations on the current situation in the Cyprusreal estate market and highlights the main trends. Over the past two years, there has been a clear advantage in favor of sellers, which is linked to the high demand for housing.

Popular attractions

Apartments suitable for participation in the "Permanent Residency through Investment" program quickly find their buyers. Usually, the highest number of inquiries is for properties priced around€300 thousandespecially in the popular regions of the island.

Market trends

The cost of real estate in Cyprus is gradually increasing, but the number of transactions continues to rise rapidly. In 2022, a record sales volume was recorded, instilling confidence in sellers. As a result, the negotiation process has become more complicated, as sellers now hold significant power in the market.

Changes in demand during the pandemic

The demand for housing noticeably intensified during the pandemic, when many realized how comfortable and convenient it is to have their own home by the sea during lockdown.

Who buys real estate?

In recent years, Cyprus has become particularly interesting to citizens.

• United Kingdom
• Germany
• Other countries of Europe

Those who have appreciated the advantages of living on this island. Russian buyers are also actively participating in this process, drawn by the opportunity not only to purchase real estate but also to explore immigration options. Cyprus has become home to a large Russian-speaking community, which makes the adaptation process easier for new residents.

Advantages of living in Cyprus

The island offers many Russian-speaking schools, as well as specialists who speak Russian in banking and medical institutions, which enhances trust among potential investors. Additionally, the favorable climate, sunny days, and clean sea play a significant role in choosing a place to live.

Immigration and business

Since 2022, Cyprus has become a magnet for immigrants, both individuals and entire companies. The island has gained popularity among businesses due to its attractive tax policy, which has led to many companies relocating there. This, in turn, has increased the demand for rental properties.

Changes in the rental market

The rental housing market has transformed.

• Previously, the yield varied within the range of4-6%
• Now she can reach6-8%and even higher

It depends on the right choice of conditions for acquiring the assets.

Demand for real estate in 2023

By the beginning of 2023, the trend of increasing demand for real estate continued to develop. According to statistics, sales to foreigners increased by34%compared to the same quarter of the previous year, while among local residents the growth was12%.

Difficulties with processing transactions

As for the process of real estate transactions, it has become much more complex and multifaceted. Cypriot banks have always paid attention to the source of funds, and now the documentation requirements have increased.

Buyers and companies are required to provide numerous documents to prove the source of funds, and the verification process can take anywhere fromtwo to three monthsThis poses a barrier for investors from Russia. Thus, against the backdrop of market growth and increased interest from buyers, the rules have become stricter, creating certain challenges when purchasing real estate in Cyprus.

Difficulties in withdrawing funds to Cyprus

Recently, Russian banks have been facing certain issues when transferring funds to Cyprus. These difficulties are forcing local developers to resort to using special contracts, which allows them to still carry out transactions while complying with Russia's legal requirements.

Problems in the secondary market

The situation in the secondary real estate market is even more complicated: financial transactions here are subject to significant difficulties, and these problems affect not only Cyprus but also other countries in Europe. It is practically impossible to transfer money to an individual who is a resident of a country that does not have friendly relations with Russia.

Purchase of real estate and residence permit

It is important to note that for those planning to obtain permanent residency through real estate purchase, the secondary market is not a suitable option. Participation in the program is only possible with new constructions.

Conditions of the residency permit program

Key conditions for participating in the "permanent residency by investment" program in Cyprus include:

• Purchase of real estate worth over300 thousand euros (plus VAT), which must be purchased directly from the developer.
• Confirmation of an annual income of at least50 thousand euros, received from abroad. This amount increases by15 thousand eurosIn the event that a spouse is included in the application, and on10 thousand euros— for each minor child.

The relevance of a minimum income

Don't forget that the proposal to raise the minimum annual income to50 thousand euroswas presentedApril 21, 2023As of today, it remains unclear when the new regulations will come into effect, so until then, the old limit is still valid.30 thousand eurosTo obtain up-to-date information, it is recommended to consult the specialists at Astons.

Payment practices for Russians

Now let us discuss how Russians actually make payments under this program. According to its terms, the funds must come from abroad, as the money in the account in a Cypriot bank requires certain documents confirming the source of its receipt. This is to prove that they are not related to income earned in Cyprus, but were transferred earlier for the purpose of purchasing real estate.

