Cyprus: Mediterranean living on the cheap—where gas costs 60 cents a gallon and your utility bills will total less than $400 for the whole year

Year-round sunshine, golden beaches, and crystal-blue waters hardly ever too cold for a swim… this is Cyprus, a Mediterranean island nudging up against the Middle East. It’s a holiday haven that doubles as an expatriate hideaway. In fact, it’s one of the cheapest places in the world to live a Mediterranean-island lifestyle.

The towns are clean and cosmopolitan. Compared with prices in other parts of the Mediterranean, real estate is inexpensive. Indeed, it’s about 30 percent cheaper than in Spain, Portugal, and Greece. And it doesn’t cost a lot to buy in on the first rung of the Cypriot property ladder. In the Limassol area, for example, you can buy a studio apartment resale for as little as CYP9,500 (about $17,500).

Most ancient civilizations dropped anchor here at one time or another, giving the island an outstanding archeological legacy of Roman temples, Byzantine monasteries, and Crusader castles. The entire town of Paphos is on UNESCO’s list of World Heritage sites. Locals call it the "Playground of the Gods," and myth has it that this is where Aphrodite emerged from the waves.

Apart from the capital, Nicosia, the main population centers (Paphos, Lamaca, Limassol, and Ayia Napa) are on the southern coast. The island is home to a sizable number of foreign residents, mostly Britons but also other Europeans, Arabs, Russians, and Americans. The whole island is about 1 _ times the size of Delaware.

A safe haven… and tax-friendly

Of course, cheap property shouldn’t be the only deciding factor when choosing a new home. As well as being very affordable, Cyprus is safe. Crime is virtually nonexistent. And nearly the whole population (90 percent) speaks English. Street names are in English, making it an easy place to get around.

Furthermore, foreign residents in Cyprus can take advantage of one of the world’s most favorable tax regimes. You’ll pay only a flat rate of 5 percent on all pension and investment income.

The resort towns are magnetsfor European vacationers, but the coastline is also dotted with quieter spots. The wild Akamas Peninsula in the Far West region, for example, is home to such exotic wildlife as vultures and bee-eaters, as well as rare loggerhead turtles that come to lay their eggs in the peninsula’s sandy beaches.

The island’s small seaside villages enjoy a much slower rhythm than the towns. Peaceful havens include Latchi and Polis on the Akamas Peninsula and also Pissouri, midway between historic Paphos and bustling Limassol. Its flower-bedecked village square is traffic-free, and the mainstays of village life remain intact: You’ll find a church, a bakery, a post office, and a handful of family-run tavernas. Paths through the vine terraces lead to the white sands and cliffs of Pissouri Beach, a gorgeous spot (where, for as little as CYP55,000, about $100,000, you could pick up a three-bedroom home with terrace views of the Mediterranean).

In addition, Cyprus is a tax haven. It’s home to almost 40,000 "brass-plate" companies taking advantage of the 4.25 percent tax rate that applies to corporate profits in the offshore sector.

The Republic of Cyprus is regarded as a major European gateway for investors from both the Middle East and Russia. An associate member of the European Union, it has lodged an application (expected to be granted in 2003) for full membership.

A meal for two for less than $30

Real estate is not the only bargain here. Other costs of living are very affordable as well. Most properties come free of property taxes. Gas is just 60 cents a gallon. Your water and electricity bills, combined, will amount to less than $350…for an entire year! You can rent a video for $1.40. A meal for two in almost any local taverna will cost less than $30.

Medical care is good, with both government and private hospitals and clinics in all the major towns. Doctors speak English, and the majority gained their qualifications in Western Europe or North America. Although foreign residents must arrange private health insurance, visiting tourists who have an accident are entitled to free emergency treatment in public hospitals. A consultation with a private doctor in most cases will cost just $15 to $20.

Another bonus: You can bring your pets. There is a six-month quarantine period, but you may (depending on the property you own) be able to keep your pet in your home for the quarantine period.

Stay in the South

Geographically closer to Syria than Athens, Cyprus is the Mediterranean’s third-largest island--with a population of about 750,000. Like Ireland, it too is a divided island, with Greek-Cypriots in the south part and Turkish-Cypriots in the northern part. (The Turks invaded in 1974 and have been here ever since.)

The majority of foreign residents are in southern Cyprus (the Republic of Cyprus), which comprises about 60 percent of the island land mass. This is where we recommend you look, as Northern Cyprus is something of an international pariah, and is recognized only by Turkey. There’s no love lost between the island’s two ethnic traditions, and southern maps show northern Cyprus as being "inaccessible because of the Turkish occupation."

Many people think of the Republic of Cyprus as a Greek island, probably because it effectively operates as a Greek colony…complete with tavernas, bouzouki music, and traditional Easter celebrations.

But don’t start thinking that southern Cyprus is just another bit of Greece. It’s not. It’s a country in its own right, with entirely separate laws. The entire island was a British colony for 80 years, and the Brits bequeathed Cyprus its banking, police, and judiciary systems…as well as its custom of driving on the left.

Pay as little as 3 percent flat tax

Americans can take advantage of the double-taxation treaty between Cyprus and the United States, which ensures that you won’t pay taxes twice on the same income (including pension income).

