«Don’t let anyone fool you — there are no cheap apartments in Cyprus anymore» The expert on all the nuances of buying property in Northern Cyprus
The real estate market in Northern Cyprus is literally growing by leaps and bounds, and that is why it is so interesting for investors. But how to buy an apartment in Northern Cyprus but not go bankrupt? What taxes must be paid when buying? And in general, is it too late to buy an apartment in Cyprus now? The expert answered these and other questions in detail and put all the details about the process of buying a home in Northern Cyprus together.
Alexandra Feshchenko — expert on the real estate market of Northern Cyprus, director and founder of Casa di sole investment (Northern Cyprus), director of the company «New House for You» in Minsk (Belarus). Worked in the real estate market of Belarus since 2004, and in the real estate market of Cyprus since 2016.
How to buy property in Northern Cyprus. Key steps
The process of buying property in North Cyprus is highly dependent on whether an investor plans to buy online or offline.
If we are talking about online buying, everything seems to be simpler. The buyer finds some company, to which he entrusts the selection and registration of the apartment in Northern Cyprus. Then this company sends some properties, the buyer chooses something and then the transaction begins. It consists of the following stages:
- Approval of the transaction and preparation of the deposit agreement. The deposit agreement specifies all the terms of the transaction and should then be signed online by both parties.
- Paying a deposit. It can be sent online, but necessarily to the developer’s current account (never send the money to any third party who will promise to give it to the construction company). Here it is also important to understand that usually not more than a month passes from the moment you make a deposit to the final payment and registration of the transaction. The developers are not willing to wait and give more than two weeks.
- The final payment and the signing of the purchase contract. When buying online in most cases the buyer does not come to the island, even to sign the contract (usually a power of attorney is drawn up) for the final stage of the transaction. All calculations take place also online.
- Passing of the apartment (if it is a new building). But here, too, the third party can accept the apartment by power of attorney from the buyer.
Online buying is the easiest way to buy real estate if you can’t leave the country or need to make quick decisions that can’t wait to be in person. However, here everything is built on the trust of the company that the buyer will choose, and this is probably the most difficult component.
The offline purchase of a property in Northern Cyprus consists of the following steps:
- Remote Viewing. Most often, the buyer learns all the information about the developers, new projects, or the secondary market. Already at this stage, the buyer is usually a realtor who provides all this information.
- Exploration tour. The buyer comes to the island and looks at all the projects that are interesting to him. Once the choice is made, the procedure of the transaction itself starts: negotiation, and agreement of all terms.
- Deposit payment. After the buyer pays the deposit, the selected property is taken off the market.
- Signing the contract of sale. I always recommend involving a lawyer in the transaction, because you will need to register the contract in the buyer’s name, deal with the transfer of title (more on that later), and generally check the transaction for its legality. Developers now almost never prepare the contract themselves, this is done by the buyer’s lawyer. Some companies sign a sales contract after making a deposit, but most developers sign a contract after the first payment (from 30% of the value of the property and above).
- Registration at the Land Cadastre and payment of stamp duty. The contract must be registered in the Land Cadastre within 21 days from the date of signing the contract of sale. The Land Cadastre is the authority that records and registers all real estate transactions. Such registration includes the payment of tax — a stamp duty. And here is an important point — be careful: sometimes it happens that the stamp duty is paid, but the agreement is not registered in the cadastre. It turns out that in fact there are no documents for the apartment, and most often this fact is revealed in the situation of resale of real estate. And this is where the difficulties begin.
- Apartment acceptance and keys handover. At the apartment acceptance, if you see any flaws in the property, the developer is obliged to fix them. The keys will be transferred only when the terms of the contract are fulfilled, i.e. by this time the amount specified in the contract has been paid. Here you also need to be careful — the developer may not sign anything at all when handing over the keys, just handed over the keys and that’s it.
Obtaining a Title (land ownership)
At this stage, the apartment owner can stop and even resell the purchased property. Another option is to complete the registration of the property and transfer the Title Deed ( land ownership) in his name. The fact is that in Northern Cyprus, people have the Western vision of real estate ownership, and during the transaction, it is not so much about the walls of the house or apartment, but about the land on which the house is built. The title means that the property is really yours, and you have the right to conduct any transactions with it, regardless of the developer or management company.
