Investments under scrutiny: Cyprus prepares new rules for foreign capital

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The Cypriot parliament is considering a draft law on foreign investment control, which may slow down real estate transactions, reports the Cyprus Property Buyers portal. The Association of Credit Acquisition and Asset Management Companies (ACACS) argues that vague definitions and lengthy approval deadlines will create barriers for investors and undermine the country’s appeal to capital.

Screening foreign investors

The amendments aim to establish a mechanism for screening foreign investments in line with EU Regulation 2019/452. The draft introduces mandatory notifications, approval criteria, and designates the Ministry of Finance as the competent authority. The initiative is presented as a way to safeguard national interests.

ACACS director Lisa Solones sent a letter to the parliamentary finance committee. She warns that the draft introduces ambiguous terms such as “enterprise of strategic importance” and “critical infrastructure facilities”. Without precise definitions, a wide range of real estate transactions could fall under the law, leading to uncertainty and bureaucratic delays.

The deadlines for notification and review are of particular concern. The bill requires investors to notify of a transaction at least ten days in advance but does not clarify which date should be considered the moment of execution. In addition, the draft allows 20 days to decide on a review and up to 65 days to conduct it, which could ultimately delay approvals by more than four months.

Another contentious provision gives the Ministry of Finance the power to revoke approval and annul agreements within 14 months after completion. The Association notes that this creates significant risks for market participants. If a developer begins construction and the transaction is later canceled, it is unclear who should bear the potential losses.

As a solution, the Association proposes reducing the review period to two or three months and introducing a compensation mechanism for investors whose projects may be canceled. Experts stress that such measures should be applied only in exceptional cases where national security is at stake.

Golden Visa under review

Cyprus is also debating other major reforms, some of which are linked to the country’s expected accession to the Schengen Zone in 2026. Some experts see this as an additional incentive, while others argue that existing practices, such as “golden visas,” need to be reviewed. MP Georgios Loukaides called the current scheme a “program without criteria” and proposed abolishing the preferential 5% VAT on real estate, as well as introducing clear rules and monitoring mechanisms. If this does not happen, he believes that residence permits for investment should be suspended entirely within six months.

Opposition representatives argue that once integrated into the Schengen Zone, investors will use Cypriot residence permits mainly for free movement across the EU. The government and business community, however, believe that connecting to EU-wide systems will strengthen oversight and reduce the risk of abuse. At the same time, the proposal to abolish preferential VAT has also gained broad support. The European Commission generally views such schemes negatively, as they are often used for money laundering and sanctions evasion.

The Cyprus Migration Department explains that the program applies to third-country nationals willing to invest in the island’s economy. The minimum investment is €300,000. Funds can be directed into residential or commercial real estate, as well as other categories of assets approved by the authorities. At the same time, the investor must prove an annual post-tax income of at least €50,000. For spouses the threshold rises by €15,000, and by €10,000 for each child.

The investor’s income must be sufficient to support the family without recourse to Cyprus’ social welfare. Applicants are also required to demonstrate the legality of their funds and provide a certificate of no criminal record from their country of origin or permanent residence.
The program does not require permanent residence on the island. However, to maintain status, investors must visit Cyprus at least once every two years. If all conditions are met, the application is processed under a fast-track procedure.

Rental yields under pressure

Global Property Guide notes that in 2024 housing prices in Cyprus rose by 7–8% compared to 2023. In Paphos and Famagusta prices jumped by 11–12%, in Nicosia by 2.7%, while Limassol and Larnaca showed more moderate growth. The average price of a new apartment reached €281,000, and a house – €461,000. The highest concentration of expensive projects was seen in coastal cities.

Apartment rental rates increased by 1.5%, while house rents fell by 0.8%. In Paphos, rents surged by 10% year-on-year, while in Nicosia the increase was modest at just 1.6%. Limassol recorded a 4% drop, with average rents at the beginning of 2025 reaching €2,742 per month for an apartment and €4,492 for a house. In Q3, experts at Global Property Guide estimated rental yields in the city at 5.78%, above the national average of 5.09%.

A one-bedroom apartment worth €255,000 can generate a yield of 7.06% if rented for €1,500. Two-bedroom properties reach 6.29%, but their price is €420,000, with the optimal rent level at €2,200. Three-bedroom apartments priced at €810,000 deliver just 4% yield when rented for €2,700 per month.

In Nicosia, the average yield is 4.90%, with a possible maximum of 5.57% from a one-bedroom flat costing €140,000 and rented for €650. In Paphos, the city-wide yield stands at 4.57%. Slightly higher, 4.71%, is possible from a three-bedroom apartment priced at €420,000 and rented for €1,650. Overall, Cyprus’ market shows weakening rental income growth and increasing dependence on specific locations. In addition, new restrictions for property owners may further weigh on the market.

Investors are required to commit substantial capital, while projected returns remain modest. Some countries offer more attractive ratios. For example, in Georgia average yields stand at 8–9%, with many properties generating significantly higher returns. Particularly appealing is the branded hotel sector, which has begun to develop in the country.

Economic outlook and market risks

IMF experts report that in 2024 Cyprus posted a budget surplus of 4.3% of GDP, while public debt fell to 65% of GDP. The banking sector retains sufficient liquidity and capital, helping to contain financial risks. For 2025, economic growth is projected at 2.5%, with a medium-term outlook of around 3%.

The Fund also warns of a possible global slowdown, which could reduce export revenues and investment inflows, as well as inflationary risks. Increased government spending or new stimulus measures could push prices higher and raise debt burdens.

The report stresses the need to accelerate structural reforms, noting persistent issues such as low labor productivity and lengthy judicial procedures, which increase risks for businesses and investors.