Cyprus Country Profile

Cyprus is the third largest island in the Mediterranean. It lies 65 km from Turkey’s southern coast, in the East Mediterranean Sea. The beaches of North Cyprus are among the cleanest and safest in the Mediterranean. The average water temperature is 24C between May and October. North Cyprus scenery is characterised by the olive and carob trees which dominate its landscape. Another prominent feature of the region is the Kyrenia Mountains, also known as ‘five finger mountains’, which run parallel to the coast for approximately 130km and rise to 1,023m.

Brief Political History

Ever since warriors returned to Cyprus from the Siege of Troy in ancient times, many powers have tried to conquer and claim the island of Cyprus, including the Romans, the Byzantines and the Venetians. In 1960 the British relinquished control over Cyprus to a power-sharing government of both Greek and Turkish Cypriots. However, the Greek Cypriot elements began to squeeze out the minority Turkish Cypriot representatives and their influence, until events reached boiling point. In 1974, the Turkish authorities intervened in the north of the island to protect the rights of the resident Turkish Cypriot residents in Cyprus. The resulting “Green Line” boundary between north and south has been in place ever since, dividing the island. The Turkish Republic of North Cyprus (TRNC) has been established in the north, but is not recognised by the UN Security Council, whilst the Republic of Cyprus in the south has recently become a member of the EU.

North Cyprus Title Deeds

During the events of 1974, Turkish Cypriots fled north leaving their homes and lands in the south, and Greek Cypriots did the opposite, moving north to south. It is the status of these abandoned lands on both sides of the border that is at the heart of the Cyprus property issue.

Since 2004 investment in property in North Cyprus has surged ahead with real estate buyers aware that many types of property for sale in TRNC have internationally recognised title deeds. The Turkish Republic of Northern Cyprus is the Turkish Cypriot controlled area which makes up the northern third of the Mediterranean island of Cyprus and which is divided from the rest of Cyprus by the UN controlled buffer zone or ‘green line.’

The Turkish Republic of North Cyprus was formed as an area of safety for the Turkish Cypriot inhabitants of the island following the Greek mainland attempt to seize control of the government of Cyprus back in 1974. Since 1974 the northern third of the island has suffered embargos and has been annexed politically from the rest of the world; but since 2004 all that has slowly begun to change and the world is awakening once more to the stunning beauty and wealth of opportunity available in North Cyprus.

If you’ve read many conflicting reports about Cyprus relating to the 1974 war, the creation of the TRNC and the involvement of Turkey and Greece here is our guide - specifically for property investors - to understand North Cyprus and recognizing the potential afforded by the country.

Cyprus was once a British colony and in recent history it was inhabited mainly by Greek and Turkish Cypriots but also by a number of British citizens as well. In 1960 Britain gave Cyprus its independence but retained two sovereign bases in the country. In 1963 violence began to erupt between the majority Greek Cypriots and the minority Turkish Cypriots. Over time this violence escalated and the UN peacekeepers were called in, they established a green line between certain enclaves housing Turkish Cypriots - who fled into the enclaves as they feared for their safety - and the Greek Cypriots.

The sorry state of affairs continued with violence and threat escalating on both sides until 1974 when a Greek sponsored coup in Cyprus attempted to join the island with the Greek mainland. Turkey, fearing for the safety of its people launched a swift and effective military operation which swept Greek Cypriots out of the northern third of Cyprus and secured this land for its Cypriot people. Because Turkey did not wait for UN backing for its military operation the Greek sponsored coup was quickly forgotten about and instead, North Cyprus was politically annexed and the people of the island suffered embargos up until 2004.

In 2004 as Cyprus was aligned for EU entry the UN finally realized that they had to attempt to reunite the island, as never before had a divided nation entered the EU. The UN brokered peace talks between both sides of the island and these resulted in the development of the Annan Plan to which both sides were asked to agree upon. Among many other issues, the Plan would put an end to the land disputes that exist in Cyprus, and about which you’ve surely read.

