THE NINTH edition of the RICS Cyprus Property Price Index reports that property prices in the Island’s main urban areas continued to fall during the fourth quarter of 2011 although there was a small increase in apartment rental values.
Commenting on the latest Index Pavlos Loizou MRICS, Board member of RICS Cyprus, said “During the fourth quarter of 2011 Cyprus’ economy bore the consequences of the decoupling of the Greek economy, the slowdown in mortgage and corporate lending, the increased cost of electricity, and the rising rate of unemployment. The combination of the above, along with the decrease in salaries of government workers and uncertainty surrounding Cyprus’ banking system, led to a decrease in retail spending and a slowdown of the economy”.
“Whilst the first and second quarters saw some signs of muted economic growth, the third and forth quarters saw investors postpone their decision making and banks retrenching by limiting the amount of credit available. This led to a low transaction turnover and to reduced interest, especially by local buyers, as they were more affected by the increase in unemployment and the decrease in credit.”
Prices of apartments and houses showed a quarterly fall of 1.3% and 1.6% respectively. Limassol experienced the biggest drop in apartment prices, down 3.5%. The largest drop in house prices was reported in Famagusta-Paralimni, where they went down by 5.6%.
Nationwide, the prices of retail properties fell by an average of 2.8%, while those of offices and warehouses fell by 2.6% and 3.2% respectively.
Compared with the fourth quarter of 2010, prices dropped 9.7% for apartments, 5.2% for houses, 10.1% for retail, 6.4% for office and 7.8% for warehouses.
During the fourth quarter of 2011, rental values across Cyprus increased 1.4% for apartments, driven mainly by increases in rents in Famagusta-Paralimni and Paphos. However, rents fell 0.1% for houses, 3.4% for retail units, 2.01% for warehouses, and 6.9% for offices.
Compared to the fourth quarter of 2010, rents dropped 4.6% for apartments, 0.8% for houses, 11.5% for retail, 11.4% for offices and 9.2% for warehouses.
Yields are a useful tool showing the relationship between rent and property prices. At the end of the fourth quarter of 2011, average gross yields stood at 3.8% for apartments, 2.0% for houses, 5.9% for retail, 4.8% 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), suggesting that there is still room for re-pricing of capital values to take place.
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.