THE THIRTEENTH edition of the RICS Cyprus Property Price Index, which is produced in conjunction with the Association of Quantity Surveyors and Construction Economists, shows continued falls in property prices across the island.
Over the quarter, prices of residential apartments and houses fell by an average of 3.1% and 1.4% respectively.
Apartment prices in Paralimni/Famagusta fell 7.0% over the quarter, followed by Limassol (-5.0%), Nicosia (-2.5%), Paphos (-1.5%) and Larnaca (-0.3%).
House prices in the Paphos and Paralimni/Famagusta areas remained steady. But prices Larnaca fell 4.6%, followed by Nicosia (-1.3%) and Limassol (-1.1%).
RICS Cyprus commentary
During the fourth quarter of 2012 the Cyprus economy bore the consequences of the slowdown in the economy (year-on-year GDP contraction of 3.3%), the increase in unemployment (year-end at 14.7%), the on-going turbulence in the banking and financial sector, and the political uncertainty caused by the lack of a Memorandum to bailout the country.
The worsening state of the Cyprus economy and the growing political and economic uncertainty, led to a pronounced slowdown in mortgage and corporate lending and a further rise in the rate of unemployment.
There has been a dearth of investment transactions during the second half of 2012. Property, both commercial and residential, is viewed as a risky asset and one with negative prospects in the near to medium term. 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.
Price changes over the past year
Compared to Q4 2011, the average price of a residential apartment has fallen by 7.9%, while the price of an average house has fallen 5.7%.
Prices for commercial property have also fallen, with the price of retail units falling by 15.5%, while the prices of offices and warehouses have fallen by 10.0% and 9.3% respectively.
Gross rental yields
Yields are a useful tool showing the relationship between rent and property prices. At the end of Q4 2012 average gross yields stood at 3.8% for apartments, 2.0% for houses, 6.0% for retail, 4.7% for warehouses, and 4.6% 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.
Some pundits predict that there will be double-digit price falls in property prices in some areas of the island in the wake of the 10-billion euro rescue deal reached between Cyprus and the European Union last Monday.
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).
The methodology underpinning the RICS Cyprus Property Price Index was developed by the University of Reading UK and may be viewed by clicking here.