The land disputes exist where Turkish Cypriot land in south Cyprus was nationalised by the government of the Republic of Cyprus following 1974 and given to displaced Greek Cypriots from the northern third of the island. And of course it also exists the other way where former Greek Cypriot land in North Cyprus was nationalised by the TRNC government and given to Turkish Cypriots displaced from the south.

The Turkish Republic of Northern Cyprus and the Republic of (South) Cyprus took the terms of the Annan Plan to their people for a vote of confidence. Unfortunately only the Turkish Cypriots voted in favour of the plan for peace. Further unfortunate events began to unfold as it became clear that the progress of Cyprus towards EU accession had gone too far to stop it and so only the Republic of Cyprus was able to join the EU in 2004 meaning that a divided nation did indeed join the European Union. Oddly though, all Cypriots - whether Greek or Turkish - now have the right to an EU passport and the whole of Cyprus has begun to benefit from the EU effect!

The land disputes continue but despite what you may have read not all land and property in North Cyprus is in dispute - far from it in fact. Only about 17% of the land in North Cyprus was formerly owned by Greek Cypriots are there’s an abundance of land and property for sale in North Cyprus with internationally recognised title deeds.

North Cyprus and Turkey established the Immovable Property Commission in North Cyprus to hear claims in TRNC rather than at the European Court of Human Rights – it was hoped that the Immovable Property Commission would fulfil all the terms of the proposed Annan Plan which wanted an internationally recognised body, formed in North Cyprus, to deal with the property claims.

An amendment was made to the North Cyprus property law regarding the commission so that it is now theoretically possible for land restitution – but under the terms of the commission’s guidelines as it stands to this day, esdeger or “exchange” land will be immune from restitution – i.e. it cannot be given back.

This amendment satisfied all parties concerned – the UN, the European Court for Human Rights, the terms of the Annan Plan, Turkey and the TRNC – and so the pending claims at the European Court for Human Rights were moved to the Immovable Property Commission.

So, to summarize the significance of recent events, especially for those considering buying property in North Cyprus where the title deeds are esdeger or “exchange” lands: the fact that the European Court of Human Rights recognizes the Immovable Property Commission and has referred all outstanding Greek claims to it means that there is a normalizing of relations between the TRNC and the European Union.

Greek Cypriots can no longer go to the European Court of Human Rights about their property claims.

The European Court of Human Rights has upheld proposals in the Annan Plan for a Cyprus based legal agency to resolve property matters and what’s more, the TRNC Immovable Property Commission has no Greek Cypriot control or membership.

Under the new system, any compensation will be limited and capped, esdeger or “exchange” land is immune from restitution and furthermore any compensation awarded will be paid by the Immovable Property Commission with funding from Turkey.

Tourism

Following from relaxed border restrictions with the Greek Cypriots, North Cyprus is now embracing economic growth and announcing plans for developing tourism. The Strategic Plan for Tourism 2010 (please see link above) aims to upgrade facilities and resorts in line with changes in tourism trends. The Plan focuses on increasing tourist arrivals, per capita tourist expenditure, length of stay and repeat visits. TRNC is currently experiencing an increase in marinas, golf courses, agro/nature tourism and theme parks to cater for this additional tourist demand.

A key element in this plan is to continue to improve air access to Cyprus, a factor which has underpinned the steady growth in tourism figures. A new airport (Ercan) opened in May 2004. Once the travel embargo is lifted the new airport will enable planes to fly directly to North Cyprus for the first time since 1974. This will conservatively lift the annual tourist numbers from 433,000 to 2 million people annually over the next five years, which is still far below the 2.3 million people who visit Southern Cyprus each year. Additionally, reports claim that the airport at Getickale may attract American finance to provide further capacity. These steps towards improved tourist facilities and a boosted Cypriot economy, signal North Cyprus’s commitment to building a stable and large tourist market, which is good news for tourists and investors alike.

