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Investors who invest in Cyprus real estate can gain residency or citizenship depending on the level of investment:
A key factor for many investors in addition to the residency visa and passport is the return on investment (ROI).
There are two factors affecting a property’s ROI and its profitability:
• Rental income
• Capital appreciation
They are two types of rental.
Long term rental – is for a period of one year and more. This rental is used by Cypriots and foreigners permanently working in Cyprus. Proximity to the sea for this type of lease – is not necessary. There are disadvantages of such proximity – high humidity, the tourist noise.
Short-term rental – is for the period from several days to several weeks. It is for holidaymakers and an alternative to accommodation in hotels. Property for such rental should be located close to the sea and have swimming pool.
Yields on long-term leases are around 4% per annum. Short-term rental yields are slightly more – about 5.0%-5.5%. However, in case of short-term lease some renovation should be made from time to time.
Capital appreciation on real estate is a factor that ultimately provides investors with greater profitability potential.
The prices in the Cyprus real estate market will grow in the medium and long-term perspective. Our optimism has solid foundation based on key economic factors. Briefly the drivers of market growth are:
1. The growth of the whole Cyprus economy. According to IMF forecasts, the Cyprus economy will grow in 2016 by 1.4%. The European Commission estimates the Cyprus GDP growth rate – 1.5% in this year and 2% in 2017.
2. Start of industrial extraction of natural gas in 2019. Large offshore gas deposits have recently been discovered in the Exclusive Economic Zone of Cyprus. The value amounts to 300%-3000% of GDP. Naturally, the gas production will boost the island’s economy. In addition, new industry will require relocating to Cyprus many foreign workers and that will push up property prices.
3. Construction of the first casino resort is set to increase the number of rich tourists up to 1.0 million a year. This will add to 2.6 million tourists currently visiting the island every year. The casino resort is planned to be the largest in Europe. The growth of tourism will increase demand for rental property and hence the price of that real estate.
4. Reduction of property taxes:
• Capital Gains Tax. Capital Gains Tax on property purchased during the period between July 16, 2015 and December 31, 2016 and sold anytime in future for a bigger price, will not be charged
• Transfer Fee. Transfer Fee for property subject to VAT payment is not charged. For a property that is VAT exempt and is purchased before 31 December 2016 Transfer Fee rate is reduced by 50%.
• VAT. When property is purchased, a reduced VAT rate amounting to 5% (subject to a number of simple conditions) will be charged instead of the current rate of 19%.
5. Non-domicile tax residents of Cyprus are exempt from paying taxes on dividends and interest on deposits, earned in Cyprus and around the world. This means that foreigners who have moved to Cyprus, do not pay taxes on the dividends earned somewhere else (the rule is valid for 17 years after the move). It is expected that many wealthy foreigners will take advantage of this opportunity. They will need premium class properties for living, rising demand and prices in this real estate segment.
The following are our recommendations and approach for finding properties for our clients with the greatest growth potential.
1. Property must be new, not resale. Real estate, which was built in Cyprus in large quantities, say, 10 years ago, was designed for the British – then the main buyers of Cyprus property. Unfortunately, their low requirements thoroughly spoiled that property. For a number of reasons (for example, due to the fact that houses/apartments were considered only as holidays homes), the British did not mind that properties had no heating systems and proper insulation, and the internal and external design was primitive. Currently, such Real estate is obsolete and is not in demand, despite of falling prices.
2. Property must have high specifications of construction and finishing. There must be high ceilings, efficient heating systems, expensive flooring, tiles, sanitary and kitchen ware. Real estate should look stylish and modern. Such property can be sold in future with good profit.
3. We recommend to buy in the premium segment of the market. Generally, the Cyprus property market is shifting towards more expensive housing. This is evidenced by the dynamics of sales. In recent years, sales of expensive property have been increased, while economy class property stagnates.
4. If an investor buys a property at the initial stage of construction, he/she can expect a good discount to the price. This provides a good capital appreciation.
5. Real estate on the first line to the beach in Limassol and other cities is characterized by permanently good demand. The demand is high while the supply is limited (only few plots of land on the first line in the cities are available). This pushes the prices on sea front properties up.
6. Properties in the tourist area of Limassol, located in walking distance to the sea, are very popular among foreign buyers. Their prices steadily grow. First of all, this applies to large 3 and 4 bedroom apartments.
7. There are several prestigious hills in the nearest suburbs of Limassol. Buying a luxury villa on one of these hills – is a good investment for an applicant for passport.
