IMPORTANT UPDATE: It’s official, Cyprus closed its popular citizenship by investment program on 1 November 2020. What this means is investors will no longer be able to directly acquire a Cypriot passport by investment.
A new program has taken place, however. The Cyprus Golden Visa provides individuals with an alternative route to permanent residency in Cyprus. Those looking for European citizenship can also apply to the Malta citizenship program, which offers a direct investment route to a Maltese passport.
We take a look at the property markets in Portugal, Spain, Malta, Cyprus and the UK to examine factors like recovery, growth and restrictions on foreign ownership.
Portugal Property Market
Portugal has been experiencing a recovery in its property market. After 13 consecutive quarters of year on year declines, property prices started to recover in Q4 2104.
The house price index has risen continuously since Q1 2015, rising from 100.89 in Q3 to 102.06 in Q4 2016, and increasing steadily from its record low of 85.93 in Q2 2013. It is expected to continue rising and to be at 121 in 2020. Lisbon apartment rental yields ranged from 5.4% to 6.2% in September 2016.
Home ownership in Portugal is at ~75%. Portugal has one of the lowest ratios of house prices to GDP per capita in Europe, as well as one of the lowest prices in Europe per square metre within city centres.
A recent survey by the Royal Institute of Chartered Surveyors and Confidencial Imobilario shows a strong demand and a lack of supply in the housing market is expected to continue to push up prices, with the largest price increases in the Algarve over the coming year, with further increases in Lisbon and Porto. It also shows that promised sales are at the strongest pace on record and that rents are expected to increase.
Portugal places no restrictions on foreign property ownership. Transaction costs are generally low. President Antonio Costa has suggested raising indirect taxes in 2017 on properties with a market value of over €600k; however many are opposed.
Spanish Property Market
House prices in Spain fell for nearly seven years, returning to growth in Q4 2015.
The house price index rose to 1512 €/square metre in Q4 2016 from 1499.7 in Q3. It is expected to rise to 1832 in 2020. Prices fell year on year to March 2017 however by 1.3%, partly due to the decline in the price of single-family homes by 6.2%, and by subsidised housing dragging down the average price of flats by 0.3%. Increasing prices in Barcelona and the Balearics are also being offset by decreasing prices in the interior.
The Notaries Association in Spain’s latest set of figures shows that demand is strong and growing, and sales increased 19.5% year on year in March 2016. Apartment sales were up 20.5% and family homes increased 15.6%, however, new build home sales were down 11.5%.
Home ownership in Spain is at ~78%. Spain places no restrictions on foreign property ownership. Transaction costs are moderate. Mortgages are charged to the property; any outstanding mortgages will be passed on to the buyer.
UK Property Market
Housing demand in the UK experienced strong sustained growth in the years leading to 2016. House price growth is slowing, partly due to decreasing affordability due to this growth, and partly due to a decline in the pace of job creation and increasing inflation.
The house price index was at 710.9 in April 2017, down from its all-time high of 719.1 in December 2016. House prices increased 3.8% year on year in Q4 2016 and Q1 2017, the lowest annual rate since May 2013. This was down 0.2% on Q3 2016 and the first quarterly decline since November 2012. Average prices increased by 4.1% year on year to March 2017, down from 5.6% year on year to February. The highest annual growth was in the East of England and the East Midlands at 6.7%, while the lowest was in the North East with a decrease of 0.4%, followed by London with an increase of 1.5%.
House price growth in 2017 is expected to average 1% in 2017, with a 1% fall in prices forecast in central London. Prices are then expected to recover, with UK wide rises of 2.5% in 2018, 3% in 2019 and 2020 and 4% in 2021 predicted.
Rents were up 1.8% in the year to April 2017, and are predicted to increase by 1.4% in 2017, and by 2% per year for the following four years.
Home ownership in the UK is at ~63.5%. The UK has a shortage of available homes and focus is increasing on new build homes. New build supply is outstripping that of existing homes, which is near a record low. Key risks are uncertainly surrounding Brexit and a possible slowdown in economic growth. Affordability is an issue with the shortage of supply and high deposits required by lenders.
Malta Property Market
Property prices have been rising in Malta for three years. The Maltese central bank attributes much of this to the effects of the Individual Investor Visa (IIP) programme and the waiving of the 3.5% stamp duty on the first €150k for first-time buyers (to continue in effect until the end of 2017).
Prices increased for all property types in 2016, with Maisonettes experiencing the highest increases at 20.42%, apartments increasing 15.86%, terraced houses by 13.33%; other houses such as townhouses and villas however increased by only 1.96%. The house price index rose in Q4 2016 from 119 to an all-time high of 126.15. It is expected to continue rising and to be at 144 in 2020. Rental yields on apartments average approximately 4.42%.
Home ownership in Malta is at nearly 81%. Stamp duty in Gozo will be reduced from 5% to ~2% through 2018 for promises of sales registered in 2017. Malta’s 2017 budget includes €100k in subsidies for expenses related to restoration of certain properties and simplified tax collection on inherited property.
Malta places restrictions on foreign property ownership. Foreigners (including EU citizens) are limited to purchasing a single property unless further purchases are in specially designated areas. Restrictions on renting foreign-owned property include that the property much is valued at over €233k, must have a swimming pool, be registered with the appropriate board, and is only available for short term lets.
Cyprus Property Market
Building permits have been on an increasing trend over the last three years. 444 building permits were issued in Cyprus in February 2017, down from 465 in January. Construction output increased 0.3% for the year 2015, and 12.9% in 2016.
The house price index rose throughout 2016 and was at 90.5 index points in Q4 2016. It is expected to continue rising to 92.76 points in a year’s time and to be at nearly 95 points in 2020. House prices rose 1.7% in Q4 2016, while apartment prices were up 0.7%. Sales were down 2% year on year to April 2017, but up 7% for the first four months of 2017, led by areas popular with international investors. Paphos was up 22%, Limassol 16% and Nicosia 3%. By contrast, sales were down 13% in Famagusta and 12% in Lanarca.
Apartment rental prices increased 1.8% and house rental prices increased 2.9% quarterly and were up 6.6% and 8.7% year on year to Q4 2016. Average gross rental yields for apartments at the end of 2016 was 4%, while that for houses was 2.1%.
Home ownership in Cyprus is at 73%. The Cypriot Council of Ministers decided in April 2017 that as has been the case since 2013, rent increases will not be allowed until 2019 for properties covered by the Tenancy Law. This covers properties built pre 2000 in controlled areas for which no rental agreement is in force.