Property prices and gross rental yields

THE influential Global Property Guide has recently published its list of the most expensive real estate markets in 2009.

Perhaps not surprisingly, Monte Carlo is in the number 1 position, more than twice as expensive, at €34,142, as the runner up. Battling for the number 2 position are prime central Moscow and London. Prime central Moscow’s €14,964 per square metre price tag slightly outpaces core Prime London’s €14,895 per square metre, though it is fairer to say the two cities are neck-and-neck.

The Global Property Guide’s figures are based on a 120m² apartment.

Closer to home in Cyprus:

• Limassol is at number 55 with a price tag of €2,343/m² and a gross rental yield of 3.45%.

• Paphos is at number 71 with a price tag of €2,004/m² and a gross rental yield of 2.83%.

• Nicosia is at number 81 with a price tag of €1,619/m² and a gross rental yield of 3.76%.

• Larnaca is marginally less expensive at number 85 with a price tag of €1,560/m² and a gross rental yield of 3.64%.

What does rental yield mean? Why is it important?

The gross annual rental income expressed as a percentage of today’s property purchase price. This is what a landlord can expect as return to his investment.

The rental yield is one useful yardstick of whether property is over-valued or under-valued:

20% – Very undervalued

15% – Very undervalued

12% – Undervalued

10% – Undervalued

8% – Borderline undervalued

7% – Fairly priced

6% – Fairly priced

5% – Borderline overvalued

4% – Overvalued

3% – Overvalued

2.5% – Very overvalued

2% – Very overvalued

The table below has been assembled from figures provided by Global Property Guide.