RESIDENTIAL property prices continued to fall in most areas of the island during the second quarter of 2012, according to the eleventh issue of the Property Price Index published by Royal Institute of Chartered Surveyors (RICS).
Quarter-on-quarter, the average prices of residential apartments fell by 2.0% and those of houses fell by 2.0%. Limassol was worst affected with prices for apartments and houses dropping by 3.4% and 2.3% respectively.
House prices in Paphos and Paralimni/Famagusta remained unchanged over the quarter, bringing hope that the market has bottomed out in these areas and perhaps showing some early signs of a recovery. However, the prices of residential apartments continued to fall across all the main urban areas of the island.
Prices of commercial property also fell over the quarter. Retail properties fell by an average of 3.0%, office were down 2.1% and warehouses fell 3.2%.
Reporting on the latest figures Pavlos Loizou MRICS, who is in charge of the RICS Cyprus index, said “During the second quarter of 2012 Cyprus’ economy bore the consequences of the political turmoil in Greece and the progressive decoupling of the local economy.
“The worsening state of Cyprus’ economy and the growing political and economic uncertainty across the eurozone, led to a pronounced slowdown in mortgage and corporate lending and a further rise in the rate of unemployment.”
Mr Loizou went on to say “The first half of 2012 saw investors postpone their decision making and look for safe havens. Property, both commercial and residential, was increasingly viewed as a risky asset and one with negative prospects in the near to medium term.
“This led to a reduction in interest from both local and overseas buyers, resulting in low transaction turnover. Local buyers in particular were the most discerning as the increase in unemployment and the worsening prospects of the local economy led to a sharp reduction in interest.”
Compared to the second quarter of 2011, apartment prices have fallen by 10.2% and house prices are down 6.4%. The prices of retail premises have fallen 10.8%, while those of offices and warehouses are down by 9.0% and 12.0% respectively.
Yields are a useful tool showing the relationship between rent and property prices. During the second quarter of 2012, average gross yields stood at 3.8% for apartments, 2.0% for houses, 6.0% for retail, 4.7% for warehouses, and 4.5% for offices.
The parallel reduction in capital values and rents is keeping investment yields relatively stable and at very low levels (compared to yields overseas). This suggests that there is still room for re-pricing of capital values to take place.
Outline of properties used to calculate the index
Apartments: Residential, two bedroom, 85sqm, Medium quality.
Houses: Residential, three bedroom with garden, Semi-detached, 250sqm, Medium quality.
Retail: High-street retail, 100sqm ground floor area with 50sqm mezzanine.
Warehouse: Light industrial area, 2,000sqm, which includes 200sqm office space.
Office: Grade A, City centre location, 200sqm
(All property types used to calculate the index are: freehold, have all licences and permits in place, have their Title Deeds, are subject to VAT and are in a good state of repair).
Methodology
The methodology underpinning the RICS Cyprus Property Price Index was developed by the University of Reading UK and may be viewed by clicking here.