Property Valuation – Market Appraisal in Cyprus
Property Valuation – Property Market Appraisal in Cyprus
Most property investors, before proceeding to the purchase of a property, they must make clear the return that their investment will generates.
In simple mathematics, the property valuation/market appraisal must prove that the purchase price is right to secure an efficient ROI (Return in investment) percentage. The usual percentage that is considered efficient for a property investment in Cyprus is between 4% - 6% annually. For example, a villa bought for 500,000 Euros and rented for 2,000 Euros monthly – 24,000 Euros annually, generates a GROSS return of 4.8%.
However, will be important to clarify the NET return after deducting the actual costs such as: pool & garden maintenance, utility bills, council tax, landlord tax, sewerage tax, defense tax etc. Sometimes, the property owner / landlord prefers to register the utility bills and taxes on tenant’s name, but this is part of the leasing agreement.
Another good point that must be clarified is how the property purchase will be funded. If the transaction – property purchase will be supported by a mortgage, then would be crucial to agree with the bank a fixed interest rate and not variable interest rate. By securing a fixed interest rate the property investor will be able to calculate the 10 – 15 years property investment circle.
In our experience and be involved for many years in the real estate industry of Cyprus as property valuers, we advise our clients that the guidance from a professional property valuer it’s a must. The property valuation / market appraisal will eliminate the risk of getting involve to a bad, non-profitable and low return property investment in Cyprus.
In addition, the property valuation will examine the legal aspects of the property and will check the legal background of the property. Many times, we received property valuation inquiries from property investors of worried why the property they are buying in Cyprus is so cheap. Unfortunately, nobody made them clear that only a share of the property was for sale (Not the whole share).
Also, for property investors that buying land in Cyprus, they need to know in advance the building potential and the building regulations affecting the property development. It’s true that the building density (%) is one of the most important factors that affects property marketability and value, however, may will be restrictions that do not allow the construction of buildings. Also, maybe the area is controlled and protected from the department of antiquities of Cyprus.
As well, in the past we dealed with cases that the building regulations of land was sufficient, however, the land soil quality was not ideal to build. For sure there are solutions, however, the property investor needs to know from before the additional cost will be needed for the building stability – site foundation.
Finally, would be good to clarify the land for sale if is affected by VAT. In Cyprus since 2020, most of the residential land is affected by VAT. However, there are some exceptions related to the seller of the land, but, will be necessary to clarify through the tax office if VAT will be applicable.
