Those who rent out property in Cyprus have better returns that those with deposits at commercial banks since interest rates on offer are getting lower and lower.
Following Hellenic Bank, Bank of Cyprus has also lowered deposit rates recently. And while depositors collect peanuts from interest rates ranging from 0.2% to 0.8%, those being paid rent enjoy five to six times higher yields.
This was not the case in Cyprus a decade ago when deposits were a lucrative investment with interest rates as high as up to 6%. That was the time when now defunct Laiki Bank had liquidity problems and paid dearly for deposits, prompting strong competition with interest rates amongst the island’s lenders.
The banking system today has excessive liquidity and this led to decreased deposit rates and, thus, lower profitability.
The annual yield for €100,000 of deposits with an interest rate of 0.2% is just €200. Twelve years ago, the interest rate was 6% and the yield as high as €6000.
Returns on rentals for houses in Nicosia range from 3% to 4%, for apartments from 4% to 5%, for shops from 5.50% -6%, for offices from 5% to 5.50% and for holiday homes from 2% to 2.5%.
Limassol home rental rates range from 2.5% to 3%, apartments from 4.5% to 5%, shops from 5% to 5.5%, offices from 5% to 5.5% and holiday homes from 2.5% to 3.5%.
Larnaca rental rates for homes are 2.5% to 3.5%, apartments from 4.5% to 5.5%, shops from 5% to 5.5%, offices from 5% to 6% and holiday homes from 2% to 3%.
In Paphos, rental returns for homes range from 3% to 4%, apartments from 5% to 6%, shops from 5.5% to 6.5%, offices from 5% to 6% % and holiday homes from 3.5% to 4%.
In Famagusta, rental rates range from 3.5% to 4.5%, apartments from 4.5% to 5.5%, shops from 5% to 6%, offices from 5% to 6% and holiday homes from 3.5% to 4%.