25 July, 2019

Buy to Let – A Winning Proposition

To buy or to rent is an old question, with proponents on both sides, depending on various financial and lifestyle factors. Today, however, the question has changed, as people consider not whether they should buy or rent, but rather whether they should buy TO let. At present, in Cyprus, the answer seems to be a resounding ‘Yes’, for a number of reasons.

Interest rates

There is no doubt that the current state of the banks and the level of interest rates are driving the market of investment properties. As local banks are offering as little as 0.3% and rarely over 0,8% on fixed deposits, while at the same time granting housing loans at an interest rate of 2,15% to 2,25%, more and more people recognize that there is little value in cash savings.

That, combined with the banks’ recent history of instability has all but pushed anyone with any disposable income – let alone serious investors – to turn to property. And while property has always been a favourite among long-term investors, today it is even a short-term winner, with rents delivering very attractive returns – no less than 2% and even reaching 6,5% in certain cases.

Rental income

The annual ROI on investment properties is calculated by taking the annual rental income and dividing it by the purchase price of a property. Although rents are on the rise in general across Cyprus, furnished holiday properties and seafront properties are often earning much more than long-term rentals.

Given the popularity of Airbnb among holidaymakers, this option is the current favourite; anyone who has any type of accommodation, especially near the coast, is seizing the opportunity and jumping on the bandwagon.

A word of caution: Apart from the fact that this area is largely unregulated for now, changes in legislation and especially taxation are expected, possibly sooner rather than later. Furthermore, it is no secret that short-term tenants are often less interested in preserving the property, which means that maintenance costs can be disproportionate when compared to long-term tenants.

The best way to capitalize on the holiday rental market is, therefore, to work with reliable property rental/management agencies that have market experience and can ensure that you don’t end up with a loss.

Front runners

In the holiday rentals market, the rule is simple and obvious: The closer the property to the sea, the higher the demand – and ultimately the rent you can charge. As holiday homes are competing with hotel accommodation, the size, number of bedrooms, facilities and comfort features all factor into the rental price.

SkyPrime Luxury Holidays, is a prime example. On behalf of property owners, the company manages an attractive portfolio of different properties of various sizes, primarily in and around Ayia Napa. SkyPrime’s rental service is combined with an extensive list of optional Concierge and VIP services, resulting in a win-win proposition for owners and tenants.

Houses with several bedrooms attract groups of friends and/or couples, thereby bringing down the cost per person. Self-catering facilities in well-equipped kitchens eliminate the need to eat in the hotel or other restaurants at every meal. Having a private pool is the cherry on top.

Although the short-term holiday rental rates are much higher per day, long-term rentals, student accommodation, and commercial properties – offices and shops – are also in demand and can possibly earn more, depending on their location. Especially if you prefer a steady flow of income without the fluctuations and high maintenance and management fees of the very short-term option, longer-term conscientious tenants may be more advisable.

Any property, anywhere

Looking at the different coastal towns, and the returns according to property type, Limassol has registered a low of 2,5% for houses, a high of 5% for apartments, and between 5% and 5,5% for offices and shops. In Larnaca, the general picture is similar, while villas in the Ayia Napa and Protaras area are earning 3,5% to 4,5%, apartments generate 4,5% to 5,5%, and shops and offices between 5% and 6%. Paphos is at the upper end, with owners earning up to 4% from villa rentals, apartments generating up to 6%, and shops even up to 6,5%. Nicosia, while in a league of its own as it has limited appeal among holidaymakers, is registering comparable results, with shops earning the highest rate, up to 6%.

Given all the above, it is not surprising that both domestic and foreign buyers are quickly identifying the most attractive properties and snatching them, with a view to capitalizing on the current market conditions.

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Yiannos Trisokkas

Yiannos Trisokkas

Yiannos Trisokkas is the Director of Casamont Cyprus Ltd overseeing operations in Cyprus and Greece. He has also been the Managing Partner of Henley & Partners Cyprus Ltd since 2013, with Greece’s Golden Visa Program within his ambit. He serves as the Chairman of the Real Estate Committee and Member of the Management Board of Henley & Partners.