8. Properties on golf resorts have good prospects. Not any golf property, but having certain specific characteristics. For example, the panoramic unobstructed sea views. Such properties are often sold before their construction is even started.
9. The growth of the culture of the Cyprus construction industry, combined with the increased requirements of buyers have led to the emergence of properties with unique (for Cyprus) and advanced (for the world) architectural solutions. These properties will give a high profitability due to its fashionable image. And also due to the fact that the time of design, obtaining of all necessary permissions and construction of such properties is so long, that they will never be in excess.
Let’s now estimate the possible figures of ROI, which can be received from the Cyprus property recommended above. The total profitability is a sum of Rental income and Capital appreciation.
• The average annual rate of long-term rent in Cyprus is 4%.
• Property market value will grow (according to conservative estimates) by 30% over the next 5 years, an average of 6% pa.
Together combined this gives an average return of 10% per annum.
Our assessment of the Cypriot property market is very positive over the coming years. However investors should be aware that in any market, property prices can vary, they can fall and they may not achieve the predicted forecasts.
Please contact us on 0044 207 060 1475 for a personal assessment with one of our Cyprus real estate consultants.
Real estate investment in countries such as Portugal and Cyprus is beginning to look attractive as markets start their recoveries.
Prices of real estate fell significantly in many European markets after the credit crisis started in 2008. After several years of recession, economic growth returned to the EU in 2014 and European countries are beginning to show strong recovery. On the back of this economic recovery, real estate prices are rising from all-time low points.
Property prices in Portugal rose 2.8% in the six months to 30th September 2015. A recent forecast from the University of Barcelona predicted property price rises in Spain of 12% in 2016 and as much as 50% over the next four years.
Price to income levels in Portugal and Cyprus in particular are some of the lowest in Europe suggesting upside as the market continues its recovery.
Rental yields are high in Portugal after traditional middle class buyers were kept out of the market post credit crisis due to lack of bank lending. There are many years of pent up demand from buyers who have been forced to hold back and rent their property rather than buy. The real estate cycle has reached a new phase in these countries and there is significant scope for catch up with the rest of Europe.
Countries such as Spain, Portugal, Greece and Cyprus have significant scope for capital growth in the coming years. Banks are lending again and improving economies are bringing domestic buyers back to home ownership.
Spanish property prices appear to be rising and could climb by 12% in 2016 according to an article published in the Spanish daily newspaper El Mundo recently. Barcelona University professor and real estate expert Gonzalo Bernardos explains the reasons behind rising prices and why the market could rise as much as 50% over the next four years.
Currently, the residential market in Spain is expanding. In the second quarter of 2015 the annual increase of housing prices was 4% and the level of transactions rose by 13.9%. The first signs of a rising market were observed in the main cities in late 2014. However, “nobody should expect the formation of a new bubble”, as all the main variables including market price, housing starts and percentage of household income devoted to making mortgage payments are far from the level they reached in 2006 and 2007.
The main reasons for the rise in price of housing are:
Once adjusted for inflation, most are worth less than half that in 2007 and about the same as in 2002. Bernardos claims that at present buying a well located home is a great opportunity, and that in 2016 prices will rise by 12%.
The willingness of banks to grant more mortgages. Today, banks have plenty of liquidity and are earning low margins on lending. Mortgage loans are attractive to the banks. The loans are less risky and lead to cross selling of products. Banks are keen to lend again in the property market and easier credit will fuel prices. The number of residential mortgages issued climbed by 28.5% in the year to July 2015.
With low returns on deposits and volatile equity markets many risk-averse investors are turning to the real estate market. Bernardos says housing offers a mix of high expected capital gains (up to 50% in what remains of this decade), and rental yields of around 3.5%, better than savings accounts.
Many households in Spain sat out the crisis in rented accommodation, waiting for house prices to bottom out, for the economy to improve and mortgages to get cheaper. With those conditions now in place and the Spanish economy growing at an annual 3.1%, Spanish families are jumping back into the market, unleashing pent up demand.
In short, Bernardos says a new stage in the housing market has begun in Spain. However, nothing will be the same as the boom and bust of recent years. All said, this is encouraging news for investors looking to buy for the Spanish Golden Visa.
In 2015 we have seen exceptional growth in demand for golden visas from around the globe. The Middle East, Asia and Africa continue to show strong growth with countries such as India, Pakistan, China, South Africa, Nigeria and the UAE all demonstrating considerable interest in the various programmes on offer.
