High ROI Cyprus real estate: properties and locations

In the modern world, torn apart by political and military conflicts and economic instability, investors increasingly feel the need to secure their assets. In the face of uncertainty and fluctuations in financial markets, it is clear that the search for stable and secure investments is a matter of paramount importance. In this context, purchasing real estate in Cyprus is one of the most reliable ways to preserve capital.

Thanks to its geographical location and stable economy, Cyprus represents an attractive solution for investors seeking to ensure the long-term stability of their financial portfolios.

Let’s look at the key trends in the Cyprus real estate market 2023, evaluate the economic situation, and delve into the most profitable types of real estate in Cyprus that can provide a stable and sufficiently high return on investment (ROI).

Furthermore, our team of experts, utilizing our proprietary analytics system, has prepared a new report on the Cyprus real estate market for you. This will enable you to navigate freely and make informed investment decisions.

 

Main trends in the real estate market in Cyprus in 2023

The year 2023 reveals an intriguing landscape in the Cyprus real estate market. There is a consistent upward trend in prices, with a shift in focus towards eco-friendly and family-oriented properties in the premium segment. Additionally, the island is experiencing a growing trend of business and IT communities relocating. The country is also attracting digital nomads — freelancers from the IT sector who come to the island and choose to make it their home.

Among other things, several key trends have emerged as the leitmotif of the year 2023.

Price Stability

In 2022, Cyprus demonstrated consistent property price growth, which continues into 2023. The island attracts residents and foreign investors, creating a demand for housing. The increase in prices is now associated not only with the rise in the cost of construction materials but also with limited supply and increased demand from foreign citizens, making real estate in Cyprus a profitable investment.

Environmentally Friendly Properties

The growing interest in energy-efficient and environmentally friendly real estate reflects a global shift in mindset. Investors and buyers increasingly focus on low-emission properties constructed using eco-friendly technologies. Solar panels, water treatment systems, and other green solutions are becoming mandatory for new construction projects.

Relocating to Cyprus for Permanent Residency

The COVID-19 pandemic has intensified the remote work trend, and many people are now seeking a place to live and work amidst nature and cultural richness. With its excellent climate, high quality of life, and safe environment, Cyprus has become a magnet for digital nomads (freelance nomads) and those who want to change their working and living conditions. Additionally, the Cyprus Permanent Residency program for property investments is gaining popularity. Through the accelerated program, one can obtain permanent residency status in just two months with an investment of 300,000 euros plus VAT.

Real Estate Purchase in Cyprus for Investments

The year 2023 brought instability to many markets and jurisdictions. Citizens of many countries were forced to change their residence and transfer their assets to a more reliable and stable field. Against this backdrop, Cyprus has become the place that remains unaffected by the impact of the previous pandemic and current military and political conflicts. Cyprus’s GDP continues to grow (plus 3,4% in just the first half of 2023), the real estate market contributes 15% to the country’s budget, property prices have risen by 15% in the last 5 years, and real estate sales have increased by 8% compared to the previous year, 2022.

Moreover, the key trends in the Cyprus real estate market in 2023 include the following:

• Paphos will remain a focal point for investors, especially in areas close to the sea.
• The proportion of foreign buyers of residential real estate in Cyprus will continue to grow, already constituting half of all property transactions.
• In areas remote from business infrastructure, a decrease in rental price growth or stabilization is anticipated.
• Property prices in Cyprus are rising in tandem with the recovery of the tourism sector after the pandemic.
• Since 2022, prices have continued to rise, with the average cost of properties increasing by 10% from January to May 2023 compared to the same period the previous year.
• The volume of construction areas in Cyprus decreased by 15% in 2022 compared to the previous year.
• Half of the real estate transactions in Cyprus are carried out by foreigners—citizens of third countries.

The most popular cities for purchasing real estate in Cyprus are Limassol, Paphos, and Nicosia. These cities account for three-quarters of all sales. Foreign buyers predominantly acquire properties in the three southern coastal regions — Limassol, Paphos, and Larnaca. In Nicosia, purchases are primarily made by the local population. It is also noteworthy that Paphos and Limassol stand out as the most favored cities for real estate acquisition among international investors.

Additionally, some reasons contributing to the rise in property prices in Cyprus include:

• Significant increase in rental prices from 2019 to 2023.
• Rise in tourist influx, surpassing pre-COVID levels.
• Interest from foreign buyers constitutes nearly half of all property transactions.
• The COVID-19 pandemic has intensified interest in island real estate, as people prefer living and vacationing in their homes rather than hotels.
• Construction volume decreased by 15% in 2022 compared to the previous year.

