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