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Cyprus property prices and rents continue to fall

The tenth publication of the RICS Cyprus Property Price Index shows a continuing drop in property prices and rents across the main urban areas of the Island during the first quarter of 2012.

ACCORDING to the latest figures released by the Royal Institute of Chartered Surveyors (RICS) property prices and rents across Cyprus continued to fall during the first quarter of 2012.

Overall, Limassol faired the worst as it was the least affected market until the second half of 2011 and the one that had experienced the greatest reduction in interest from overseas buyers.

According to Pavlos Loizou MRICS, member of the RICS Board in Cyprus: “During the first quarter of 2012 Cyprus’ economy continued to bear the consequences of the decoupling of the Greek economy and of the “haircut” in Greek government debt”.

He explained that the above had a significant impact on prices and rents as they had led to a pronounced slowdown in mortgage and corporate lending and a rise in the rate of unemployment. “The combination of the above, along with uncertainty surrounding Cyprus’ banking system, led to a further slowdown of the economy”.

Mr Loizou went on to say that “whilst the first half of 2011 saw some signs of muted economic growth, the second half of the year and the first quarter of 2012 saw investors postpone their decision making. This led to low transaction turnover and reduced interest, especially by local buyers, as they were more affected by the increase in unemployment and the decrease in credit.”

Residential prices for both houses and apartments fell by 2.4% and 2.6% respectively, with the biggest drop being in Limassol (6.5% for apartments and 5.3% for houses). Values of retail properties fell by an average of 3.0%, whilst those of offices and warehouses fell by 3.1% and 2.1% respectively.

Compared to the first quarter of 2011, apartment prices have fallen by 10.8%, while house prices are down 6.3%. The prices of retail premises have fallen 12.0%, while those for offices and warehouses are down 9.0% and 10.7% respectively.

Yields are a useful tool showing the relationship between rent and property prices. During the first quarter of 2012, average gross yields stood at 3.8% for apartments, 2.0% for houses, 6.0% for retail, 4.8% for warehouses, and 4.5% for offices.

Derived from the RICS Cyprus Property Price Index for Q1 2012

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.

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

(All property types used to calculate the index are: freehold, have all licences and permits in place, have their Title Deeds, are subject to VAT and are in a good state of repair).

Methodology

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

Readers' comments

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  • Pavlos Loizou says:

    Dear Martyn

    The values stated are applicable for new properties in the city centre of the various cities (the index takes an average of values across the urban centre, focusing solely on areas where locals buy for permanent residence – no holiday homes/ tourist areas are included). Thus, when compared to properties outside the city, or in tourist areas, or older properties the index will obviously be higher.

    As for the matter or liquidity of properties, again this varies considerably according to the type of property, its price, and its location. If you would like to review this in detail see Project RED.

    With reference to rental yields, I have been renting for the past five years and, not withstanding what the boss decides (I have a feisty Irish wife who takes no nonsense), will continue to do so for a while now. The reason is not only the low yield (as mentioned) which means that it’s cheaper to rent than to own (pay a mortgage), but also that these yields are gross which means that they are “overstated” after you account for tax, maintenance, management costs, etc.

  • Martyn says:

    The values given are from our experience overstated by some 10-40%, especially apartments outside Nicosia and mature up-market completed developments in Limassol. Another observation, reflected by our knowledge of mature, improved Houses in non – tourist areas, outside Nicosia and Limassol as above described, is the pitiful rental yields these generate, on these the capital values seem to hold up quite well, but then as others know can still take numerous years to find a suitable purchaser!

    Overall not good and will we reckon, given the overall and often unique Cyprus factors, get considerably worse before they start to recover. Those of us Cyprus owners, shall we say seniors?, lucky enough to enjoy inflation- proofed pensions, decent rents from UK properties, and/or contributions from SIPPs can afford to sit back, enjoy the sun and other Cyprus related benefits and look medium-longer term (sensing 5-8 years) when some kind of new ‘Proposition’ on living here materialises, all the time thinking though about being SKIers (spending – or not spending -the Kids Inheritances’)!!

  • John Rose says:

    These rents and house prices do not reflect the reality ‘on the ground’ or are out of date.

  • @Clive – Unfortunately no. In Cyprus, land and property built on that land are inseparable in terms of title.

    Good try!

  • Clive says:

    Just a thought regarding getting round the LRO pricing of property. Could you sell a property with Title Deeds but only sell the land and make a separate legal arrangement for the buildings and contents?

  • Costas Apacket says:

    I agree with you Nigel and I am aware of this.

    The point I am trying to make is that a large amount of property is now worth less than what was paid for it 6 years ago, but the authorities still try to charge transfer taxes on a valuation that is way above what was paid for it.

    There is no connection or sensibility to what is happening in the market place / real world when it comes to these valuations.

    Lets also be clear, the authorities should not be taking twenty tears to issue title deeds.

  • @Costas Apacket – The Land Registry uses it’s assessment of the property’s value at its date of purchase to calculate Property Transfer Fees not its current market value.

    Suppose you bought property (like me) twenty years ago and you were asked to pay Property Transfer Fees based on its market value today. In my case I would have to pay more than 10 times (1,000% more) than the property’s value when I bought it.

  • Costas Apacket says:

    It’s a pity that this reality in property values isn’t reflected in those calculations produced by the District Lands Offices for Title Deed transfer taxes which only seem to have the flexibility to be revalued upwards.

    “Aah my friend, we understand that your property is only worth 70% of what you paid for it”?

    “Never mind, we would like to charge you transfer taxes based on 115% of what you paid for it”.

    That seems fair now, doesn’t it?

  • The views expressed in readers' comments are not necessarily shared by the Cyprus Property News.

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