Cyprus Mail
Cyprus Property

Let the market decide rents, say property owners

By Poly Pantelides

THE CYPRUS Property Owners’ Association on Wednesday renewed its warnings against a bill to regulate rental prices, and suggested the body would take any available legal measures should lawmakers pass the law.

One of the bills lawmakers have pencilled in for discussion in today’s plenum is a proposal pushed by the small shopkeeper’s union POVEK and main opposition party AKEL to reduce rents.

The bill proposes a 20 per cent reduction in residential and commercial rents for a year as a way to alleviate pressure on tenants and shopkeepers amid the recession. Voting has already been postponed several times, frustrating POVEK that sees the measure as a much needed boost for its members.

But the head of the property owners’ association has asked lawmakers to leave the market alone.

Giorgos Strovolides said that rent prices have been dropping by themselves responding to market forces.

Some owners have voluntarily reduced rents and those who don’t face the consequences, Strovolides said, referring to the empty shops along Nicosia’s Makarios avenue, a once-vibrant shopping street.

“The market has regulated the matter by itself,” he said.

He said if the bill were to pass through the plenum then they would “responsibly” consider further measures, including any available legal ones that would contest the law’s questionable constitutionality, he said. Examining the law’s constitutionality falls under the jurisdiction of the Supreme Court.

Property and rental prices have been falling for years with the property market adjusting to a long-term average following unsustainable increases between 2004 and 2008 which roughly tripled prices as banks readily financed development projects.

But as the economy continues to slow down, there is financial and banking uncertainty which has sharply reduced interest in property transactions.

Properties’ initial gross yields – showing the percentage of annual rents to a property’s market value – are at “very low levels” compared to yields overseas, according to the Royal Institute of Chartered Surveyors (RICS) which compiles regular indexes on the sector.

At the end of the second quarter of the year, average gross yields stood at 3.8 per cent for apartments, 4.3 per cent for offices and at 5.6 per cent for retail. A normal yield for Cyprus would be closer to 6.0 or 7.0 per cent for a central location but both capital values and rents have been falling in parallel and so the yields have remained stable.

RICS said this suggested that capital values had not yet adjusted, i.e. that capital values should continue dropping. But the property owners’ association is concerned with the ramifications of distorting rents by intervening via regulations.



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