Property Prices in Cyprus to Continue to Rise

Cyprus is a British favourite and development is proceeding apace. However, some believe hat the essential quality of he island could be compromised. Ben West reports

Agents and developers in the south of Cyprus - the Greek sector - have been trumpeting he fact that budget airline Monarch is about to launch low-cost flights from Britain to he island. The new flights, from Luton to Larnaca, begin on Monday and cost from just £69.99 one way, including taxes, with some introductory seats at £39.99.

'Cyprus offers a good long-term investment but lacks an established re-sale market'
In truth, this is not such a big deal: the cost of flights to Cyprus have been plunging for some time. Thomas Cook and Globespan both currently offer routes from the UK to Cyprus for about £60 each way, a fraction of those offered by long-established carriers such as British Airways and Cyprus Airways. And, says Alek Kleanthous, of Cyprus specialist agency Omega Worldwide: "Ryanair is also planning to move into Cyprus soon, and, along with the huge expansion of Paphos and Larnaca airports, will result in a great increase in visitor numbers."

Cyprus is undergoing rapid change: that, at least, is beyond dispute. What is less certain, however, is whether all he changes are for good or ill. New flights aside, there are many factors stacking up that promise to transform Cyprus in he next few years and investors are rubbing their hands together in glee. If it is not the multi-million pound marinas set o emerge at Paphos and Limassol, or the new golf courses, or motorway linking Paphos Airport with Polis, the fevered talk is of "Neapolis", a £550 million, mixed-use development to be situated near Paphos town centre. The 250-acre site will feature a university, park, hospital, business park, and exhibition and conference centres.

Optimism has been on the increase since Cyprus joined the European Union in 2004 and the border between Greek and Turkish Cyprus was relaxed. Entry into he eurozone in January 2008 will be the icing on the cake for the Greek Cypriots: replacing the Cyprus pound with he euro will bring added stability and confidence.

"The adoption of the euro is an exciting progression," says Dr Stelios Platis, compiler of the BuySell Real Estate Home Price Index, a gauge of the Cyprus housing market. "The positive effects upon the economy are likely to increase demand in an already buoyant market and lead o an increase in house prices." Cyprus's charms are already well-known to UK buyers, especially as it was once a British colony. It has a good infrastructure and a friendly, widely English-speaking population. There is no inheritance, gift or wealth tax, and personal taxation is low, starting from just 5 per cent.

"The climate offers almost year-round sunshine, the main owns and cities give a sophisticated choice of shops, restaurants, art galleries and heatres, while the villages offer an escape to the relaxed lifestyle of old," says Pantelis Leptos, marketing director of Cyprus-based Leptos Estates. "There is virtually no crime on he island and the cost of living is still very low.

"There are currently 60,000 British homeowners on the island providing a lively expat community. Property prices have shown a steady increase over the past 10 years, averaging about 8 per cent per annum. While emerging markets such as Bulgaria and Romania are cheaper, property prices on the island are still very competitive compared to Spain, Portugal and Italy."

Alek Kleanthous says: "Cyprus has strict building regulations aimed to prevent overdevelopment, as opposed to countries like Spain. A prime example is that no residential building can be higher than hree storeys. Many countries, such as Bulgaria, do not have such building controls."

Kyriakos Loizides, 39, has three properties in Cyprus and he is pleased with his investments: "Every town and city is built up but you can find sleepy villages quite easily. I bought two off-plan two-bedroom apartments in Larnaca last May for £63,750 each and the developer is planning similar ones for £90,000 this year."

Yet not everyone sees Cyprus as he sunny haven its fans would lead us to believe. Monotonous concrete developments mar major centres of tourism along the coast such as Paphos and Limassol. This has led to rush-hour traffic jams, crowded beaches and jumbles of crammed-in hotels. Any influx of newcomers resulting from the new low-cost air routes is likely to exacerbate those problems.

Nor do the new flights impress everyone - particularly, for obvious reasons, those involved in selling Spain. "Cyprus may be getting a new budget flight, but here are already low-cost flights to Spain from almost every corner of the UK and the flight times are also only 2.5 hours on average, as opposed to 4.5 hours to Cyprus," says Chris Mercer of Spanish specialist agency Mercers.

Kieran Byrne, managing director of Home España, says: "With the wide range of airports, frequency of flights and short journey times, it is no wonder hat people choose Spain as heir No 1 holiday destination. Cyprus offers a good long-term investment but there is not an established resale market, like here is in Spain. In the short erm, investors will struggle to sell new builds on and there may not be much call for rentals."

Many people believe that when he island was divided in 1974 he Turks got the more fertile and attractive region. The relaxation of border controls, enabling people to move freely between the Greek and Turkish sectors, has prompted many buyers on the Greek side to discover the lack of development and low property prices that the north offers.

The low prices are often a reflection of the question of ownership that hangs over many properties for sale in the north (recently highlighted by the Orams case where a Sussex couple were unsuccessfully taken to the High Court in London by a Greek Cypriot claiming his family owned the land). Many buyers believe that the big savings hat can be made justify the risk of a possible serious ownership dispute in the future.

Some purchasers of homes in the south are selling up to buy cheaper ones in the north, and if their numbers became significant, there is always the possibility that Greek Cypriot homeowners and developers could have no choice but to slash prices to compete.

While Cyprus is clearly set for ransformation in the coming years, no one yet truly knows how much of that will be for the better, and how much for the worse.