THIS is the second publication of the RICS Cyprus Property Price Index, a quarterly publication which is based on methodology produced by the University of Reading, UK.
The Index tracks property and rental prices across all districts, and monitors changes in residential (apartments and houses), offices, high street retail, and warehouses.
The beginning of 2010 finds Cyprus bearing the brunt of the global economic crisis, as the economy has slowed down, there is a decrease in the government’s income from taxation, and there is a severe reduction in property transactions. The latter can be mainly attributed to the decrease in overseas buyers (down around 80% compared to 2005-2008), to the curtailing of loans by banks and other financing institutions for property purchases, and to the change in people’s expectations of future changes in capital values.
Market Selling Values
The Property Price Index has recorded what can only be described as the anticipated spread and behaviour of property prices across Cyprus’ major urban areas.
Residential prices for both houses and flats fell by an average of 4.5% and 1.6% respectively, with the biggest drop for houses taking place in Larnaca (-6.8%) and for flats in Paralimni (-14.9%). Values of commercial properties generally fell across all cities by an average of 1.4% for retail and 2.9% for warehouses. The exception was offices which rose by an average of 1.4%, greatly influenced by offices in Nicosia which rose by 6.1%.
Market Rental Values
Rental values across Cyprus fell for apartments, houses, and retail units by 1.9%, 2.7% and 1.5% respectively. In contrast rents on warehouses and offices increased by a respective average of 1.0% and 2.7%.
The distribution of rents shows an interesting dichotomy between Nicosia and the coastal cities.
Rents for warehouse and office space in Nicosia increased by 10% and 12.5%, counterbalancing the drop in rents in all other cities. This can be attributed to a lack of Grade A office space across Nicosia, especially space that has ample parking and is easily accessible from the highway. The latter also applies for warehouse space as companies seek to lower their distribution costs by centralising their operations.
Investment yield is a term rarely used in Cyprus as most companies own their real estate instead of leasing it. However, yields are a useful tool showing the relationship between rent and property prices.
Initial yields on commercial property increased slightly, and now stand at 6.1% for retail, 4.7% for offices, and 5.0% for warehouses. Yields on residential property are at a very low of 3.6% for apartments and 2.0% for houses, showing that prices relative to rents remain at multiples which are considerably above that of other European countries.
Outline of the properties used to calculate the index
Apartments: Two bedroom, 85m2, Medium quality.
Houses: Three bedroom with garden, Semi-detached, 250m2, Medium quality.
Retail: High-street retail, 100 m2 ground floor area with 50 m2 mezzanine.
Warehouse: Light industrial area, 2,000 m2, 200 m2 office space.
Office: Grade A, City centre location, 200 m2.
View the full RICS Cyprus Property Price Index Report for Q1 2010