 

Popular regions and their attractiveness to investors

Several popular regions in Cyprus attract investors.

Limassol

Limassol, the business hub and the most expensive city in Cyprus, is witnessing growth in commercial and high-end residential real estate. Its allure lies in picturesque beaches, developed infrastructure, and expansive business zones.

Limassol’s residential real estate market demonstrates steady growth, with property prices rising in 2023. Noteworthy investment areas in Limassol include the Historic Center, Neapolis, and Agios Tychonas. Investors can choose from various property types for investment, including residential houses for reconstruction, luxury villas, penthouses near the marina, boutique hotels, and new developments.

Paphos

Paphos appeals to investors seeking luxury real estate by the sea and near golf courses, embodying a Mediterranean lifestyle. The city boasts high-quality real estate options and rental opportunities.

Key investment areas in Paphos include Kato Paphos, the tourist promenade and harbor, and Universal, an elite development with pools and beautiful architecture.

Larnaca

Larnaca is the island’s air gateway, hosting the main airport and transit port. Real estate investments near the airport can be lucrative.

Promising investment areas in Larnaca include Kato Larnaca, near the harbor and promenade, and Harbor and Mackenzie, close to tourist hotspots.

Nicosia

Nicosia, the capital, sees the most popularity among the local population for real estate, with apartments, including budget options, being in high demand due to the presence of numerous universities.

Additionally, tourist areas like Ayia Napa and Protaras are actively develop, offering creative spaces and opportunities. Villas, particularly sought after during the high season, interest tourists.

Each region has its advantages, but there is a trend towards specific properties that can yield a stable ROI. For more detailed information on square meter prices in each region, refer to our report, «High-Yield Property Types in Cyprus 2023»:

Download the report

 

Types of real estate with high ROI

The highest returns in residential real estate are not merely derived from villas and apartments but from properties located in strategic areas.

On average, projects yield around 8% annually.

In summary, short-term rentals in tourist areas near the sea can achieve the highest ROI. The profitability of such properties during the hot season, spanning from May to October, can reach an impressive 15-35% annually. Typically, this involves luxurious seafront villas or, to a slightly lesser extent, apartments within walking distance of the beach with a sea view.

Apartments and Flats

Apartments with a high ROI are complexes with well-developed internal infrastructure, crucially featuring proximity to the sea and beach. Optimal locations for apartment investments in Cyprus are Limassol, Larnaca, and Paphos.

Villas and Houses

Villas and houses are in high demand for short-term rentals among affluent tourists desiring luxury and comfort in Paphos and Limassol. In Ayia Napa, villas are also popular, especially among the «jet set» who visit the resort in groups. Ayia Napa is informally recognized as the Cypriot «Ibiza» and is particularly popular among young vacationers. In a favorable location during the high season, ROI can reach an incredible 25-30%.

Commercial Real Estate

Highly sought-after types of commercial real estate include business centers and office spaces. Many foreign companies relocating to the island require office space for their employees. ROI typically ranges from 8 to 10%.

Tourist Real Estate

Hotels, apart-hotels, and hostels generate the highest profits in this sector. ROI ranges from 6-12%, depending on the property type, location, and marketing campaign. It’s worth noting that in Cyprus, hotel occupancy reaches around 90% from May to October.

For more detailed information on the types of sought-after real estate and conditions for achieving high ROI, refer to our report, «High-Yield Property Types in Cyprus 2023»:

Download the report

 

Factors affecting ROI

The real estate market in Cyprus is a unique investment opportunity with the potential for high returns. However, there are several important factors to consider to maximize ROI.

Location

Key driver for successful investments. Properties near the sea or major cities like Paphos, Limassol, and Larnaca traditionally experience high demand, fostering increased value and rental income.

Infrastructure and Development

Infrastructure development projects, such as schools, medical facilities, and transport networks, can impact property value and attract tenants.

Services and Amenities Within Complex

Additional services and amenities like pools, gyms, parking, etc., can attract more tenants and tourists, potentially increasing ROI. Noteworthy projections are associated with new «city within a city» projects.

Property Management

Establishing a property management company.

High Demand for Housing

Demand shapes both the domestic and external resident markets from foreign citizens. In 2023, the share of foreign property buyers accounted for approximately 60% of total real estate transactions. Among foreigners, the largest group of buyers were Eastern European expatriates, comprising 80%.

Rising Real Estate Prices

Housing prices vary across Cyprus but are consistently increasing. Prices for Cypriot homes and apartments grew by 3,5% in 2022 and continued to rise in 2023, with a 6% increase in the first quarter. The annual growth for 2023 is expected to be around 7,7%. Notably, while the rising cost of construction materials primarily drove the increase in property prices in 2022, this year’s growth is fueled by increased demand.

