Content:
- Prices doubled in a year
- Brief Background
- Who buys? What do they buy? How quickly do they resell?
- Taxes, Avidat and other "obligations"
- Delivery deadlines and possible delays
- Introductory tours
- To be continued
Prices doubled in a year
While many potential buyers were cautious about property in Northern Cyprus, given the unrecognised status of the republic, not everyone understood the correctness of document processing and land ownership rights. However, the swift profitability of local properties, surpassing real estate in Turkey, convinced many investors.
Indeed, for many years, the Turkish Republic of Northern Cyprus (TRNC) did not attract much attention from investors worldwide. However, considering the colossal sums that those who managed to buy property here in early 2023 and earlier were able to earn from resale, interest from investors of various countries not only began to look into but practically rushed to local real estate.
Brief Background
The surge of interest in Northern Cyprus occurred around the beginning of the pandemic and currently, the real estate market in the Republic is actively developing. One of the triggers, at least one of them, was an article in Forbes magazine released in 2021, where the 5-kilometre Long Beach in Famagusta was mentioned as the number one investment destination worldwide. The article sharply popularised not only Famagusta but also the TRNC as a whole, as a priority destination for both property purchase and rental.
Before this publication, apartments and houses were mainly purchased here by the English, as Northern Cyprus was a former colony belonging to Great Britain until the 1960s. Relatively recently, the ranks of buyers have been replenished by Swedes, Norwegians and residents of other Scandinavian countries. Then Germans joined in, and more recently, citizens of Iran, Iraq, as well as former CIS countries, became interested in this direction. The conclusion of a large number of transactions was slowed down only by the fact that the status of an unrecognised republic does not allow direct arrivals here and all economic, diplomatic, trade relations and other communications of Northern Cyprus are conducted practically only with Turkey (and through Turkey). Flights are also all connecting, with a transfer at any international airport in the country (Ankara, Istanbul, Antalya, Adana, Izmir, etc.). Another option is to fly to Southern Cyprus and cross the border by land through checkpoints.
On closer examination, everything is not as complicated, cumbersome and lengthy as it seems at first glance: even with a connecting flight, the journey takes an average of seven hours. The advantages are colossal, offering a practically European atmosphere, maximum comfort and safety, along with excellent ecology and fantastically beautiful nature. The TRNC has quietly evolved into an extraordinarily successful mix of East and West: it has successfully adopted everything resort-like from Turkey, including an established banking system and mobile communication infrastructure. From Europe, it has embraced the Cambridge education programme, valued worldwide, as well as clear and coherent British legislation, meticulous compliance with rules and stability of the British pound sterling (many establishments in the TRNC still conduct transactions in them). Therefore, Northern Cyprus offers an excellent opportunity to live in Turkey but essentially live like you would in England.
The icing on the cake was the colossal changes in infrastructure development that the TRNC underwent over the past year. In the summer of 2023, the local airport Ercan was reopened, refurbished and greatly expanded, reaching a capacity of 10 million people. Additionally, many countries plan to launch direct charter flights here soon. This will lead to explosive growth in tourism in the TRNC.
People also come here for education: practically every fourth resident of the TRNC now is a student or pupil. In previous years, Northern Cyprus was in such high demand, including among immigrants and relocators (there are currently over 50 thousand people here as per official data), that many who bought an apartment here in 2022 and even in 2023 and already sold it, received very good profits. Yes, literally in one or two years.
In 2023, prices doubled!
Owners are in no hurry to sell their real estate solely because they anticipate earning much more, either through resale later or through rental income, and most likely through both simultaneously.
To avoid making unfounded statements, let's refer to statistics: if in 2021–2022 the cost of a studio apartment in Iskele ranged GBP 30,000 – 40,000 (USD 38,000 – USD 50,500), it has now risen to GBP 90,000 (USD 114,000). Investment returns of 8% to 13% per year are guaranteed, however, figures of 13% and sometimes even higher can be found in hotel-apartment complexes with good service in popular areas.
Let's consider the most important aspects regarding potential real estate purchases in Northern Cyprus and the prevailing trends at the onset of 2024.
Who buys? What do they buy? How quickly do they resell?
Undoubtedly, a clear trend among buyers in the TRNC is that many purchase not just one apartment (as is often the case with apartments in Turkey or Europe), but at least two: one for rental purposes and the other for personal use or for vacations several times a year. Moreover, both apartments can be sold at any time, often with a good profit. Regarding rentals, in Northern Cyprus, the rental income ranges from 8% to 15% per year, depending on the location, the class of the complex, the area of the residence, etc. As for resale, the price range varies widely depending on when the property is listed and its construction stage (if the residential complex is not yet completed). However, the previous year, 2023, proved to be stellar in this regard: many who purchased under-construction housing and sold it upon completion earned returns of up to 40% per annum or even more.
Nevertheless, with resale, the growth can amount to around 30% in addition to the initial price. Moreover, the earlier you buy, the greater this increase. According to the classic scheme, from the ground-breaking stage (or even the planning stage, when the project only exists on paper and construction has not yet begun), growth can be around 20 to 25% per year. Therefore, considering that the average construction period is two years or slightly more, profit can be about 45–50% (over two years) from the ground-breaking stage to the completion of the construction.
