Short-term or long-term rental in Paphos: calculating the net yield

“Let it short-term or long-term?” — this question is usually answered with someone else’s screenshot showing 10% a year. We answer with a calculation. Below is an honest breakdown of the two rental modes in Paphos on fresh data: what professional yield valuation actually shows, where the tourist flow is going, and why the “bright” gross figure of short-term letting often settles down towards the modest long-term one once costs and vacancy are deducted. We count what the “passive income” pitch forgets to show.

Two modes — two different economics

Long-term letting means a stable tenant, an annual contract, minimal operations and predictable cash flow. Short-term letting is a micro-hotel: check-ins and check-outs, cleaning, dynamic pricing, seasonality and a management company that takes its percentage. The same property in these two modes is two different businesses with different yields, different risks and different regulation. Ultimately what matters to an investor is how much stays in the pocket after all costs and vacancy.

What professional yield valuation says

Let us start with an anchor that does not depend on anyone’s marketing — gross yields from RICS/KPMG for Cyprus (valuation-based, Q4 2025). Holiday apartments deliver 5.66% against 5.45% for ordinary apartments on long-term lets — the short-term premium exists, but it is only about 0.2 p.p. at the level of the gross valuation. For houses the picture is the opposite: holiday houses — 2.79%, ordinary houses on long lets — 2.96%. It is important to note that these are average figures for Cyprus; the more expensive the property, the lower the yield. In other words, a villa as a “short-let” asset loses on valuation yield to itself as a long-term let. A villa is a play on capital growth and lifestyle, not on slicing up nights.

Remember this: the short-term premium lives in apartments, and even there it is thin.

Demand: record tourist flow, and Paphos growing faster than the island

The fuel of short-term letting is tourists, and here the numbers are strong. In 2025 Cyprus received 4.5 million tourists — a record, +12.2% on 2024. Tourism revenue was €3.7 billion, +15.2%: income is growing faster than the flow, which means the tourist has started spending more per night. For short-term rental that is a tailwind. For Paphos specifically: the deputy minister of tourism called 2025 a record year and stated that the flow into Paphos grew by more than 30% year on year — that is, Paphos outpaced the island in absolute terms. At the same time, the share of Paphos in the overall flow according to the CyStat survey has been sliding in recent years — from 37.5% in 2017 to 31.5% in 2024 (CyStat has not yet published share data for 2025). Read this correctly: the flow into Paphos is growing strongly, but unevenly across locations. The conclusion for an investor: short-term letting in Paphos depends on location far more than on the “island average” — the front line and walking distance to the sea catch this record flow, while a property further inland barely sees it.

The gross figure is pretty, but we calculate the net

A screenshot of “10%+ a year” from a listings platform is a gross yield based on peak-season revenue, before costs. The real picture comes from the net figure. For a specific property in Paphos the gross short-term yield comes out at around 8-9% a year, but out of it go: management at 20–25% of revenue, cleaning and consumables, utilities and internet (paid by the owner, not the tenant), furnishing with depreciation, increased wear and tear, off-season vacancy and the tax burden. After all of this, the “bright 10%” of short-term letting and the “modest 5%” of long-term letting converge closer than the picture promises. Long-term letting gives less on top, but takes almost none of your time and keeps occupancy 12 months a year — short-term letting in Paphos lives off the season.

Regulation: short-term rental is a licensed business

This is the key thing that turns “passive income” into operating income. Short-term letting to tourists in Cyprus requires registration of the property in the self-catering register of the Deputy Ministry of Tourism of Cyprus and a registration number, which is mandatory in every listing. On top of that the tax regime differs: tourist accommodation is subject to VAT at 9%, whereas long-term residential letting is exempt from VAT. Management companies charge their fee precisely because they take this operational work and compliance off your hands. To calculate the yield of short-term letting without accounting for the licence, VAT and management is to calculate someone else’s number, not your own.

That is why we always recommend signing a contract with an experienced management company that will take 25-40% of gross income for itself, but through its experience will deliver good occupancy over the year and, accordingly, keep your net yield at an acceptable level.

What this means for entering the market

• An apartment by the sea, within walking distance of the promenade or the beach, is the only segment where short-term letting in Paphos gives a meaningful premium over long-term letting. The exception is the rare residential complex with its own full infrastructure and a professional management company (there location matters less). And even then the premium is thin — management and vacancy eat it up if the location is not front-row.
• A villa is for long-term letting or capital growth, not for short lets. The valuation yield of holiday houses is below that of long-let houses — the market has already priced this in.
• The island’s tourist flow is at a record (+12.2% arrivals, +15.2% revenue in 2025), but bet on short-term letting by the specific location, not by the “Cyprus average”.
• Short-term letting is a business with a licence, VAT and operations, not passive income. Long-term letting gives less on top, but takes almost no time and keeps occupancy all year round.