Factors to consider when deciding whether to buy or rent property in Cyprus

In the current financial crisis, many of those who do not own their own home in Cyprus are wondering whether to buy or rent a house or apartment. Those less familiar with the island and those with no previous experience of property in Cyprus are concerned to learn of the huge increases in recent years in property prices in Cyprus and whether or not it is a wise business decision to invest. in a market that is in a difficult period.

Although many variables need to be considered before making this decision, it currently seems initially that renting in Cyprus is the smartest financial decision.

The time has changed

Six months ago, it was relatively easy to get a low-interest loan from local banks in Cyprus, which made it easy to buy, and also local property prices continued to rise, which was also favorable for buyers.

The actual situation?

• Local interest rates have risen, and now Cypriot retail banks’ monthly mortgage lines are much higher than they were 6 months or a year ago and the cost of borrowing has gone up.
• Sales across the island are down so there are plenty of apartments and houses available on the Cyprus market in all major residential areas including Limassol, Paphos and Nicosia.
• Local banks, such as Bank Marfin Laiki and Bank of Cyprus, no longer lend easily because they feel that there are already too many loans in real estate and are unwilling to continue lending at high rates.

Factors to consider when deciding: income and costs

When looking for properties for sale in Cyprus, whether you are buying a villa in Limassol as an investment or to live in, the factors you need to consider are:

• Annual rent to be paid compared to the value of the property
• Rate at which property prices in Limassol increase year over year

Assuming that the cost to buy is basically the cost of the loan (7-9% today), then if the annual rental fees due will be greater than the cost of the loan, then it is better to buy, otherwise rent is the Better option. . Properties in Nicosia in particular are less affected by trends in tourism due to the location of the city and business center and lack of coastline, therefore more likely to retain value.

Perhaps renting in Cyprus is more advantageous today, but this needs to be investigated.

Due to the current high cost of borrowing and the uncertainty of future real estate market prices, many may feel that renting a home in Cyprus is a safer option at this time than buying. However, if your annual rent paid is close to or greater than 10% of the value of the property, you should probably reconsider taking out a loan to purchase the property if possible. The current high cost of loans may be temporary.

Of course, interest rates are a major factor and the high cost of borrowing today is a deterrent to buyers, but in Cyprus it is debatable whether these levels can be sustained in the long term. Since home loans typically last 20-30 years, if they only turn out to be a few high-interest months, this probably has little bearing on the overall repayment over this extended period.

Annual increase in property price

Due to the current market uncertainty in the crisis, the rate of increase in property prices in Cyprus cannot be estimated as it could go in either direction. However, over time, as Cyprus real estate agents, we expect property values ​​to start rising again at an average annual rate related to inflation, GNP and other factors such as the cost of construction.

Buying a house is a decision of the heart and not just financial a

This approach outlined above is of course just one way of looking at it, as the decision whether you want to stay in a house temporarily or for a much longer period is also a personal choice. A person who lives in their own house has a very different feeling than one who lives in a rented house. Every decision has its good and bad points. Ownership at the end of the day allows you to make your house your home, decorate and change it as you wish, without regard to an owner, but at the same time gives you the responsibility for all the care and maintenance of the house. Buying or renting is not a purely financial decision after all, but a combination of personal feelings and financial considerations.