Optimal translation option

The optimal strategy is for a Russian citizen to transfer funds from a bank account in a third country. Many buyers already had foreign accounts, and some opened them for this transaction, usually in banks in the United Arab Emirates or Central Asia.

Difficulties of translations from Russia

As for transfers from Russia, they are also possible, but much more complicated. According to our observations, the situation will worsen every month due to the decreasing number of banks capable of conducting transfers in euros. Recent news reports indicate that Raiffeisen Bank is considering a complete cessation of its operations in Russia, which will certainly complicate the process for customers who used this bank for their financial transactions.

Cryptocurrency and buying real estate in Cyprus

Cryptocurrency is a very interesting topic, however, when it comes to buying property in Cyprus for the purpose of obtaining permanent residency (Permanent Residence), there are a number of important points to consider.

At the moment, it is not possible to directly pay for accommodation in Cyprus with cryptocurrency, as the prerequisite will be the prior exchange of digital assets into fiat currency using specialized exchangers. In addition, it will be necessary to open a bank account to make this process legitimate.

We strongly advise against opting for this option, as it may lead to a number of complications. The main difficulty lies in the fact that Cypriot financial institutions conduct very thorough checks.due diligence) and may ask questions about the origin of your funds.

For example, a bank may inquire about the source of the funds in your account in Georgia. When using cryptocurrency, finding yourself in a similar situation will be significantly more challenging in terms of providing proof of the origin of the funds.

In this context, there is a risk of not obtaining approval from the bank for such a transaction, especially considering the recent sanctions against a number of legal entities in Cyprus for assisting Russians in circumventing various restrictions.

Interest in the residency by investment program

Regarding the program for obtaining permanent residency through investments, interest in it has noticeably increased. After similar programs were closed in Greece, Latvia, and Malta for Russian citizens, many are looking for ways to unblock their accounts in Europe and are now turning their attention to Cyprus — one of the few countries where this opportunity still exists.

We expect a new surge of interest, as the citizenship by investment program in Grenada, which also accepted Russians, has recently been completed. This situation makes the opportunity to obtain permanent residency in Cyprus particularly relevant, as it is unclear how long such conditions will remain available.

Risks of closing the permanent residency program for Russians

Is there a risk that the permanent residency program could be closed to Russian citizens? At the moment, it is quite possible that such a development could occur. In conditions of uncertainty, much will depend on Cyprus's diplomatic activity in negotiations with other countries and European institutions, including the European Parliament and the European Commission.

It is possible that Cyprus will be able to maintain the right to issue residence permits for Russians, but a scenario similar to the situation in Greece, where the programs remain but Russians are not accepted, cannot be ruled out either.

Predicting the next steps is quite difficult. For example, in the case of Grenada, the closure of the program was announced only a month in advance, leaving potential investors with almost no time to act. Therefore, many who are considering the possibility of obtaining permanent residency are trying not to delay their plans.

The tasks of Russian citizens when obtaining permanent residency in Cyprus.

Citizens of Russia seeking to obtain permanent residency status in Cyprus are addressing several key tasks at once:

• Creating a reliable backup option.When acquiring real estate, a person automatically receives permanent residency status, which allows them to stay in Cyprus at any time.
• Education for children.This is very important for families with children, as the island has many international and British schools, as well as branches of universities from the UK.
• Comfortable living conditions.The island offers a variety of comfortable places — from bustling cities to quiet and secluded spots in nature.

Life in Cyprus definitely has many advantages, and in light of current events, interest in this place will clearly continue to grow.

Diversity of opportunities

You are provided with various opportunities. The key task is the processing of European documents. Achieving permanent residency status allows you to avoid restrictions related to opening bank accounts in European countries and depositing large sums.

Many clients learned last year about their banks' recommendations, which stated the need to provide a residence permit to unblock their accounts. These circumstances are the main reasons prompting them to obtain permanent residency.

