Investing In Property Markets Of Turkey And Cyprus - Tips And Tricks

By: Derek Watkins

The property markets of Cyprus and Turkey are emerging as attractive destinations for savvy investors. While Turkey is expected to join European Union by 2015, Cyprus is already a member of EU and recently transitioned to Euro. Turkey has a GDP growth of 8%, one of the highest growth rates in tourism, cheap labor and low cost of housing in comparison to other European countries. The property market in Cyprus is becoming extremely popular among large corporations and individuals from European countries. In addition to its exotic location and pleasant weather, investment in property has numerous incentives in both Turkey and Cyprus. Investors in the property markets benefit from strong rental yields as well as stunning long term capital appreciation.

The Turkey Property market is witnessing a growing demand for buy-to-let property. While letting out property in peak season for short term fetches high income, you should consider the increased property management and maintenance cost. On the other hand long-term rental which has lower monthly rental has low overhead and maintenance cost. The choice depends on location of the property and the investment goals. In order to maximize rental yield from any property investment the location of the property becomes of prime importance.

Buying an "Off Plan Property" is an attractive option in Turkey but it is best to do this with experience or expert advice. Such properties generally offer a discount for the early bird and needs as low as 25% to 30% of the value to be deposited initially, and the remainder either paid at stages through the project or in some cases on completion of the development. As the project nears completion price appreciates and the investment grows. If a Turkish property is bought before 1.1.07 and sold within 4 years of the acquisition date, the difference between selling and acquisition price (adjusted for inflation) is liable for CGT (Capital Gain Tax) with exemption of TL 7600. However, firms paying corporate tax, that have owned a property for at least two years can claim exemption relating to real estate gains if they add the gains to their capital.

Cyprus has low cost of living. A retired couple can live active social life, with a car for CY£10,000 - 12,000 per year, provided they have no mortgage. After allowing annual initial tax exempt of CY£2,000, pensions from abroad are taxed at a flat rate 5%. Cyprus is considered as tax efficient location with local and international companies taxed at 10% corporation tax and employees of both types benefit from first CY£9,000 tax exempt. Depending on age and long term income, bank loans are available for 60-80% of the value of the property.

The necessary stamp duty, transfer fee, immovable property tax and insurance should be cleared and paid when purchasing a property in Cyprus. In addition to this relevant utilities and municipal levies need to be paid at regular intervals throughout the year. A sale of property is liable for Capital Gain Tax (CGT) in Cyprus. After allowing an exemption of CY£10,000 per person and adjusting the purchase price with inflation, CGT is charged at 20%. However if the seller can prove that it has been his primary residence for last five years exemption up to CY£50,000 in total is allowed.