Costas Markides on the proposed Spanish property tax change's impact on Cyprus' real estate market

Tax expert Costas Markides suggests Cyprus could be among the handful of countries filling the void if Spain goes ahead with plans to introduce a 100% tax on property acquisitions by third country buyers.

The CPA, Board Member, International Business Unit, Head of International Tax and Transfer Pricing Services at KPMG told CBN, “If the Spanish Prime Minister delivers on his promise to move forward, although practically difficult, then Cyprus is among a handful of countries that can fill the void along with Italy, Greece, Malta and France.”

Markides explained that the recently announced intention of Spanish Prime Minister Pedro Sanchez to introduce a 100% tax on property acquisitions, aims to at least contain the demand from third country property buyers in Spain, since this is not possible for EU citizens due to the founding principle of the free movement of persons enshrined in the treaty establishing the European Union.

“What remains to be seen,” Markides continued, “is the magnitude of the impact of such a decision on the housing market in Cyprus, taking into consideration the current problematic situation and scarcity of affordable housing solutions on the island and a real estate market that has for many, been operating full steam for a while now.”

As the tax expert went on to point out, Cyprus has long been a popular destination for real estate investments.

“Cyprus has always been a favorable destination for people from the greater Eastern Europe, Scandinavia and Britain,” he said, going on to elaborate, “The year-round mild climate above all, combined with the relaxed lifestyle and safety that comes with it, have been instrumental in attracting foreign direct investments in luxury holiday homes in and around the area of Limassol at first, with Larnaca, Paphos and the surrounding areas closely following.”

“As a result,” Markides continued, “a stand-alone ecosystem spanning from luxury hotels to family owned shops and businesses with a multiplying effect on the local economy was created, which in turn has attracted further interest and has largely contributed to higher demand for housing solutions. The demand surpassed available supply and as a result caused prices of properties to go up, taking into consideration the natural constraints of the limited supply of available land on the island.”

He did, however, also underline that, “Although Cyprus is at its core, a hospitable and welcoming multicultural jurisdiction, the higher demand for housing solutions and the inevitably increase in property prices, has created a housing problem which has been exacerbated further in recent years as a result of the geopolitical uncertainty that surrounds us.”

The British press has also suggested that Cyprus could prove popular with UK citizens wanting a place in the sun for their homes or investment properties.

Also read: British experts predict buyers will turn to Cyprus following Spain’s planned property tax hike