By Staff Reporter
Residential prices for both houses and flats fell by 1.6 per cent and 0.5 per cent respectively during the fourth quarter (Q4) of 2013, the latest RICS Cyprus’ Property Price Index, published on Tuesday showed.
The biggest drops were in Larnaca (1.4 per cent for houses) and Nicosia (6.8 per cent for flats). Values of retail properties fell by an average of 3.2 per cent, whilst those of offices and warehouses fell by 1.4 per cent and 0.7 per cent respectively.
“Nicosia is clearly feeling the impact on the government and banking sector (the two sectors who dominate the local employment market), whilst other cities are progressively bottoming out,” said the RICS report.
Compared to Q4 2012, prices dropped by 13.3 per cent for apartments, 10.5 per cent for houses, 19.8 per cent for retail, 12.8 per cent for office, and 15.4 per cent for warehouses.
Across Cyprus, on a quarterly basis rental values decreased by 1.0 per cent for apartments, 1.3 per cent for houses, 3.0 per cent for retail units, 1.4 per cent for warehouses, and 1.6 per cent for offices.
Compared to Q4 2012, rents dropped by 13.3 per cent for flats, 12.3 per cent for houses, 29.4 per cent for retail, 18.0 per cent for warehouses, and 18.8 per cent for offices.
At the end of Q4 2013 average gross yields stood at 3.8 per cent for apartments, 1.9 per cent for houses, 5.3 per cent for retail, 4.5 per cent for warehouses, and 4.3 per cent 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, said RICS.
The majority of asset classes and geographies continue to be affected, with areas that had dropped
the most early on in the property cycle now nearing the trough. Only properties in Famagusta district
showed a marginal increase in both capital values and rents, as the market there appears to be stabilising, the report added.
RICS attributed the drop to prevailing economic conditions and the turbulence in Cyprus’ banking system. “There was a lack of transactions during the quarter. Local buyers in particular were the most discerning as the increase in unemployment and the worsening prospects of the local economy led to a sharp reduction in interest,” it said. “Furthermore, those interested were unable to access bank-finance or their deposits.”
RICS is a quarterly price and rental index which is based on methodology produced by the University of Reading, UK. The Index tracks property and rental prices across all districts and main property types.