House prices continued their downward trend, falling an average 0.5 per cent in the second quarter of the year, compared to January to March, to a level comparable to 2006, the Central Bank said on Tuesday.
The drop in prices in April to June was mainly on a 0.6 per cent quarterly drop in the prices of houses, whereas apartment prices fell only 0.2 per cent.
“The very small changes of the home price index recently reflect a stabilisation trend on the market and/or reversal of negative trends,” the bank supervisor said. In the second quarter of 2015, house prices fell a quarterly 0.8 per cent.
The prices are important to banks because they indirectly affect their capital adequacy, as a large portion of their collateral includes homes.
Home prices fell 1.7 per cent in the second quarter, compared to the respective quarter of 2015, when they fell 5.1 per cent, the bank said. Prices for houses fell an annual 2.1 per cent while those of flats dropped 0.4 per cent.
The Central Bank’s findings, which are based on data collected from commercial banks, differ from those announced by the Cyprus branch of the Royal Institute of Chartered Surveyors (RICS) in October, because it applies a different methodology. RICS said house prices increased a quarterly 0.3 per cent and an annual 1.1 per cent in the second quarter, while apartment prices rose 0.2 per cent and 0.5 per cent respectively.
On a quarterly basis, home prices fell the most in the Famagusta area, where they became 2.9 per cent more affordable, followed by Limassol and Nicosia with 0.8 per cent and 0.6 per cent respectively, the central bank said. In Larnaca and Paphos, they rose 0.4 and 0.1 per cent respectively.
Compared to the second quarter of 2015, the steepest drop in April to June was again in the Famagusta area with a 4.1 per cent drop, followed by Nicosia where home prices fell 3.2 per cent, Limassol with 1.3 per cent, and Larnaca with 0.4 per cent. In Paphos, home prices rose 0.7 per cent “after almost seven years of consecutive annual drops”.