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Cost of owning a home in Cyprus could rise

The cost of owning a home in Cyprus could increase as a consequence of the package of measures announced yesterday by Interior Minister Charilaos Stavrakis and this may have the effect of further depressing the Island’s already beleaguered overseas property market.

THE package of measures presented yesterday to MPs and social partners by Finance Minister Charilaos Stavrakis will introduce higher tax on property other than a home by adjusting real estate valuations which have remained unchanged over the past 30 years.

According to Mr Stavrakis, a reappraisal of property taxes based on current rather than 1980 market values will bring in additional revenue of between €80 and €100 million next year.

Question: But if this higher tax excludes homes, how will it affect home buyers?

Those buying resale (second hand) homes which have Title Deeds should be unaffected by the change in real estate valuations.

However, those who are buying property for which a Title Deed has not been issued may not be so lucky. Their cost of home ownership may increase as a result of the unacceptable delays in issuing Title Deeds, which in some cases exceed 20 years.

During this delay property developers are liable for the Immovable Property Tax on all of the land, buildings and other structures fixed to that land that is registered in their name. Many of them pass on this tax to their buyers (and many ‘scams’ involving overcharging and other fraudulent activities have been reported that you can read about elsewhere in this magazine).

At the present time, Immovable Property Tax is based on the market value as at 1 January 1980. Mr Stavrakis’ intention to reappraise property taxes based on their current rather than their 1980 market values could have a significant impact on the amount of Immovable Property Tax levied by the Inland Revenue due to the escalation in real estate values over the last 30 years.

For example, the Land Registry assessed the 1980 value of my plot of land at €11/m2. There are currently two plots of land similar to mine for sale in the area priced at €509/m2 and €457/m2 respectively.

A simple calculation shows that the market value of land in my area has escalated by approximately 4,400% over the past 30 years – and no doubt similar increases have taken place in many areas of the island.

If the Finance Minister imposes Immovable Property Tax based on current market values rather than 1980 values, property developers are going to receive substantially larger tax bills than they have in the past.

I have no doubt that many of these developers will pass these larger tax bills on to home buyers who have yet to receive their Title Deeds. This will increase the overall costs of owing a home in Cyprus and could further depress the Island’s already beleaguered overseas property market.

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