La Vida has dealt with over 5,000 enquiries this year from around the globe. Our team of advisors has been busy helping many clients find the right real estate investment to obtain their residency and citizenship. Our team is often visiting countries where local meetings can take place. But with demand so widespread it is not possible to visit each country frequently. However we are always available to meet with clients in our head office in London and most of our clients simply liaise by phone/email/skype with our consultants before coming out to meet our representatives in the country of interest for their intended residency visa.
A revision of rules for the golden visa in Portugal has left many potential applicants confused as to the rules and a great deal of misleading literature posted on the web suggesting the Portuguese golden visa limit has been reduced.
The qualifying real estate investment level for the golden visa in Portugal is €500,000. Earlier this summer the Portuguese government introduced a new investment level of €350,000 for certain categories of real estate.
The law states the following: “Acquisition of immovable assets, the construction of which has been completed, at least, 30 years ago or located in an area of urban regeneration and execution of refurbishment works in the acquired immovable assets…equal to or above 350 thousand euros;”
The point here is that even though this new option applies, it only applies to property that is over 30 years old or located in an urban regeneration area. It involves the execution of refurbishment works. This is an important aspect.
To qualify for the golden visa under such an investment requires the necessary permissions for renovation work on the building. Such permissions and payments to contractors all need to be done legally and of course within the tax structure so the necessary paperwork, proofs and payments are fully in order. To undertake such a project would mean employing project managers and the necessary architects. The applicant would have to have all the licences in place prior to any application being submitted which will of course delay any application for the visa. To mitigate any risk it is vital to ensure that any such property would qualify within this category. Clients would need to ensure they build sufficient time into their schedule to take care of all these additional aspects.
Clients visiting to invest €500,000 in a location such as Lisbon can usually complete the necessary tasks within a few days, accompanied by ourselves and our lawyers in a methodical, established and time proven manner. The alternative investment of €350,000 will require far more time and hands on management. Golden Visa applicants should be wary of companies offering such management for a fee and in particular remain conscious of the scope for overpaying for assets requiring reconstruction without the necessary independent professional advice from architects and surveyors. For any international client not residing in Portugal and trying to manage from a distance it can be problematic, time consuming and expensive.
The €350,000 is reduced by a further 20% to €280,000 for renovation in low density, less developed areas of the country. This naturally does not apply to the cities or the more populated coastal regions creating issues for any future rental income potential.
Applicants for the golden visa programme in Cyprus who are investing in real estate have received a boost following changes to the Capital Gains Tax law in Cyprus. Those acquiring a property in Cyprus before 31 December 2016 will avoid any capital gains tax on sale of the real estate irrespective of the date of sale of the asset.
The change is part of a package of measure introduced by the Cypriot government and enacted into law on 9 July 2015. A key change is the exemption from taxation for personal investment income for non-domiciled individuals who will no longer be subject to the Cyprus Special Defence Contribution (SDC) of 17% on dividends and 30% on interest.
Together with existing income tax exemptions this means that non-domiciled individuals will pay zero tax in Cyprus irrespective of whether the income is earned in Cyprus or abroad. The measures have been introduced to encourage high net worth investors to invest and reside in Cyprus.
It is important for any prospective investors to take careful professional advice on the programmes available before committing to an investment. There are many programmes on the market from differing countries, but not all of these lead to citizenship through investment.
The likes of Hungary, Greece and Spain are difficult or unlikely, sometimes requiring residence in the country. Portugal is far easier and Cyprus can be gained immediately with the right investment.
So what is citizenship and what benefits does it bring? Citizenship of any particular country within the European Union means a passport and importantly citizenship of the EU. So for example, if you gain citizenship in Portugal through real estate investment then you become an EU citizen. Similarly if you gain citizenship in Bulgaria through investment in government bonds you can also gain citizenship of the EU even though Bulgaria is outside the Euro and Schengen visa zone.
Every person holding the nationality of an EU country is automatically a citizen of the EU. This allows that person to move freely within the EU. To work, study and live wherever they wish within the European Union countries.
It is important to draw the distinction between the EU countries (there are 28) and the Schengen visa countries (there are 26). There are 22 EU countries participating in the Schengen visa zone and there are an additional 4 countries not part of the EU.
Residency in the Schengen visa countries allows freedom of travel throughout the Schengen area. But citizenship of an EU country provides the right to live and work within the EU countries. For example the United Kingdom and Ireland are EU countries, but not part of the Schengen visa zone.
Whichever country an investor targets for citizenship, there are sometimes faster, cheaper and easier options to gain permanent residency allowing them to live, work and study in that country by gaining entry through an alternative EU country.
