THE TWENTY-SEVENTH edition of the RICS Cyprus Property Prices Index issued yesterday reports that the average price of residential apartments and houses across the island rose by 0.2% and 0.3% respectively during the second quarter of 2016.
During the second quarter of 2016 the Cyprus economy showed some signs of stability, with the economy’s performance being better than expected and tourism mildly outperforming forecasts. Unemployment remained at relatively high levels, on a downtrend to approximately 12% (from the high levels of 17%).
Given prevailing economic conditions and the turbulence in the Cyprus banking system, there were relatively few transactions during the quarter although volume was higher on a year on year basis. Local buyers in particular were the most discerning as unemployment and high debt for locals maintained lack of interest. Furthermore, those interested are trying to access bank-finance.
The Property Price Index has recorded increases in almost all cities and asset classes, with significant increases being recorded in Larnaca area, whilst other cities are progressively bottoming out.
Larnaca recorded the largest quarterly increase in apartment prices (1.1%), while the largest rise in house prices (1.1%) was recorded in Paphos.
The values of holiday homes rose 2.7% for apartments and 1.1% for houses.
Across Cyprus, on a quarterly basis rental values increased by 0.4% for apartments, 0.5% for houses, 1.5% for retail, 0.6% for office while warehouses rents decreased by 0.4%.
Compared to Q2 2015, rents increased by 4.9% for flats, 4.9% for houses, 0.5% for retail and 5.2% for offices. Warehouses dropped by 1.2%.
The majority of asset classes and geographies are bottoming out, with areas that had dropped the most early on in the property cycle e.g Paphos, Famagusta and Larnaca are showing some signs of price stability.
At the Q2 of 2016 average gross yields stood at 4% for apartments, 2.0% for houses, 5.3% for retail, 4.3% for warehouses, and 4.5% for offices. The parallel reduction and/or stabilisation in capital values and rents is keeping investment yields relatively stable and at low levels (compared to yields overseas). This suggests that there is still room for some re-pricing of capital values to take place, especially for properties in secondary locations.