The SIXTEENTH edition of the RICS Property Price Index recorded significant falls across Cyprus’ major urban areas, with property prices and rents falling in most districts. Overall, Nicosia and Limassol fared worst as they were the least affected markets until the second half of 2012.
Over the quarter, prices of residential apartments and houses fell by an average of 2.7% and 1.0% respectively.
Although apartments and houses in the Famagusta district showed a marginal increase in their capital values over the quarter, increasing by 2.3% and 3.7% respectively, the prices of houses and apartments in other urban areas fell.
House prices in Limassol fell by 3.0%, followed by Nicosia (-2.5%), Paphos (-1.7%) and Larnaca (-1.3%).
Apartment prices in Larnaca fell by 5.2%, followed by Nicosia (-4.3%), Limassol (-2.5%) and Paphos (-2.4%)
Compared to Q3 2012, prices have dropped by 14.6% for apartments, 11.1% for houses, 20.2% for retail, 13.2% for office, and 16.2% for warehouses.
RICS Cyprus commentary
During the third quarter of 2013 Cyprus bore the consequences of the decisions of the Eurogroup on 15 and 27 March to “bail-in” the depositors of two of Cyprus’ largest banks, to close down Laiki Bank, and to impose capital restrictions. The implications of these decisions were unfolding throughout the quarter, with no bank finance being available and deposits being blocked in bank accounts.
Given prevailing economic conditions and the turbulence in Cyprus’ banking system, there was a lack of transactions during the quarter. 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. Furthermore, those interested were unable to access bank-finance or their deposits.
Price changes over the past year
Compared to Q3 2012, the average price of a residential apartment has dropped by 14.6%, while the price of an average house has fallen 11.1%.
Prices for commercial property have also fallen, with the price of retail units falling by 20.2%, while the prices of offices and warehouses have fallen by 13.2% and 16.2% respectively.
Gross rental yields
Yields are a useful tool showing the relationship between rent and property prices. At the end of Q3 2013 average gross yields stood at 3.8% for apartments, 1.9% for houses, 5.3% for retail, 4.5% for warehouses, and 4.3% for offices.
(Derived from the RICS Cyprus Property Price Index for Q3 2013)
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).
Monitoring Process
The estimation of price levels is carried out by accredited RICS property professionals who are active in the relevant markets.
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.