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RICS index reports falling real estate prices and rents

THE eighth publication of the quarterly RICS Cyprus Property Price Index reports that the decline in real estate prices and rents continued to fall during the third quarter of the year across all of the Island’s major urban areas.

In his commentary on the Index, Pavlos Loizou MRICS, Board member of RICS Cyprus writes: “During the third quarter of 2011 Cyprus’ economy bore the consequences of the decoupling of the Greek economy and the explosion at Evangelos Florakis Naval Base which severely damaged the country’s main electricity power station. The combination of the turmoil in Greece with this unfortunate event caused severe disruptions in daily lives and a loss of people’s confidence in the abilities of the state. In turn, the explosion led to numerous accusation and discussions by parliamentarians and government officials which escalated causing political instability.

Whilst the first and second quarters saw some signs of muted economic growth, the third quarter saw investors postpone their decision making and banks retrenching by limiting the amount of credit available. In turn this led to a low transaction turnover and to reduced interest, especially by local buyers, as they were affected by the increased tension between government and parliament.”


Residential prices for both houses and flats fell by 1.7% and 4.4% respectively during the third quarter of the year.

Nicosia suffered the biggest drop in apartment prices, where they fell by 5.3%, while the biggest drop in house prices was in Limassol, where they fell by 3.8%.

The values of retail properties fell by an average of 2.4% across the Island, whilst those of offices and warehouses fell by 4.1% and 1.4% respectively.

Compared to the third quarter of 2010, apartment and house prices have fallen by 10.7% and 6.7% respectively. Prices for retail units have fallen 9.4%, while those for offices are down 6.8% and those for warehouses are down 7.9%.


Over the quarter, average rental values for apartments and houses fell by 2.0% and 0.5% respectively. However, rental values for houses in Nicosia were up 5.9%.

Rental values for retail units fell 3.6%, while those for warehouses and offices fell by 2.2% and 1.3% respectively.

Compared to the third quarter of 2010, rents for apartments have dropped 11.4% and those for houses have fallen 6.6%. Retail unit rents have fallen 11.7%, office rents are down 7.5% and warehouse rents are down 11.4%.

The data shows that all asset classes and geographies are now affected, with landlords lowering their rents in order to attract tenants.

Investment yields

Yields are a useful tool showing the relationship between rent and property prices. At the end of the third quarter average gross yields stood at 3.7% for apartments, 2.0% for houses, 6.0% for retail, 4.7% for warehouses, and 4.8% 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.

Derived from the RICS Cyprus Property Price Index for Q3 2011

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


The methodology underpinning the RICS Cyprus Property Price Index was developed by the University of Reading UK and may be viewed by clicking here.