It is possible to achieve citizenship through investment in real estate in Spain but the investor will need to live in Spain for 10 years before applying.
Citizenship can be applied for in Portugal six years after investment of a minimum €500,000 in real estate.
Citizenship is available in Cyprus within 2 – 3 months on investing a minimum €2.5 million in real estate.
Malta has an investment visa programme with a comination of investment and contribution totalling around €1.2 million with citizenship taking approximately 12 months.
Citizenship in Greece through its real estate investment programme will be possible following changes to legislation (2015).
Changes to legislation in Hungary mean the investor visa bond programme could lead to citizenship after 5 years rather than the current 8 years. (2015)
The investment bond programme in Bulgaria can lead to fast track citizenship by doubling the bond investment from €512,000 to €1,024,000.
For reference the EU countries are: Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the UK.
The government of Dominica has introduced certain selected real estate investments as part of its citizenship investment programme. The Dominican citizenship programme running since 1991 originally only allowed investment through contributions. From this year investors can invest $200,000 in real estate plus fees to gain a second passport. Government and advisory fees for a family of four are in the region of $150,000. In total this still makes Dominica one of the most affordable citizenship programmes. The investment must be maintained for a minimum of 3 years. If maintained and sold after 5 years, it would qualify the next buyer for citizenship as well.
We have a limited selection of real estate on this superb Luxury Collection Resort. Each fully furnished apartment is offered with a guaranteed 5% return after costs, for 5 years. The apartments, offered freehold, are ideal for international investors seeking the Portugal Golden Visa and looking for a “hassle free” fully managed property. Owners benefit from six months usage in addition to the guaranteed annual return. This allows owners to become tax resident if they so which and take advantage of the Portuguese non habitual residency tax law.
A total of 76 luxury apartments adjacent to the golf course, will have magnificent views overlooking the sea and the spectacular Algarve coastline in Portugal. The interior designer was inspired by the many Portuguese Discoveries and the exquisite hand painted tiles. A perfect combination of a Luxurious & Classic Style of the Portuguese Culture and the Glamour of the Luxury Collection ® Brand, part of Starwood Hotels & Resorts.
Prices start from €780,000 for two bedroom two bathroom apartments. Contact us for further details, a full brochure and video link.
La Vida can offer a superb option for investment into St. Kitts to obtain a second passport and citizenship. Invest just $400,000 in order to gain St. Kitts and Nevis citizenship.
Koi Resort | Residences provides the optimal solution for wealthy individuals seeking dual citizenship or stunning vacation property. Koi is a title-deeded ownership residence that is currently in development on the Eastern Caribbean island of St. Kitts. Located on 14-acres of beachfront property on Halfmoon Bay, the resort will feature a variety of luxury villas and suites with sweeping ocean views and the very best in amenities.
Koi Resort | Residences has been approved by the government of St. Kitts and Nevis as a Citizenship by Investment project, and has also been qualified as a National Development Project.
During the 5-year holding period, buyers that purchase before February 15, 2015 are entitled to receive:
• KRL Worry-Free Credit of the Regular Annual Assessments during the 5-Year Holding Period, as a draw against future Rental Revenues.
• Early Buyer Credit of $29,057 to cover Real Estate Closing Costs (see below)
Real Estate Closing Costs
• Stamp Duty(Gov’t tax 5%) USD $ 20,000.00
• Government Assurance Fund USD $ 800.00
• Registration & Non-National Fee USD $ 57.00
• Attorney Closing Fees 1% USD $ 4,000.00
• Escrow Fees 1% USD $ 4,000.00
• Courier Fees ($100 each x 2 max = $200) USD $ 200.00
• Total Real Estate Closing Costs $ 29,057.00
Each title-deeded interest owner is entitled to:
• 7 usage days during the high season (November 1 to May 14), AND
• 28 usage days during the low season (May 15 to October 31)
• Access to: housekeeping, concierge, gym, spa, pool, tennis courts, and other amenities
• Projected Rental Revenues of 2-5%
5-Star Management Company handles:
• hiring and maintaining operational and management staff
• maintenance work for interior of residences, common areas and landscaping
• utilities, security, and other services
• fully furnished residences, regularly maintained
Complimentary One-year Membership to Elite St. Kitts- which provides the following services:
• Obtaining Residency Requirements
• Obtaining Driver’s License and SKN Biometric Passport Renewal
• Company Formation
• Banking Relations
• Foreign Visa Travel Updates