Tourism

The recovery of tourism contributes to the real estate market’s stability. In 2023, tourist arrivals fully recovered to pre-COVID levels from 2017, leading to full occupancy in the hotel sector and an increased demand for seafront villas and apartment rentals.

Collectively, these factors provide an opportunity to achieve a favorable return on investments and effectively diversify portfolios with a stable asset. This is particularly crucial during periods of global economic instability. Additionally, considerations on minimizing risks during crises and optimal asset investments for 2023 are discussed in our article, which you can read here.

 

Real estate management and maintenance: how it affects profitability

Real estate management and maintenance encompass a range of activities aimed at the efficient administration and upkeep of various types of properties, whether they be residential homes, commercial establishments, apartments, or villas. This process involves various aspects designed to ensure the real estate’s safety, comfort, and value preservation.

In most cases, developers either establish their own management services or enlist the services of existing property management companies in Cyprus to achieve these objectives.

A management company performs several important functions related to the management and maintenance of real estate:

• Maintenance, which includes ensuring regular maintenance of buildings and infrastructure: inspection and maintenance of heating, ventilation, air conditioning, electrical systems, plumbing, and other technical units.
• Lease management, finding tenants, drafting contracts, accepting rent payments, and resolving lease-related issues.
• Taking care of green areas, gardens, swimming pools, and other public areas. Regular cleaning and maintenance keep the property looking good and comfortable for tenants or guests.
• Keeping track of finances, paying bills, taxes, and insurance premiums. Management companies may also provide reports to property owners.
• If there are staff (e.g., security guards, cleaners) managing their activities and responsibilities.
• Securing the facilities with CCTV alarm systems and coordinating security services when necessary.
• Maintaining open and transparent communication with property owners.
• Resolving conflicts and ensuring customer satisfaction, resolving property maintenance issues, and maintaining high customer satisfaction.

These functions aim to ensure the efficient and smooth running of the property, maintaining its value and attractiveness to tenants or potential buyers.

In addition, the management and maintenance of real estate in Cyprus plays a key role in its profitability. This applies to both commercial and residential properties. And this is exactly what a property management company does. Here are a few aspects to consider:

• Regular maintenance helps preserve the quality of structures and prevents costly repairs in the future, while effective HVAC, electrical, and plumbing maintenance keeps properties comfortable.
• Ensuring a property’s security, including alarm systems and video surveillance, can increase its attractiveness to tenants and buyers.
• Well-maintained areas around the property can improve its appearance and appeal. Regular garden and pool maintenance is important to keep them in good condition.
• In the case of rental properties, good rental management, including attracting tenants, monitoring the condition of the premises, and collecting rent payments, can improve the return on the investment.
• Investment in energy-efficient technologies (e.g., solar panels) can reduce energy costs and increase the property’s attractiveness to tenants.
• Proximity to well-developed infrastructure such as transportation, shopping, and restaurants can increase the value and demand for the property.
• Choosing a professional management company with a good reputation can ensure efficient management and improve profitability.

With the right approach, all of these measures can positively impact the profitability and value of your property.

 

Real estate selection tips: planning for long-term and short-term investments

The higher the profitability, the more risky the investment tends to be. However, in Cyprus, there is an opportunity to choose real estate for investment in the golden mean, providing stable price growth and yielding approximately 8% ROI.

Here are several pieces of advice that can help you make informed decisions:

• Thoroughly study the real estate market in Cyprus. Examine various regions, property types, and current prices.
• Choose properties in good locations, close to beaches, restaurants, and other amenities.
• Determine the type of property that best suits your investment goals. This could be residential property for long-term leasing or quick resale after construction completion, commercial properties, short-term rental properties, etc.
• Define your income goal: income from long-term leasing, short-term leasing for tourists, or future value growth.
• Research the growth prospects of property values in the chosen areas. Consider infrastructure development plans and other factors that may impact property prices. Currently, Limassol is the most sought-after city. Paphos and Larnaca are actively developing, but soon, promising prospects will be shown by underestimated emerging areas such as Troodos, Pomo, Polis, Protaras, and Ayia Napa.
• Consider the costs of property maintenance, taxes, and utility payments. This is an important aspect when calculating overall profitability.
• Thoroughly assess the condition of the property. If rental is planned, the property must be in good condition to attract quality tenants.
• Consider the possibility of using professional property management companies to maintain and rent your property.
• Consciously assess risks. Consider potential economic policy changes and other factors impacting the real estate market.