Many expatriates living here off investment income keep their cash growing free of tax in another offshore banking haven, such as the Channel Islands or the Bahamas, and then bring into Cyprus what’s needed for annual expenses. This is because the Cyprus government taxes the assets of expatriates solely on a remittance basis. You pay a flat rate of 5 percent on the pension and investment income you bring into the country. You may also be able to claim exemptions, which can effectively reduce your personal taxation rate to as little as 3 percent.

Apartments from $37,000

If you’re looking for a low-maintenance home, within easy reach of shops and on a bus route, consider a town apartment in a high-rise complex or a maisonette on a small estate. Villas and bungalows are dream choices for retirees, but you’ll pay the price of privacy. Like villas in most other sunny locations, uninterrupted sea views and private pools add a hefty premium. You may also want to consider one of the many small, purpose-built "villages" of stylish villas and maisonettes with large swimming pools, and tennis courts.

Prices are higher around Paphos than elsewhere, but this is the nicest of the resort towns. It was the last of the larger places to be developed, and town planners laid down fairly strict guidelines. Paphos, unlike Larnaca and Limassol, has no tower block apartments, and most buildings are only two or three stories tall.

Benacon lists two-bedroom rural villas starting at CYP45,000 ($80,000), semi-detached houses for CYP38,000 to CYP90,000 ($70,000 to $160,000), and apartments for CYP22,000 ($40,000) and upward. A fully-furnished two-bedroom apartment is on sale right now for CYP27,000 ($50,000).

Another major developer in the Paphos area is the Leptos Group, which handles both resale transactions and new homes. You can view monthly "special offers" on the group’s Web site: www.leptos.com.cy (prices are handily given in dollars). Recent offers have included a studio flat ($21,000), a one-bedroom apartment ($37,000), a two-bedroom terraced house ($66,000).

If price is your most important consideration, look to Larnaca or Limassol, where you can pick up resale studios for less than CYP10,000 ($18,000) and one-bedroom apartments for CYP12,000 (22,000), both currently through the Louis Constantinou Group.

Once the island’s principal port, Larnaca boasts a palm-lined promenade and a yacht marina that give the town a French Riviera feel. Limassol is where you would embark on boat trips to Egypt and Israel. It’s also a good base for exploring Crusader castles and for catching performances at Kourian, an ancient Roman theater with a magnificent mosaic tiled floor.

Chris Michael Estates also has lots of property buys in this area: two-bedroom maisonettes with sea and mountain views starting at CYP50,000 ($90,000).

Heading east, Ayia Napa will probably be too down-market for most tastes; it caters to the bargain end of the European package-tour trade. Around Cape Greco (a national park), Protaras is a better bet for seaside living. Blessed with secluded coves and white-sand beaches, this area has long been a favorite summer escape for locals from Nicosia. Through Karoullas & Markoullis, semidetached two-bedroom houses start at CYP32,000 ($60,000).

Deeds and taxes

Foreign nationals can purchase, on a freehold basis, a residence or a plot of land up to 4,000 square meters in size. But you must use your property for your own personal use. You can’t sublet unless you first set up a company in Cyprus.

Cyprus does have exchange controls—meaning it’s necessary to pay for property in foreign currency; personal checks, bank drafts, and telex transfers are all acceptable. Certificates relating to property purchases are obtained from the Bank of Cyprus.

Purchasing property in Cyprus is a relatively straightforward process. Make sure you use a developer who has a good reputation if you intend to buy off-plan or have a villa built to your own specifications. Take special care when making a private arrangement to buy an older house in the country--ownership of the trees on the land (or even the property itself) could be disputed by other members of the vendor’s family.

It is safest to buy through an agent (since agents must be government licensed) and to have an attorney check the title for you. Title deeds go through a land-registry office, which is run as is a similar office in Britain. Contracts and other legal paperwork are written in English.

You will, as in Britain, have to pay stamp duty, which is effectively a one-time purchase tax…and nominal. On a property costing CYP40,000, you’ll pay stamp duty of CYP60 (about $110).

The land-registry office also levies a property-transfer fee, calculated at 3 percent on the first CYP50,000 of a property’s purchase price, then 5 percent on the next CYP50,000. High-value properties (costing more than CYP100,000) are taxed at 8 percent.

Plus…you will have to pay property taxes (between 2 percent and 3 percent depending on the value of your property) on properties valued at more than CYP100,000.

Luxury rentals from $185 per week

Most Cypriot real-estate agents also operate as property-rental agents. Many of the rental properties are luxurious affairs, set in spanking-new developments with swimming pools, tennis courts, and private walkways to the coast. Apartments and villas are invariably well-furnished. Satellite TVs and stereos seem to be standard equipment, as are heating and airconditioning.

For a classy "village" apartment sleeping two in the Limassol area, expect to pay up to $185 weekly in the winter or $370 weekly in July and August.

If, however, you can do without a swimming pool, a sea view, and an on-site bar/restaurant, you’ll find many cheaper studio and apartment options. In Limassol and Larnaca, monthly rents for a two-bedroom place go for CYP200 to CYP300 ($370 to $550). Check with Chris Michael Estates.

Through Benacon, a month’s stay in a top-notch Paphos apartment would cost about $800 in winter or $1,200 in April or May. When renting by the month, you’ll be billed separately for electricity use.

If you’re looking for a short-term rental, ask the Cyprus Tourist Office for its accommodation handbook, which includes many listings. IL