Restrictions of the permanent residency status

Nevertheless, it is important to emphasize that the permanent residency status does not grant the right to travel visa-free to European countries, as Cyprus has not yet joined the Schengen Area. However, Cyprus has prospects of becoming a candidate for membership, which could change the current situation in the future.

The process of obtaining permanent resident status in Cyprus through the purchase of real estate involves several significant stages, each of which requires careful attention and adherence to specific conditions. Initially, you will need to sign a reservation agreement for the property and make a down payment. This initial stage usually goes quite quickly — typically within one day.

The next step is the legal review of the contract and the property itself. This procedure is usually handled by a lawyer who carefully examines all the details and nuances of the transaction. Conducting this analysis can take up to one week. After the review is completed, the necessary documents are sent to a Cypriot bank, where they are also checked. At the same time, if the money is being transferred from Russia, it is important to organize interaction with banks in your country. This process can be delayed and may take up to three months.

After the banking institutions confirm all the details and approve the transaction, the payment is made, which usually takes place within a week. Following that, the ownership registration for the new owner occurs, along with the payment of the corresponding stamp duty. This entire process typically takes about a month.

The next step will be the need to formulate an application for permanent resident status and submit it for review. This stage can take up to six months. After that, the applicant will need to arrive in Cyprus to provide biometric data, which is done within one week.

As a result, from the moment the contract is signed to obtaining permanent resident status, it can take anywhere from six to eight months. It is important to note that in recent years, the processing times have significantly increased. The pandemic has led to queues at the migration service, which has affected the application review process and made checks by financial institutions longer. Previously, this process could be completed in three to four months, but now that figure has increased significantly.

Reasons for refusals

Recently, questions have arisen regarding rejections of applications under this program. There are so-called "stop lists" that list categories of applicants who are strongly advised not to submit documents. For instance, having any criminal offenses has always been a barrier to participating in the program. As of today, restrictions have also been introduced concerning individual sanctions, companies, and their assets. If there is even the slightest suspicion in this regard, the chances of obtaining approval drop sharply.

Financial requirements

Often, the reasons for refusals lie in the lack of transparency regarding income sources. Investors looking to purchase real estate need to confirm the presence of a regular income of at least€50 thousandper year. For example, if a citizen makes a profit from trading cryptocurrency and does not declare their income, this could be a reason for denial of permanent residency in Cyprus.

Regarding the receipt of regular income from a business in Russia, it is important to note that this option is possible, but with one crucial condition: the company itself must not be under sanctions. This topic requires utmost caution. In practice, recent actions by the Bank of Cyprus have shown that many accounts of clients without residency status on the island and confirmed income from Russia have been blocked.

Caution of banks

In the current environment, banking institutions are exercising extreme caution regarding sanctions and often block all suspicious accounts. The process of complying with regulatory requirements incurs significant costs for them, highlighting the need for a thorough analysis of each case before submitting an application. It is important to know in advance which documents need to be prepared and which aspects of declaration are mandatory.

Current situation

The situation for Russian citizens is currently considered to be significantly deteriorating. We are constantly working in this area and often see that clients, upon hearing certain news, start to postpone their decisions, intending to "think" about their next steps.

Conclusion

In conclusion, I would like to say that the real estate market in Cyprus is currently showing unprecedented activity and interest from foreign investors, which is due to a number of factors. The growing demand for housing with the "Permanent Residency by Investment" program, as well as favorable economic conditions, make Cyprus attractive to buyers seeking stability and a quality life by the sea.

Despite some difficulties related to making payments and the need to verify the sources of funds, many Russians and other foreign citizens find ways to successfully complete transactions.

Trends in the real estate market in Cyprus

• The increase in rental yields makes investments in Cypriot real estate even more attractive.
• The ongoing increase in demand for housing among foreign buyers.
• Positive prospects for market development, especially considering the interest of foreign entrepreneurs in starting businesses on the island.

Cyprus continues to be not only a summer vacation destination but also a full-fledged home for thousands of new residents. I hope that changes in legislation regarding immigration and investment programs will keep pace with the growing needs and demands of the market.

Ultimately, the appeal of Cyprus as one of the key destinations for living and working will only increase, opening up new opportunities for everyone interested in acquiring property on this wonderful island.