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Nicosia and Limassol home price falls accelerating

Property prices in Paphos and Famagusta have been falling for years, while prices started to fall in Nicosia and Limassol six months ago and the rate at which they are dropping is accelerating.

PROPERTY prices for buyers may be down but so are rents on apartments, warehouses and offices, the latest figures show.

The latest index from the Royal Institute of Chartered Surveyors (RICS) shows “significant falls across Cyprus’ major urban areas, with prices and rents falling across all districts” in the second quarter of 2012.

Over six months, the average rental price of a Nicosia two bedroom apartment went from €555 in March to €535 in June. In Limassol, rental prices for apartments went down from €502 to €479 in the same time period.

In just three months, about €2,631 got shaved off the average buying price of a two bedroom apartment in Cyprus falling from €131,120 in March to 128,484 € in June.

Compared to the second quarter of 2011, prices dropped by 10.2% for apartments, 6.4% for houses, 10.8% for retail, 9.0% offices, and 12.0% for warehouses, according to the RICS Cyprus property price index.

“[Prices] are going down. The country’s bankrupt and so are the banks. It’s as simple as that,” said Pavlos Loizou MRICS who is in charge of the RICS Cyprus index.

“Eighty-three per cent of Cypriots own their home so we don’t really have lots of people who want to buy… at this point you have almost 11 percent unemployment which means that people who want to buy are putting it off,” he said.

Most investors in Cyprus and abroad, such as property developers who would have an interest in buying a property, are “also sitting on the fence waiting to see how they play it out,” Loizou said.

If the state of the economy and property prices were the only thing concerning investors then they might be buying, Loizou said.

What is going on is that no one knows if and what changes there will be in taxes and legal requirements.

Cyprus is due to borrow money from its EU partners and will be asked to restructure its economy and increase its income.

Property developers cannot calculate what their income will be from renting out a property for the following year, since they might soon be asked to contribute a bigger proportion of their turnover, Loizou said.

Or they might not. The point is that no one knows, “there are questions, e.g. are things playing out as they are in Greece?”

So what next for the following year or two?

“Paphos and Famagusta have seen their prices drop for years. Nicosia and Limassol started six months ago so prices for them are dropping at an accelerating rate,” Loizou said.

Nicosia – relying more on the state and the banks – will suffer more in the following year, Loizou said.

“But the fact prices are falling is a sign the market is rebalancing,” he said.

“Between 2004 and 2008 when prices tripled we had just had a decade of stability and employment, banks gave loans out very easily. There was a state of euphoria, as if we were drunk,” Loizou said.

Prices are adjusting to a long-term average, he said.

Loizou said that when rent prices stop falling investors will know how much rent they will get from an investment and it will be a sign that offices are feeling robust enough to pay rents.

But it will be a year and a half before that, he said.

Of course when it comes down to specifics, sweeping generalisations are useless, another member of RICS said.

“The index is a mirror of what is happening now,” she said.

However, unless investors feel they can track their property’s future, they will postpone making choices.

And prices will probably continue dropping.

Nicosia and Limassol home price

Readers' comments

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  • Jim says:

    Good morning Pavlo,

    I agree that in the month of June there was an increase of locals buying property in Paphos. The figures however, show a drop in overseas buyers.

    I can only see a further decline in the property market given the prospects for the Cypriot economy, once the Troika reveals the true position.

    As each day passes the bailout figure mentioned becomes ever higher. Also will the government have the intestinal fortitude to take the necessary medication.

    I am beginning to wonder if a bailout of the required size is even possible. If not, then a return to a much devalued Cyprus pound would be almost a certainty.

  • Pavlos Loizou says:

    Good morning Jim,

    The property market is moving at different speeds/ ways depending on the type of asset and their location.

    The property markets of Paphos and Famagusta were dominated by overseas (British) buyers, with demand falling since 2008, and prices have been falling since 2009. In these two districts, built property (not land), has fallen by circa 30-50% and is slowly bottoming out. I don’t expect any further significant price reductions, but neither do i expect a significant pick up (boom) in demand. Its more likely going to be more activity that the lows of last year, with minimal/ no impact on prices (they will stabilise, but not rise).

    In contrast, the property markets of Limassol and Nicosia are dominated by locals (Larnaca is between the two sets) with Nicosia being reliant on banking/ government sector workers. These markets started “falling” since 2009 (later than the others) and are thus experiencing significant price falls which I don’t expect to stop in the short run.

    Thus, overall the property market is going down but there are some early signs of stabilisation/ qualified recovery in Paphos and Famagusta.

    PS 1: The reasons for this recovery: (1) Prices have fallen by 30-50% and the sterling has strengthened against the Euro by 25% since 2008/09, (2) Russian and Chinese buyers in Paphos, (3) Some locals are buying again in Paphos, as prices are at more “reasonable prices”.

    PS 2: I am not hopeful about the state or prospects of the property market.

  • Jim says:

    Pavlos. You seem to be singing off a different song sheet than the final part (Cyprus property market) of your thread, where you see “early signs of recovery” in ‘Caught with our pants down‘.

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