How are you doing this month? Have you been on holiday yet – or are you going soon?

Last week I returned from an excellent holiday in Canada and New York. I flew into Toronto with some friends and we enjoyed a NY Yankee’s vs. Toronto Blue Jays baseball game. We got drenched on the Maid of the Mist in Niagara Falls, went on a wine tour of the Finger Lakes in NY and spent a week boating, swimming and sunning on the St. Lawrence River.

And I almost died. On the 12th of July a bunch of us took the motor boat up the river to see a fireworks display. Unbeknownst to us, a major storm was on the horizon and just as the final firework went off, the river began to stir and the clouds unleashed a torrential downpour. Because there were many boats and cars all trying to make it home at the same time, it was hard to determine what was land and what was the river. And to make matters worse, our GPS stopped and we couldn’t find our way home. Oh-my-gosh, I looked calm, but inside I was a wee bit horrified…well, truth be known, more than a wee bit!!

After 20 minutes we made our way home, managing to rescue another boat on our way back…I really was scared – nothing is worse than being lost in the dark on a boat in a storm!

Anyway, enough about my holiday and dramatic near-death experience. On to our favourite subject – Cyprus. As expected, the most common topic of discussion is still the water issue. Currently, there are tankers cruising into Cyprus every day from Greece. I recently read a UK newspaper and in the funny news section they reported that Cyprus had to turn away one full tanker of water because it smelled terrible. Apparently the powers that be did not have equipment to get the water from the boat into the Cyprus system quickly enough and thus it sat around too long and worked up a terrible stench!

Otherwise, the temperatures are super hot. It’s over 35 degrees every day (95 Fahrenheit) and in the sun it’s simply sweltering. From what I’ve been told the swimming pools feel like baths and everyone is working overtime to stay cool!

Tourism is expected to be down due to the ‘credit crunch’; however the locals tell me that it’s as busy as ever. This year the Cyprus Tourism Board is going to promote winter tourism in a massive way, thus many people think that overall tourism will remain the same, if not increase.

And while talking with one of my friends in Cyprus, she mentioned that the date for the Cyprus Marathon has been set for the 15th of March 2009. Apparently, there are 20 different countries represented and last year there were 450 runners. For more information, go to: http://www.cyprusmarathon.com/index2.htm

No – you won’t see me running next year. I just can’t imagine running that far…but it would be such an awesome goal to reach for. Hmmmmmm…maybe I’ll think about it.

Okay – let’s move on with the newsletter. This month I’ve included an article of mine that has appeared in several publications in Cyprus and has received very good feedback. It’s all about researching and choosing a good developer. Thereafter, we have some solid information from Charles Purdy at Smart Currency Exchange followed by Jackie Nicholls on a Cyprus Tax Questions and Answer. And to finish, we have the property of the month and some good stuff on finance.

Give me a shout if you need anything…and if I don’t hear from you, have an excellent month.

Kim

Cyprus Buying Guide
The Overseas Guides Company
Kim@CyprusBuyingGuide.com

Researching and Choosing a Good Developer

When buying a property in Cyprus it’s possible to buy from a developer that provides bad service, is unauthorised to build property and leaves town with all your money. It’s also possible to find a good developer that builds a property on time, to specification and within the budget requested. And then there are all the other developers that fall somewhere in between!

There are three stages to choosing a good developer. However, many buyers are either unaware of, or simply skip, the first two stages. Failure to spend time on stages 1 and 2 dramatically increases the likelihood of serious problems later on in the buying process.

Stage 1: Research the property market and get an understanding of who’s who regarding developers.

Stage 2: Pick a developer and take actions that will increase your likelihood for a smooth purchase process.

Stage 3: Sign a contract of sale with your chosen developer.

Starting with stage 1, it is very important to get a good understanding of the Cyprus property market and the various developers that contribute to that market. There are some very shoddy developers out there that should be avoided at all costs; however, if you don’t know the market, or the players in that market, it’s difficult to determine exactly who is good and who’s not so good.

To ensure that you find a good developer there are several things you should consider before determining the developer for you. Below I’ve listed 5 actions you can take. However, I must stress at this point that the ultimate action to be taken is to do your homework, get information from a variety of resources and never, ever rush into anything!

1. If possible, move into rented accommodation for around 6 months BEFORE you plan to buy. Living with and talking to people in shops, restaurants or during a walk on the beach will give you a very good idea about reputable developers as opposed to the not so good. In Cyprus, everybody knows everybody else, and conversations often centre on the wonderful weather, a new restaurant that comes highly recommended…or the latest property scandal. Simply spending time in the area that you’re interested in can provide you with all sorts of important, indeed essential, information.

