Cyprus presents a range of benefits for those interested in property investment, characterised by a robust legal framework and the prevalence of English. Strategically located between Europe and the Middle East, Cyprus boasts a diverse international market that is favourably positioned for sustained capital appreciation.
However, non-resident investors must be aware that the Cypriot government has been enforcing stricter regulations on short-term rentals, complicating the buy-to-let approach.
Additionally, Cyprus is home to a plethora of innovative and exciting development projects that investors can explore.
Whether you’re entering the property market for the first time or looking to expand an existing portfolio, there are essential factors to take into account beforehand.
Contents
- Understanding the Cyprus property market
- Letting restrictions
- Rental returns in Cyprus
- Taxes on investment property
- Where to invest in Cyprus
Cyprus is filled with excellent getaway spots, but Paphos may be perfect for you
Understanding the Cyprus property market
The Cypriot property market has undergone a significant transformation over the past two decades, shaped by both global economic turbulence and local regulatory reforms.
Before the 2008 global financial crisis, Cyprus enjoyed a real estate boom, with prices surging by as much as 20% annually, driven largely by foreign buyers seeking holiday homes and investment properties. However, the aftermath of the financial crash exposed deep structural weaknesses – particularly concerning opaque title deed processes and mortgage arrangements, such as those linked to Swiss franc loans that became prohibitively expensive due to currency shifts.
These issues undermined investor confidence throughout the early 2010s. Yet by 2016, the market began to recover steadily, helped by legal reforms, greater transparency and renewed foreign interest.
In 2023 and 2024, Cyprus saw annual price increases of around 7% to 8%, with apartments recording the most substantial gains – up nearly 14% in some areas. Houses, while still in demand, saw more modest growth just below 5%.
Regional dynamics remain a key factor in this recovery. Famagusta has emerged as a growth leader, with consistent year-on-year performance. Paphos, Larnaca and Limassol follow closely behind, each with its own investment appeal – from Limassol’s port-city dynamism to Paphos’s lifestyle-oriented atmosphere.
Notably, geopolitical shifts such as the decline in Russian investment due to sanctions and war have redirected foreign interest elsewhere, with investors from the Middle East, Western Europe and Asia becoming increasingly prominent.
For buyers in 2025, the Cypriot market presents a more stable, regulated, and opportunity-rich environment than in previous decades – though still requiring careful due diligence.
It’s important you are aware of the limitations of an overseas let
Letting restrictions
Cyprus offers attractive prospects for investors, but navigating the legal landscape – especially for short-term rentals – demands careful attention.
The government has, in recent years, tightened regulations on tourist lettings in a bid to balance economic development with quality control and neighbourhood integrity. For non-resident investors, this means that short-term letting to tourists is no longer a straightforward opportunity.
Generally, non-residents may rent to long-term tenants without significant obstacles. However, engaging in short-term rentals via platforms like Airbnb or Booking.com requires compliance with strict licensing procedures.
Any property used for holiday letting must be registered with the Register of Self-Service Accommodation Establishments, which is overseen by the Deputy Ministry of Tourism. This process entails an application fee of €222 and requires re-registration every three years – a timeline often delayed by administrative backlog.
Compliance doesn’t stop at registration. Properties must meet several conditions to be approved, including safety certifications, valid home insurance, tax registration and local authority permissions.
Operating without registration can result in fines or forced cessation of rental activity. Furthermore, local municipalities may impose additional zoning or usage restrictions, particularly in tourist-saturated areas.
In 2025, enforcement has grown stricter, with authorities actively monitoring platforms and public listings to ensure only licensed properties are in operation. Investors should also be aware that property management firms may not be able to handle short-term lets unless the property is fully compliant.
If short-term rental income is a core part of your investment strategy, it’s advisable to work with local legal professionals to secure approvals before purchase. Long-term rentals, by contrast, offer a simpler path, often with fewer regulatory hurdles.
A well-planned investment can pay for itself and protect your asset
Rental returns in Cyprus
Cyprus continues to offer solid rental returns for investors, particularly those targeting long-term tenants. Yields typically range between 3.5% and 5%, depending on property type, location, and occupancy strategy. Urban apartments and townhouses in cities like Nicosia and Limassol tend to yield consistent income, while villas in coastal resorts such as Paphos or Ayia Napa attract higher rents during peak seasons – albeit with greater variability.
One of Cyprus’s competitive advantages lies in its strategic location and year-round appeal. Unlike some Mediterranean islands where tourism is highly seasonal, Cyprus benefits from a warm climate, vibrant expat community and direct air links – especially from the UK – sustaining a longer rental season. This is particularly valuable for those pursuing long-term rental income rather than relying solely on short-stay turnover.
Short-term rental returns can be lucrative in tourist-heavy zones, particularly for studio apartments in city centres or beachfront properties. However, as noted, regulatory constraints are increasingly limiting this model for non-residents. Studio apartments in Limassol and Larnaca show strong performance due to business travellers and digital nomads, while Paphos remains a favourite among retirees and families seeking spacious villas.
