Cyprus has long been the black sheep of the overseas property family. With its economy in turmoil, hit hard by the Eurozone crisis, prices and demand have been plummeting for months. But Cyprus surprised the world this week with the news that domestic property sales in January jumped by 97 per cent compared to 2011.

The figures, published by the Department of Land and Surveys, show that 697 local sales were completed in January, compared to 354 in January the year before, marking the second consecutive monthly increase in transactions for the market.

The rise, which followed a 22 per cent increase in December, has been attributed to the tax incentives introduced by the government last year. The incentive, which reduces VAT for first-time-buyers who live there permanently, also abolishes Property Transfer Fees on the first sale of a property for six months.

Since 2004, when domestic buyers were priced out of the market, property transactions have dipped. "A fall in the Island's GDP and rising unemployment means that the ‘good days' have gone", admitted real estate analysts Leaf Research to Cyprus Property News last month.

But now local investors are rushing to complete transactions before the deadline arrives.

So what does this boom mean for overseas investors?

While locals look to Limassol for property, Paphos is the primary place of choice for international investors. According to the Land Registry, 35 per cent of overseas purchases in 2011 took place in the popular town. But demand continued to dip, with sales volumes dropping by 18 per cent compared to 2010.

As Greece, Italy and Spain continue to cause wider economic concern, confidence in Cyprus property remains low abroad - particularly in the UK, where Brits make up the main buyer demographic. Scandals over missing title deeds and developers extorting investors' money have scarred many, prompting the government to introduce new measures last year to try and repair the country's tarnished image. Meanwhile, developers are busy targeting China in an attempt to find buyers unaffected by either crisis.

In January this year, 106 contrasts were deposited by overseas investors in the Registry, indicating almost the exact opposite of the upward domestic trend. "To put this into perspective," writes Global Edge, "in 2007 sales to foreigners averaged 940 per month."

Yet while overall foreign transactions fell by 37 per cent at the start of 2012, sales in Paphos actually increased by 23 per cent.

With prices predicted to fall throughout the year and the tax incentives in place, the cost of purchasing a home is certainly low enough to be attractive. But as investors await compensation, Cyprus is still searching for a way to restore confidence in its property market. If the current trend continues for another few months, could a surge in domestic transactions be enough to convince buyers that it's safe to return?