It is important to note that the choice between long-term and short-term strategies depends on the investment goals, risk tolerance, financial situation, and other individual factors of the investor. Many investors also use a combination of both strategies to achieve diverse objectives.

Long-term Investments

The primary goal of long-term strategies is to create and increase capital over an extended period. They are oriented towards a lengthy timeframe, ranging from several years to decades.

Long-term investors may employ strategies such as «buy and hold, » portfolio diversification, and rebalancing to achieve their long-term investment objectives.

This type of investment tolerates short-term market fluctuations, focusing on long-term profitability and not prioritizing short-term speculation.

Long-Term Investment Strategies

Developing Regions
Regions with high growth potential can provide opportunities for significant capital investment and property value appreciation over time. Such regions in Cyprus include Ayia Napa, Protaras, Polis, Pomos, and Paralimni.

Long-Term Rental
Leasing property for the long term can ensure a stable income over an extended period. This is particularly suitable for residential and commercial real estate.

Infrastructure Projects
Investing in real estate located near infrastructure projects such as airports, ports, and roads can contribute to the growth of property values. In Cyprus, airports are situated in the cities of Larnaca and Paphos.

Social Infrastructure Projects
Investments in social infrastructure facilities, such as medical clinics, schools, and sports complexes, can benefit the community and create long-term demand.

Short-term investments

The primary goal of short-term strategies is to achieve quick profits within a brief period. These strategies are focused on short timeframes, often ranging from a few weeks to several months. This typically involves purchasing off-plan property and reselling it after completion. Alternatively, it may include acquiring distressed properties, renovating them, and selling them after renovation.

Short-Term Real Estate Investment Strategies

Flipping
The practice of purchasing real estate to resell it for a profit quickly. Requires a good understanding of the market and resources for renovation.

Arbitrage
For example, investing in real estate for short-term rentals through platforms like Airbnb. This can yield high short-term profits.

Renovation
Buying property with the aim of renovation and improvement. After renovation, the property can be resold or rented out at a higher price. This is the most high-margin type of real estate.

Real Estate Trading
Buying and selling real estate with the expectation of price appreciation over time. Allows for short-term profit from price differences.

 

Advantages of investing in real estate in Cyprus

The real estate market in Cyprus has demonstrated remarkable strength and resilience, making it an attractive destination for property investments. In addition to the demand for real estate and its profitability, there are several advantages:

Tax Incentives

One of the advantages is the absence of capital gains tax on the sale of property by individuals. This facilitates the free circulation of real estate and stimulates investments. The VAT rate on new property can be reduced to 5%, especially for the first 200 square meters of residential space, supporting the development of the construction industry.

Fast Permanent Residency (PR) Acquisition

Investors who acquire property in Cyprus totaling over 300,000 € plus VAT can obtain PR for themselves, their spouses, and dependent minor or student children in just 2 months. Although this process can take longer, the accelerated procedure allows obtaining PR much faster, as the standard process typically takes at least 1 year.

High Yield

The property yield in Cyprus is among Europe’s highest and most stable, averaging 5-8% annually. Cyprus property prices grow by 1-4% yearly, and the net rental income often exceeds the mortgage interest rate.

Diverse Property Selection

Cyprus offers a variety of property types, from coastal apartments to mountain villas, office buildings, innovative hubs, renovation projects, creative developments, and more. Investors can choose properties according to their individual preferences and goals.

English Law and Property Protection

Cyprus operates under English law, emphasizing protecting private property and providing transparency and predictability to real estate transactions. The Cypriot legal system ensures reliable property protection and has a robust legal foundation closely aligned with European Union legislation.

Numbers and percentages may vary depending on specific conditions and market situations. On average, however, it can be emphasized that common ROI indicators range from 8-10%. Short-term rentals during the peak season can yield returns of up to 35%, selling a building after construction completion can generate profits of around 30%, and renovated real estate may bring in returns of up to an impressive 70%. Of course, these figures may change due to shifts in policies and the economy, but looking at Cyprus' retrospective view suggests stability and the preservation of these trends for a long time, at the very least.

Moreover, suppose you are considering real estate investments in Cyprus. In that case, you may find it interesting and beneficial to learn more about innovative hubs, what they are, and why they are the best investment programs. We have extensively examined this investment model and present the financial model figures, allowing you to make an informed decision.

Also, if you plan to open a business in Cyprus, read our article «Business Relocation to Cyprus in 2023: Tax and Economic Benefits for Companies.» Here, you will find all the details on starting a company on the island and how it can help you optimize your business.

SPM — your most valuable contact in Cyprus.

To ensure you don’t lose helpful information, download our checklist in PDF:

Download the check list in PDF