THE Central Bank of Cyprus has stepped in once again to reduce loan financing for those buying property in Cyprus.
In October last year the Bank reduced financing from 70% to 60%; but in spite of this move, housing loans continue to surge, reaching a record €8.26 billion in January this year.
The new measures will affect the sale of new and resale property, but it’s too early to assess their long-term impact.
Last years measures by the Central Bank reduced loan financing for property purchases from 70% to 60% for non-residents. The new measures restrict the amount that can be borrowed even further by excluding VAT and Property Transfer Fees from the mortgage loan calculation.
For example, for a property priced at €350,000 exclusive of VAT, the maximum loan a non-resident can expect to borrow from a Cyprus bank is €210,000. In addition to the difference, €140,000, a buyer will need to find the VAT, €52,500, and the Property Transfer Fees, approximately €21,165, from elsewhere.
So a non-resident buying a property in Cyprus priced at €350,000 will have to find more than €213,600 from other sources; that’s more than 60% of the acquisition cost.
Non-residents planning to make their permanent home in Cyprus are now required to provide evidence that they will live in the property for at least 183 days/year. For those who are not already permanent residents of Cyprus, this condition will be difficult, if not impossible, to meet.
But for first-time buyers who are resident in Cyprus and able to prove that they’ll live in the property for at least 183 days/year, the situation is better; they will be able to borrow 80% of the purchase price (excluding VAT and Property Transfer Fees). For a property priced at €350,000, a resident property buyer will have to find approximately €143,700 from other sources; around 41% of the acquisition cost.
(Note. The Property Transfer Fees above are calculated on the basis of an individual buying a property in Cyprus. If the purchase is made in joint names, the Property Transfer Fees will be lower).