2. Search the Internet for ‘Expats in Cyprus’ and you’ll find various forums and groups that discuss a multitude of issues. Some forums highlight poor practices and name and shame shoddy developers. Others provide testimonials of purchases that went swimmingly well! Reading the forums will help you to determine the developers to instantly cross from your list and those that can be considered ‘maybe’s’.

3. Consider using an estate agent as they have a certain amount of leverage over developers. The last thing an agent wants is hassle, thus many tend to work with developers that have a good reputation and provide a good product. If the developer decides to cause problems, the agent often has the upper hand by threatening to withdraw future business unless the developer complies with the needs and wants of the agent and buyer.

4. View many different developers in many different areas to get a comprehensive idea as to property styles, prices and value for money. Some developers will charge €10,000 to €30,000 more for the same spec property than other developers – it pays to shop around and get to know the developers that inflate their prices.

5. Look for projects from developers that have started after the recent upgrade in EU legislation for build quality. The EU has really clamped down on building regulations and thus properties are now being built with insulation, better materials and of a higher standard.

In addition to Stage 1, you’ll want to pick a developer and take actions that will increase your likelihood for a smooth purchase process. You may want to consider some of the following actions:

- Visit a couple of the developers’ previous projects, knock on doors and talk to the previous buyers. Ask them what problems they had, what went well, what could have been improved. Also ask them if they have any advice for you.

- Force the developer to comply with your requirements by retaining a solicitor independent of the developer that will create a Contract of Sale that has several clauses inserted to protect you. Also make sure that the developer’s financial staged payments (stipulated in the contract of sale) require you to pay according to completion of milestones not simply by dates in the calendar. Some people have had to pay almost the full cost without a brick being laid if they omitted this step!

- Buy a bond or take out insurance. Yes, it costs money, but it does mean that you are covered if the developer goes bust or there are any major issues with the build.

- Interview the prospective developer: ask them for testimonials and enquire about the amount of successful projects they’ve completed (to time, to budget and within specification). You can also ask about their customer service and after-sales follow up. What is their complaints process? Do they assist with setting up bank accounts, getting mortgages, getting the water and electric bills set up?

The key points: eliminate the bad developers and find out who’s who in the world of developers (Stage 1), seek out a developer that has a past record of happy buyers and research various options that increase the likelihood of success (Stage 2) and then finally it’s time to sign a contract of sale that protects you, with a developer that has a good reputation (Stage 3).

All this said, the majority of buyers in Cyprus fly over for a holiday or a 3-day inspection trip and fail completely to do any research at all. They get caught up in the wonderful atmosphere, become emotional about living the dream and make uninformed decisions about something that could potentially affect the rest of their lives. Don’t make this mistake! Take responsibility for the entire buying journey, do your homework, don’t rush into anything and set yourself up for success.

If you’d like help finding a good agent or developer, fill out my property form at:

http://www.cyprusbuyingguide.com/requirementsform.htm

The UK house price gloom and doom….

by Smart Currency’s Charles Purdy.

We are all aware that UK house prices are falling. How far this fall will be is the question. My feeling is that there was a need for sanity to return to the UK housing market as prices all over the country have increased out off all proportion over the last few years. But difficulty in selling a UK property is causing a problem for those who want to say good bye to Gordon Brown and head off for a happier life style elsewhere.

There are some positives in the current environment. More people are renting rather than buying and this means that a property in the right area will rent very quickly. Also prices elsewhere in the world are coming down. Spain for example is in a far worse situation with a much bigger drop in house prices - property bargains there are becoming more plentiful. And finally, would you prefer to hold a euro or sterling backed asset? My preference longer term would be a euro asset because here in the UK we have some very serious economic problems which, even though Euro land isn’t immune, means that sterling will have further downward pressure in the coming months and years.

So how can people still follow their dream? I would recommend talking to a range of experts. Some financial, such as Smart on currency and an IFA on financial planning, and others such as a property agents who are experts in the region you are interested in. The current climate means that you have to take your time, plan very carefully and listen to those who really know the market before acting. If done properly, you can still live your dream.

To read the latest currency update go to: http://www.CyprusBuyingGuide.com/Currency240708.htm

Why overseas property buyers lose money...
...and how you can avoid it!

This 10-page educational report outlines:

• Case Study: When Property Buyer, Mr Reed, Purchased an Overseas Property, he Made Three Mistakes that Cost Him £10,256...learn how you can avoid them...
  
  
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To get a copy of the report at no charge go to: http://www.smartcurrencyexchange.com/freereport.htm

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Tax Situation in Cyprus (Cont.)

