The rental income/ investment ratio for a property in Cyprus is not good at all I would say but definitely an investment in Cyrpus in terms of appreciation is not bad at all.
Cypriots don't always look property purely as an investment, they do attach sentimental value to it so once a property passes to Cypriot hands it is less likely to be out in the market for sale again anytime soon thus higher offers are required to motivate people to sell.
There are a number of other reasons to mention but I'll just limit myself to saying the outcome.
Property prices in Cyprus at the moment are down but they are expected to recover in the next years. If you bought property between the years 2007 and 2009 and try to sell it now then you are likely loose money but then again if you wait for a few more years you will make a profit for sure. Real estate is a long term investment either way.
Which part of Cyprus are you looking at? Certain areas are better than others for investment. Prices are currently still falling in the resale sector and some developers are also discounting heavily. However since the beginning of this year the property market has improved slightly so these discounts may not last long. The Cypriot developers will be quick to put their prices up again once they have sold a few discounted properties to ease their financial burdens.