Another advantage in 2025 is Cyprus’s non-Schengen status, which allows third-country nationals – such as Britons and Americans – to spend 90 days in Cyprus and a separate 90 days in Schengen countries, offering a flexible base for lifestyle investors.
Ultimately, while gross yields may not reach the double digits seen in riskier markets, Cyprus combines dependable income potential with long-term capital appreciation and lifestyle benefits. It’s particularly appealing to investors prioritising stability and consistent returns over high-risk, high-reward scenarios.
Unfortunately, you can’t afford to ignore tax when buying overseas
Taxes on investment property
Taxation is a key consideration for any investor eyeing Cyprus, and the local tax framework has evolved to balance government revenue with the need to attract foreign capital.
As of 2025, Cyprus remains relatively tax-efficient for non-residents – particularly compared to other EU jurisdictions – but investors should plan carefully to avoid unexpected liabilities and ensure compliance.
Income tax in Cyprus applies only to income generated within the country for non-residents. Rental income is taxed on a progressive scale, beginning at 20% and rising to 35%, depending on the amount earned. While there are allowable deductions for expenses such as maintenance, insurance, and property management fees, these must be properly documented.
The Special Defence Contribution (SDC) is another layer of taxation that typically applies only to Cypriot tax residents. However, individual circumstances – especially for long-term residents or dual citizens – can create grey areas. The SDC imposes a 3% levy on 75% of rental income, so it’s essential to consult a local tax adviser to confirm your status and potential obligations.
Capital Gains Tax (CGT) applies to profits from the sale of immovable property in Cyprus and is set at 20%. Notably, CGT applies only to the gain, not the full sale price and allowances are available for improvement costs and transaction fees. However, unlike in some countries, Cyprus does not offer complete CGT exemptions for long-term ownership or principal residences unless specific criteria are met.
VAT is a particularly important factor when purchasing new-build properties. A full 19% VAT is levied on most new properties bought for investment purposes. While a reduced 5% rate is available for primary residences, it is strictly limited. The lower rate only applies to the first 130 square metres of buildable space on properties valued under €350,000. Above 190 square metres or €475,000, the full 19% rate is applied to the excess area or value.
Importantly, if the reduced VAT rate is granted and the property is sold within ten years, investors must repay the difference between the reduced and standard VAT. This can substantially impact resale profits. Additionally, transfer fees, though reduced in recent years, can add between 3% and 8% to the cost of secondary market purchases.
In short, Cyprus offers a reasonably transparent tax structure, but each element – from income and capital gains to VAT and municipal levies – must be calculated in advance. Professional guidance is essential to model real-world returns and ensure compliance.
A one-bedroom maisonette in the Tomb of the Kings neighbourhood in Paphos
Where to invest in Cyprus
Choosing the right location in Cyprus is crucial to the success of a property investment strategy, with distinct markets offering varied risks and rewards. In 2025, much of the demand continues to centre around Limassol, Paphos, Larnaca and Nicosia, though secondary areas like Famagusta and mountain villages are also gaining interest.
Limassol remains the island’s powerhouse – a cosmopolitan port city with luxury developments, a thriving financial services sector, and robust infrastructure. It attracts a broad investor base, from corporate tenants seeking serviced apartments to tourists drawn by high-end resorts and marinas. While property prices here are among the highest in Cyprus, so too are rental returns and long-term appreciation prospects.
Paphos appeals more to lifestyle investors and retirees. Known for its relaxed atmosphere and historical charm, the city is ideal for villa investments and long-term holiday lets. Demand here is bolstered by EU and UK nationals seeking a permanent or semi-permanent Mediterranean base. With a slightly more affordable entry point than Limassol, Paphos offers excellent value and steady demand, particularly in areas like Coral Bay and Tala.
Larnaca is undergoing a quiet transformation. Once seen as a lower-cost alternative, the city has recently attracted government-backed infrastructure projects, including the port and marina redevelopment. This has sparked interest among forward-looking investors who anticipate price growth in mid-range residential and mixed-use developments.
Nicosia, the inland capital, offers a very different proposition. As the commercial and administrative centre, it is less tourism-driven and more appealing for business-related rentals and office space. Rental demand is sustained by diplomatic staff, multinational employees, and university students, although resale markets can be slower due to limited international interest in non-coastal locations.
Beyond the urban centres, areas like Famagusta and traditional villages in the Troodos Mountains are drawing niche interest, particularly among eco-tourism operators and digital nomads. These locations tend to be more speculative but can offer high rewards for early movers, especially as remote work continues to shape property demand.
Ultimately, the best location will depend on your investment goals—whether it’s stable rental income, lifestyle enhancement, or long-term capital growth. Many investors opt to diversify across multiple cities or balance urban apartments with a holiday villa to hedge exposure and maximise potential.
