Out with the new, refurbish the old

3 mins read

Increased building costs, limited availability of suitable housing within town centres, the burden of VAT, the lack of title deeds has turned housing demand towards older properties, which require repair.

In this sense, units that have attracted very little interest and value before the new state of affairs, now with the potential of improving older units, have increased their potential and value.

In comparing the cost of older homes, the VAT (19% or 5%) for new ones, the existence of a building permit, the availability of titles for the older units are some of the factors to be taken into account

If we are to adopt the value of older apartments at ±€1,000/sq.m. (for a 100 sq.m. unit say €100,000), the new ones valued around ±€2,100-€2,300/sq.m. (plus added transfer fees, VAT) the cost difference is substantial.

Interest for the more aged units (say on average 10-15 years old) has created the need for small scale building contractors who undertake the repair/upgrading.

Such small contractors provide the whole spectrum of building work, including decoration, woodwork, electrical/mechanical works.

The difference in cost for 100 sq.m. units is around €120,000-€130,000, a difference which is much higher than the possible improvement cost.

When considering the acquisition of the older units, the buyer must consider the quality of the common areas, the possible existence of latent defects (the same for the new units but to a lesser extent), the quality of the units within the project and its neighbourhood.

As such, the comparison between new and older units cannot be absolute.

Based on our experience, however, it appears that the acquisition of an older unit compared to a new one has more economic benefits.

Bearing in mind the lack of organized small-scale contractors in Cyprus, we note firms are coming from Greece, which undertakes this type of renovation work.

You must ensure that locals or other contractors are registered with the Registrar of Contractors/duly licensed.

In case of disputes, you may run into trouble if legal issues arise [your contract may be considered void if contractors are not registered].

Looking at the older units, they are generally larger than new ones.

Smaller living areas, including verandas, the separation of the kitchen/dining area, the lack of individual bathrooms in all bedrooms, lack of storage and sufficient parking spots are not reflected in the older units.

As such, any prospective client must weigh the pros and cons of each unit before a decision.

There is an evident increase in demand for older units within central town areas, which is also caused by increased demand for rentals from students/young families/Airbnb.

Based on the available data, such units, when improved, show a good return.

A major issue is the quality of the administration of the common areas.

Newer units have fewer problems than the older ones and for this, you must also consider the common expenses bills and any pending capital costs.

On the other hand, new units, which offer higher quality and numerous facilities, have high common expenses bill. This factor is exaggerated by non-payment by a good percentage of the residents.

It is a huge problem, making the operation of apartment buildings/comprehensive development projects a major issue.

The Government is trying to reduce the cost of buying/let for units, but on the other hand, its non-action to resolve the common expenses issue creates problems, both for the building maintenance and creating animosity amongst the residents.

Examining the rental levels of other EU countries, take a two-bedroom unit for an example, the statistics record the following.

Austria/Vienna                 €1.250 p.m.

Belgium/Brussels             €1.090

Bulgaria/Sofia                   €1.150

Cyprus/Nicosia                    €740

Finland/Helsinki             €1.550

France/Paris                    €2.200

Germany/Berlin              €1.400

Greece/Athens                 €1.000

Ireland/Dublin                 €2.150

Malta/Valetta                   €1.200

Italy/Rome                           €750

Romania/Bucharest           €860

Cyprus is relatively cheap for rents, but so is the low income of its residents.

On a recent let of ours to a Japanese client, he was excited to conclude a rental of €2,000 p.m.

“Do you know how much we pay for this type of property in Tokyo? – at least four times more!!” he said.