The Cyprus property market, fuelled by buyers coming in from overseas, is booming as the island proves a popular destination, both for expatriates and those wanting to enjoy a second home.
For many, the path to realising their dream of a home in the sun can be arduous to say the least and getting hold of reliable information can prove very difficult – many who have tried are still wandering the streets, dazed and confused.
Those who have been through the process will understand. Once the necessary permit has been obtained from the Council of Ministers, permission granted for the purchase from the Central Bank, and many other details (some obvious, some less so) have been resolved, buyers rarely have much energy left.
Buyers tend not to be as rigorous when investigating their financing options as in finding the right property. By the time all the other stuff has been done, they are usually in a mad panic to get financing organised quickly. But rather than grab gratefully at the first loan offer, here would be a good time to pause and take a breath.
Is property always an investment?
Of course not. A common mistake financial people make is they often assume that buyers always consider property an investment. Conversely, the mistake many buyers make is that they want that house at any cost.
The best way of looking at it is somewhere in the middle: having found your property, at least make sure that you’re financing it in the best way for you. Remember, if someone wants to lend you money don’t be too grateful. Ask yourself why. In the same way that the property is attractive to you, the mortgage is attractive to the lender, in which case it may be attractive to other lenders too. You probably wouldn’t buy the first property you see, so don’t necessarily take the first mortgage. Find the one that’s right for you.
There are scores of banks both in Cyprus and overseas who are interested in lending money for the purpose of buying property here. Each offers financing in various currencies on numerous different schemes with often wildly different terms and conditions. The market is enormous, offering literally thousands of permutations.
What is best for you is entirely dependant on your particular situation. Negotiating your way through the maze of options may not seem easy, and sometimes the best solution can be a little more complex than the first one that comes along. But with the right help it shouldn’t take long to check them out and compare. It should at least be possible to learn quickly whether something more appropriate is available.
The easy option?
A majority of buyers prefer to borrow in the UK on existing property, so those people deserve a special mention.
The mortgage market in the UK is highly competitive and a thorough investigation can often reduce costs considerably. If this sounds “too good to be true” it shouldn’t — the fact is that in such a competitive market some institutions are hungrier for business than others. This is particularly noticeable when dealing with a current lender. Often, they charge existing clients more, simply because they can. Invariably they’re no quicker either. So while superficially this may appear the easy option, don’t assume it’s the best. Usually, the best rates are only available if you move.
Don’t ignore currency
How you go about financing the purchase is not the only factor that can influence the real cost. There are other costs and risks arising from buying property in a currency different from your own. There is some benefit in borrowing locally in Cyprus Pounds because this is one way to reduce the risk of owning property in another currency. That said, there can also be good reasons for borrowing in Sterling. Mind you, this raises other currency issues.
Once you have raised financing in the UK, for example, you will need to convert Sterling into Cyprus Pounds. Contrary to their charitable and gracious demeanour, banks are interested in generating profit. Your bank may not offer the keenest rates when you buy your Cyprus Pounds, so shop around: the savings can be substantial.
So what price have you agreed?
There is another risk you ignore at your peril: having made a substantial financial commitment, you are subject to the risk of Cyprus Pounds becoming more expensive between now and when you need to pay. For Brits, the Sterling cost of purchase is unknown today, and could change substantially. The longer the period until your final payment, the greater the danger, but currency values can change very quickly so even short periods carry risk.
There are ways to protect yourself and make sure you know how much your purchase will cost in your base currency, so make sure you investigate.
Confused?
Well don’t be. There’s no single answer because the best solution for you is relative to your circumstances. It may be more complicated than buying a property in your home country, but the answers are available so don’t give up.
Ideally, it helps to deal with financing early. The sooner you act, the more choices you’ll have and some of those options will be cheaper and more flexible. Of course, if you’ve found your property already and maybe even sourced the financing it’s still not too late to make improvements. Try to pay for your home as efficiently, and as cheaply, as possible.
Andrew Hulbert is Managing Director of Mosaic Financial Solutions Limited. Tel: 22 877550; www.mosaicfs.com
