Cyprus has become an attractive destination for real estate investments among Israelis. The pleasant climate, the high potential yield and the economic stability of the island attract many investors. 
Sunny weather, 5%-7% returns, and a growing country attracting residents from all over Europe — these factors have made Cyprus a sought-after destination for Israelis looking to purchase apartments. While prices are indeed higher than those in Greece, they remain attractive compared to Israel.
The Israeli real estate market has been exhibiting uncertainty for a long time. Housing prices are rising, and the security and geopolitical situation certainly do not contribute to a positive atmosphere. All of this has led many Israelis to seek opportunities in Cyprus, which they see not only as an economic alternative but sometimes as a destination for living or vacations. Limassol, Larnaca, and Paphos are considered the most desirable cities for investment, with Limassol being the largest and most expensive among them.
There are several economic advantages to purchasing an apartment in Cyprus. These include exemption from purchase tax, low property taxes, and unlike various countries in Europe, including Greece, there is no inheritance tax in Cyprus. As a member of the European Union, Cyprus provides free access to the European market and the business and legal advantages that come with it. The corporate tax rate is only 12.5%, and just 2.5% for high-tech companies, which attracts international businesses and private investors, indirectly impacting the local real estate market. Additionally, it allows foreign residents who come to live in the country to be exempt from dividend tax for a period of 17 years.
Of course, there are also disadvantages: there is a high VAT of 19% on the purchase of new properties, although there are various pathways that allow for a reduced rate of 5% under certain conditions. Income tax rates range from 20%-30% on rental income starting from about €19,500 per year, and there is also a capital gains tax of 20% on profits from property sales starting from about €17,000; however, exemptions and reductions exist depending on the holding period of the property.
Many Israeli players have identified the demand for purchasing properties in Cyprus, entered the local market, and are offering apartments for sale to Israelis. The Israeli buyers include high-tech professionals, economists, lawyers, real estate agents, and freelancers who often already own an apartment in Israel and are looking to diversify their investment portfolios. They seek investments that will generate passive income but also serve as vacation homes.
Mark Zeevi, chairman of BMBY Software Systems, which developed the BMBY Dreams system providing remote access to hundreds of apartment sale projects worldwide — about 30 of which are in Cyprus — moved to Larnaca with his family about six months ago. They live in a house near the sea from which he manages his business. According to company data, 70% of apartment buyers on the island are Israelis. The rest come from Germany, Britain, and Poland. “Apartment prices start at 600,000 shekels (€150,000). Purchasing a property priced over €300,000 grants residency on the island for two years; after that, it is reviewed again and can be extended for another three years,” Zeevi explains. “Israelis primarily seek properties close to the sea, and those interested in living there look for properties located near international schools. In all the sought-after cities — Larnaca, Limassol, and Paphos — communities of Israelis have formed, with Chabad houses playing a part in community cohesion.”
According to BMBY’s data, since the outbreak of war (likely referring to regional conflicts), there has been an approximately 300% increase in demand from Israelis for purchasing apartments in Cyprus. The number of transactions conducted by Israelis through the system on the island in recent months averages about 150 transactions per month. “Currently we are working together with an Israeli credit card company and local banks in Cyprus on a technological system that will allow Israeli buyers to obtain contractor loans when purchasing apartments in Cyprus,” he reveals. “This is a loan for any purpose to complete the required equity capital while the developer pays the interest. Additionally, the system will allow for rapid mortgage processing in Hebrew, where collateral for the loan will be based on the purchased property and proof of an annual income of €100,000 for the buying household.”
What are the risks involved in purchasing an apartment in Cyprus? It is important to note that some mechanisms present in the Israeli market to protect property buyers do not exist in Cyprus; therefore, it is advisable to receive detailed explanations from a lawyer regarding three main issues: how funds paid to the contractor during construction are secured in case they do not complete it; what compensation a buyer will receive in case of delays in delivery; and what extent of responsibility falls on the contractor for fixing construction defects.
In conclusion, Cyprus offers many advantages for Israelis seeking investment and living opportunities; however, purchases should be made carefully with proper legal and financial due diligenc
To view the article in YNET, click here – Hebrew article