Property Market

It has been widely forecast that North Cyprus is one of the most exciting emerging markets for medium term property price growth. Legal changes since the end of 2006 have seen the North Cyprus property market dramatically change, meaning 2007 could be one of the last years for investors to bank land and properties at prices seriously below the market average. These changes occurred as a result of two significant events;

Firstly the High Court in London (ORAMS Case) ruled that a Greek Cypriot court had no jurisdiction in North Cyprus and they also ruled in favour of a British family, the Orams, keeping former Greek Cypriot property that they had bought, taken over and redeveloped in North Cyprus.

Secondly under terms of the Annan Plan, the Immovable Property Commission (established by the TRNC in 2005) ruled that a former Greek Cypriot owner of properties in the North of the island should be paid compensation by Turkey, in return for renouncing all claim to their property. This ruling was upheld by the European Court of Human Rights. This therefore means that esdeger or exchange lands are now immune from restitution and new owners cannot be held responsible for any compensation which may be demanded in the future.

Naturally these changes are leading to greater investment in the North as developers and investors alike recognise that with fewer limitations to the property market, and its cost at currently less than half the price of the South, North Cyprus now grossly undervalued and set for a boom.

Buying Land and Properties in North Cyprus

Title Deeds

Pre 1974 Turkish Title: These are titles which a Turkish-Cypriot has owned since before 1974. These deeds are hard to find, and expensive.

TRNC Esdeger (Exchange) Title. This means that the Turkish Cypriot owner has been given this land in exchange for the equivalent piece of land they owned in the South. Exchange land has now been rendered free from restitution, as claims are handled by the Immovable Property Commission. This results in an extremely safe title deed for foreigners to purchase in the TRNC. Caesar Resort is being constructed on exchange land. This type of land is increasingly hard to find, especially close to the sea.

TRNC TMD Title. This is where no exchange has taken place, and therefore there may be some compensation payable by the owner as part of future political settlement regarding the Cyprus issue. Most developments are being built on TMD land.

The process for the foreign buyer

Foreigners are limited to holding one property title per person. Alternatively, the property may be registered in the name of a local person(s) in a trust and a trust agreement can be drafted accordingly. Please ask for more details.

The purchase can be executed without the need to visit TRNC. All that is required is a copy of your passport.

Solicitors fees

Once you have chosen your unit type, you will be required to pay a reservation fee of £1,000. Following this, you must appoint a local solicitor. Fairfax Investments is happy to recommend a reputable solicitor who specialises in the transfer of title deeds. You are able to appoint them power of attorney in your absence, and they will apply for the purchase permit from the Interior Ministers office and transfer of title. Most solicitors charge approximately £1,200 for this service, however, we have negotiated a fee for our clients of £800.

Associated Purchase Costs:

Costs when signing contract: Under the law of Cyprus, for a contract to be a legally binding contract of sale, it should be stamped with 0.5% of the contract price within 3 months of the contract date. If not stamped in three months from the contract date, the applicable penalty is 3 times which you may end up paying 1.5% of the contract price. You may choose to transfer this amount to your legal representative assisting you in your purchase.

Land office transfer fee: This fee is payable at the time of transferring the title of the property into your name at the Land office. The rate is 3% payable over the valuation that shall be carried out by the land office. The valuation is calculated by the cost of materials to build the apartment. It does not take into consideration land, labour, communal facilities, margins etc. Therefore the valuation will be significantly less than the purchase price.

VAT: VAT is payable around completion at the rate of 5% of the valuation.

Property tax: Once you have your property transferred in your name, than annual property tax is applicable. This amount is calculated over the size of the house and its location. Sample figures would be: a flat in the city centre sized 110m2 with 2 bedrooms is £100-150 a year. Therefore the property tax will be extremely low for the Caesar Resort.

Capital Gains Tax: The rate of capital gains tax is 3.5%.