Last month, The Overseas Guides Company’s Jackie Nicholls covered 6 frequently asked questions about taxes in Cyprus. If you missed the newsletter for June, you can check it out at: http://www.cyprusbuyingguide.com/archive.htm

The questions answered included:

1. If I move to Cyprus permanently, what do I do about Income Tax/other taxes?
2. How long do I need to live in Cyprus before I pay Tax there?
3. When does the Cyprus Tax Year run from?
4. What are the Income Tax Rates?
5. How much tax do I pay on my pension?
6. Are there any other taxes I need to pay?

If you’d like answers to these questions, check out the June edition of the Cyprus Buying Guide Newsletter at: http://www.cyprusbuyingguide.com/archive.htm

Moving on, Jackie has outlined the answer to six more questions below:

7. Is there any inheritance tax in Cyprus, or any similar tax?

No, there is no inheritance tax or any form of wealth tax.

8. Is there any reason why I will be better off paying all my taxes in Cyprus?

Actually, if you are resident in Cyprus then you must pay your taxes here - you have no choice.
You will usually pay far less tax in Cyprus than you would in the UK.

9. When do I need to complete an Income Tax Return?

Cyprus Income Tax Returns are issued during the first two weeks of April each year and must be completed and returned by the end of April. Bearing in mind the shortcomings of the postal service, a lot of these do not arrive in time – which is why the deadline is often extended.

But be warned, they charge interest at 9% on any tax owed – but likewise, they return you interest at 9% on any tax they owe you.

If you are an individual with no business, simply on a retirement pension, then completing the Cyprus Income Tax return is relatively easy. This is a four-page document, most of which you don’t need to complete.

As per the UK, you can of course use a local Accountant if you prefer.

10. Is there any Capital Gains Tax in Cyprus?

Yes, there is.

Capital gains tax is charged at the rate of 20% on any gain arising when you sell your property, or any property that it is in your name. You pay 20% on the profit gained between the purchase price and the sale price.

Allowances

The following allowances are available to individuals for Capital Gains purposes:

Individuals who have owned the property for less than 5 years each €17,086.01
Individuals who have owned the property for more than 5 years jointly €85,430.07

Let me explain.

If a couple bought a property as their main residence then sold it after 3 years, they would receive a Capital Gains Allowance of 17,086.01 Euros each. If the same couple sold after 5 years, they would jointly receive a Capital Gains Allowance of 85,430.07 Euros. These allowances are only given once.

Another point to note is that any costs for improvements made to your property are also allowable against Capital Gains Tax. So it is really important that you keep all your receipts and remember quotations are not accepted, you must have invoices.

Also allowable are any legal fees and surveyor’s fees and of course the fees for Land Registry when you obtain your Title Deeds.

Note:

This one is interesting and might be beneficial to you.

When a non-resident is selling, if they can prove that they acquired the property in question by importing foreign currency between 1 August 1980 and 13 July 1990 then they are exempt from any Capital Gains Tax.

11. Someone mentioned “Immovable Property Tax” can you explain what this is?

This is a tax against your property and is imposed on the market value of your property on 1st January 1980.

As long as the market value at that date was under €170,864.14 then the tax rate is nil.

Hardly anyone pays this tax.

12. What is a Transfer Fee? Is this for my property?

Yes it is. This is the fee you will need to pay Land Registry when you receive the Title Deeds for your property.

All transfer fees needs to be paid in cash or bankers draft, usually via your Solicitor.

Be warned. In addition to the Title Deed Fee, The Land Registry department are also now charging an additional administration fee of €427.35. This is apparently for the cost of staff coming to your property to measure the boundaries and make sure everything is in order before they issue the Deeds.

They are also now performing revaluations when the Title Deeds are finally available.

I know of one case where they revalued the property at 51,282.05 Euros over the price the owner paid because they said the owner could not possibly have purchased the property at the contract sale price he did – in their opinion it was too cheap!

The owner can appeal, but this is a lengthy process and Land Registry work to their scales and inevitably will not budge. And of course, any appeal incurs you additional costs.

The end result of this problem was that the owner had to pay an additional Land Registry Fee of approximately €2,500, which was not budgeted for!

There is some good news though. The owner of this property now has a receipt from Land Registry for the issuing of his Title Deeds for a higher value than initially thought. This means when the owner goes to sell the property, he then has a larger allowance towards his Capital Gains.

So do bear in mind that you may think you are in the 3% Transfer Fee band as shown in the table above, but you could find that The Land Registry Department re-values your property into the 5% band!