Moreover, if you carefully select a project, opting for a premium one situated in an elite location or possessing unique characteristics (such as low-rise complexes in the skyscraper area in sought-after Iskele), then the initial price increase when construction progresses from the early stages to the middle stages can immediately reach +20 to 25% of the initial cost. These percentages can grow within a few months rather than over a year.
Taxes, Avidat and other "obligations"
Buyers of real estate in the TRNC need to be aware that taxes here are quite significant. However, there’s a silver lining: individuals who temporarily own property with the sole intention of generating income through sales via assignment (rather than residing in the apartment themselves) are currently exempt from taxation due to the "unrecognised" status of the TRNC. Essentially, the only mandatory payment is the fee for transferring the assignment to the developer, which currently ranges from GBP 1,000 to GBP 3,000.
If you are buying property with the intention of personal residence, then indeed, you will be required to make a payment of about 6% to the tax office, plus VAT (5%) and the transfer of ownership rights to your name. However, all of these expenses occur at the stage of receiving the keys. It’s worth noting that not all investors in the TRNC receive keys; in fact, quite the opposite is true. A ridiculously small percentage of them actually receive keys, as many buy and sell one residence after another, accumulating the profit.
There is a possibility that tax rates will be reviewed in 2024; Turk Estate will continue to monitor developments.
Regarding regular payments when residing in an apartment, the system is similar to Turkey’s Avidat: contributions for the maintenance and servicing of the residential complex or standalone building, such as your own villa. The "standard" rate here (for example, for a typical two-bedroom apartment, i.e., a 2+1 format) ranges from GBP 60–70 per month. For luxury properties, more spacious ones or those in premium locations, the payment can escalate to GBP 150 per month; in extremely basic complexes or minimal studio apartments (1+0 format), the payment may be as low as GBP 40 per month. Additionally, akin to Turkey, consider water and electricity usage charges, based on metres.
We are frequently asked about who pays Avidat and utilities when an apartment is rented out. When the owner rents out the property themselves, they often assume these costs. Transferring water and electricity metres for each tenant is cumbersome and unprofitable. Moreover, tenants, especially those on "short-term" leases, are not eager to delve into the details of utilities. It's easier to handle the payments oneself (and also ensure that there are no delays in payment). However, in some residential complexes in Northern Cyprus, developers offer properties with a so-called guaranteed rental programme (or guaranteed income system), where the property management company (PMC) handles all the hassle. This includes monitoring payments and ensuring they are made on time. These expenses are typically included in the rental payment and the PMC provides its services for a certain percentage, taking care of everything from finding tenants to evicting them, as they say, in case of any issues. The property owner simply receives the agreed-upon amount monthly. This is particularly relevant when purchasing residences in complexes similar to hotels (hotel apartments); their number in the TRNC is increasing. We recommend paying attention to them, especially since the PMC contract often includes the possibility, if this property is your only one in the TRNC, to come for a month or two during the year and stay in the residence yourself. During this period, the property is simply taken off the rental market. Thus, in Northern Cyprus, you will enjoy a vacation in a free hotel room, with the difference that these apartments also belong to you.
The guaranteed income programme is typically offered for several years, with the possibility of extension by mutual agreement.
If you plan to visit the TRNC frequently or live here permanently, it may be easier to handle utility payments and Avidat yourself.
However, in addition to Avidat, you will also need a one-time contribution for connecting to sewage, etc.
Another undeniable plus is that, unlike in Turkey, the area of the balcony, which is often quite spacious, is not included in the residential floor space area for tax calculation purposes. Taxes are calculated based on the net residential area only.
Delivery deadlines and possible delays
The TRNC is a special destination for property acquisition also because there are practically no delays in delivering real estate for occupancy. During the pandemic, yes, there were precedents; however, currently, if the developer experiences any forced delays (and even when this happens, they are extremely short, a few weeks maybe) it is typically due to delays in the supply of materials, reasons beyond the developer's control. After all, apartments are delivered complete with all the finishes; they’re generally ready to move into immediately (just don't forget your cutlery and slippers, although many design projects offer furnishing and equipment, including dishes). So, the cup-spoon-fork-slippers may not be needed, simply express your requirments and the development company will accommodate them accordingly.
Moreover, there are not many developers in Northern Cyprus and none are willing to risk their long-term reputation because of shifting deadlines, even for just one project. Furthermore, considering the British legislation, the sanctions for delays here are quite significant. So, it's just easier to stick to the schedule.
Therefore, Northern Cyprus stands out in that the deadlines for occupancy here often exceed the stated ones: construction companies aim to deliver the project as swiftly as possible and move on to the next one, especially given the limited availability of land in the TRNC.
Furthermore, there have been no cases of developer bankruptcy in the last year and a half, which is also a significant indicator.
Introductory tours
Another pleasant option. However, in this aspect, Northern Cyprus is similar to Turkey: you can always arrange with the construction company and visit several properties. The main requirement is to purchase a plane ticket; upon arrival, the buyer is met at the airport and in most cases provided accommodation for two to four nights in a hotel at no charge. They are shown all the interesting residences. Some developers even reimburse the cost of the plane ticket if the client decides to purchase and make an initial payment or at least a deposit for the apartment after the introductory tour. However, this is evaluated on an individual basis.