In this case, by the time the house is put into operation, the documents are not always fully prepared as well as the land allocation (which allows the owner to re-register some of the land to itself). Most developers need about two years to divide the land between all apartment owners and fully formalize the land allocation.
The Titling procedure itself is simple, but in order for a foreigner to be eligible to take this step, he must obtain permission from the Council of Ministers to transfer a plot of land. Today, a foreigner in Northern Cyprus can own only one plot of land, not exceeding 13 acres. However, of course, there are no such large plots of land for real estate in the medium price range — as a rule, we are talking about no more than 5 acres.
You can apply for Council of Ministers’ approval for a Title deed at any stage. I advise you to do it immediately after signing the contract of sale because the consideration of the application will take at least six months. An important point here: you can not get permission to transfer some abstract plot, but only a particular plot of land in a particular project. That’s why you can apply only after the contract is signed. Moreover, if you suddenly change your mind to buy the property or have already sold it, you cannot reissue the permit granted.
I would like to emphasize: the Title can be transferred to the name of both the owner of the house and the owner of the apartment. In the second case, it will be an individually executed Title to a share of the common land. And this is the final (but not obligatory) procedure for buying real estate in Northern Cyprus.
Taxes when buying property in Northern Cyprus
We have mentioned above that at the time of registration of the property at the Land Registry Office stamp duty must be paid (not later than 21 days after signing the contract). It is fixed and amounts to 0.5% of the property value.
Next, no less critical tax — the transformer fee. This is a tax to connect the utilities, and it differs among all developers. Now you will rarely find a project where the transformer fee is less than 2,000 pounds, but most often it will be about 3,000 pounds (the amount is specified in the contract).
In addition, you will have to pay VAT of 5% of the value of the facility. Some companies have started to split this payment into several parts to include it in the installment payments, but most often VAT is paid once when receiving the keys.
A transfer fee is paid only if the Title is transferred to you. This tax is 6% of the value of the property, but there is a reduced rate, which is 3% of the value. A foreigner can take advantage of the reduced rate once to transfer the Title. It is interesting that today, basically only one Title can be transferred. But from time to time the government goes the extra mile and allows the Title to be transferred for 1% of the value of the property. This usually happens in time for elections or other significant events. If you work with a knowledgeable lawyer, you can calculate this approximately and take advantage of the discount.
When investments go «down». All about the scam in the real estate market of Northern Cyprus
The real estate market in Northern Cyprus is actively growing, there are more and more new projects. All the advertising brochures of new projects promise unprecedented profits to their potential investors, and some buyers are led by such promises, choosing the property without the help of a realtor. However, even in a growing real estate market, you can lose money if you choose the wrong property for investment.
I’m getting more and more requests to buy a 2+1 apartment for $80,000. This is unrealistic. Today an appropriate price for such an apartment is $140,000 or more. That said, $140,000 for a three-bedroom is very profitable now because there are practically no such offers. If you hear about the offer to buy a studio apartment in Northern Cyprus for $60,000, do not fall for the scam — there have been no such cheap apartments here for a long time. Because this is either a scam to offer you a better deal or an illiquid asset in some strange apartment complex. Such a residential complex will be very old (12+ years of construction), and then it was not designed for foreigners and renting. The buyer himself would not be able to live in such a house, and would not be able to rent out the apartment
Another important nuance, that only a few people talk about. In the market of Northern Cyprus, there is literally an oversupply of projects with studio apartments. As a result, finding a tenant for such real estate is becoming increasingly difficult, and they are sold harder. That is why I do not consider buying a studio apartment a good investment.
Buying a villa that is not part of a complex is also a controversial investment. Because if the buyer is not going to live in this villa by himself, it is necessary to choose the management company that will look after the house very carefully. Because if you bought a house where the management company is a developer with a bad reputation, it is a bad investment. These are the very properties that appear on the market at very «sweet» prices because experienced investors do not need them.
Before any real estate purchase, you need to think and work with a specialist. Northern Cyprus is not the same island that it was 3 years ago; over the last 3-5 years, there has been a huge improvement in infrastructure and level of services. The real estate market has become more complex, but it is still possible to make money on real estate here, it’s just time to buy wisely.