*******
If you have a question about tax or anything to do with Cyprus, please visit the Cyprus Buying Guide forum to post your questions: http://www.cbg-forum.com

Property of the Month

This month I’ve sourced a project unlike many others on the market. In fact, it’s the first time that I’ve come across a developer that has taken the current economic and natural resources issues into consideration.

The developer of the project, David Grant, has designed a development of 54 apartments that consists of one, two and three bedrooms. The project is located in Xylophagou – very close to Larnaca. Similar to other developments, the project offers refreshing communal pools, barbecue’s, pagoda’s and children play areas. HOWEVER, there are a few things that make this development stand out from the rest…

1. The entire project is being created in a manner that will allow for solar power to supply the electricity. It’s quite a paradox - Cyprus has the highest electricity costs in the EU and the most amount of sun… Why developers have failed to use solar power as a source of electricity (until now) is beyond me!

2. The project has its very own water well that will provided fresh, clean water to the entire development. With the shortage of water, rationings and the cost of a water truck to top up pools, you will be secure in the knowledge that this resource will mean that a basic necessity is provided!

3. The development will be built to new EU regulations and thus the property will be efficiently insulated. Any property that falls outside the regulations has been built (or will be built) to a lower standard. Ask anyone that lives in Cyprus – during the winter, homes are freezing and during the summer, they’re boiling hot. With the new build regulations, properties are more likely to be warm in winter and cool in summer!

4. Although this may seem like a small point, I think it’s a massively unique selling point…This developer has actually planned for CLOSETS. If you’ve never viewed properties in Cyprus before, it’s important to realise that most are built without closets, storage space or garages! This is the first developer that I’ve come across that actually has closets in the plans - and if you don’t believe how important this is, ask any woman!!

Prices start at €100,000 and the project completion date is 2010. If you’d like more information about this development (including the financials), give me a shout or visit the following link: www.CyprusBuyingGuide.com/dhome.htm

Or email me on: mailto:Kim@CyprusBuyingGuide.com

5 secrets to financial fitness

Next month sees the start of the Olympic Games, here are a few secrets to your own financial fitness!!

Get motivated
Set yourself realistic goals and work out what you need to do to achieve them. Get a financial personal trainer to whip you into shape. Use them to help you come up with an effective wealth and fitness program. Have a clear vision of what you are trying to achieve and make sure your game plan is always on track.

Get active
Take an active interest in your finances. Keep yourself informed. Book yourself in for a full financial health check. Regularly review your policies and investments. Make sure you know exactly what plans and policies you have and why you have them. The financial landscape is always changing…make sure your portfolio matches the market and your current plans.

Look after your health
There is nothing more important than your health. In order to earn the income you use to fuel your financial planning you need to be fit and well. Stay healthy and make sure you have planning in place to provide quality healthcare and financial security in the event of ill health.

Cut out bad habits
Just like health and fitness, a bit of discipline is necessary to get your money in tip top condition. Review your bank statements to ensure you aren’t wasting any money. Draw up a budget with an allowance for financial planning. Minimise and manage your debts. Make it a top priority to be debt-free.

Build strength and balance
Now that you’ve got the basics sorted, it’s time to make you financially stronger. Pump that financial iron! Gradually accumulate capital through regular saving. Balance your portfolio with investment in different asset classes and products with different levels and classes of risk.

We have a wonderful Independent Financial Advisor (or IFA) to help you achieve the maximum financial benefit for your finances, both now and into the future – the key is knowing what to do with your funds, and when.

If you need their assistance, please go to: http://www.CyprusBuyingGuide.com/resources.htm

Final Words...

Just yesterday I received this from a Cyprus Buying Guide Reader and thought I'd pass it on:

"Hi Kim,

You may wish to add the following to the section which deals with buying 'off-plan'.

According to our independent Cyprus lawyer, some agents and developers are taking reservation fees and deposits on off-plan properties for which no planning permission exists. This could be regarded as illegal and is certainly immoral as the developer uses the money to fund the construction work with no guarantee that planning permission will eventually be forthcoming. (An independent lawyer will always check this out for a purchaser but a lawyer who also acts for the developer will say nothing about planning permission.) Agents and developers have been forced to refund reservation fees when challenged with regard to planning permission.

Regards,

Stuart."

That’s all for now. Happy, happy summer days to you all. If I can help in any way please let me know won’t you? And if you have any invaluable findings property-wise to share with Cyprus Buying Guide readers please let me know at

mailto:Kim@CyprusBuyingGuide.com

or go to the forum where you can share it with all the Cyprus Buying Guide community. You’ll find it at:

http://www.cbg-forum.com

Bye,

Kim
Cyprus Buying Guide
The Overseas Guides Company Limited.
mailto:Kim@CyprusBuyingGuide.com