This is the eighteenth publication of RICS Cyprus� Property Price Index, 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.

Introduction & Commentary

During the first quarter of 2014 the Cyprus economy began stabilising from the impact of the decisions of the Eurogroup on 15 and 27 March to �bail-in� the depositors of two of Cyprus� largest banks, to close down Laiki Bank, and to impose capital restrictions. The secondary implications of these decisions, mainly the reduction of bank staff, the increase in unemployment, and further decreases in salaries, were unfolding throughout the quarter.
Given 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. Furthermore, those interested were unable to access bank-finance or their deposits.

Market Capital Values

The Property Price Index has recorded falls in almost all cities and asset classes, with significant falls being recorded in Nicosia and Limassol. 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.
Across Cyprus, residential prices for both houses and flats fell by 1.4% and 2.6% respectively, with the biggest drop being in Famagusta (4.0% for houses and 9.3% for flats). Values of retail properties fell by an average of 1.7%, whilst those of offices and warehouses fell by 1.4% and 0.9% respectively.
Compared to Q1 2013, prices dropped by 10.7% for apartments, 7.8% for houses, 14.8% for retail, 10.4% for office, and 11.4% for warehouses.

Market Rental Values

Across Cyprus, on a quarterly basis rental values decreased by 1.4% for apartments, 1.6% for houses, 1.2% for retail units, 3.1% for warehouses, and 1.2% for offices.
Compared to Q1 2013, rents dropped by 11.3% for flats, 12.6% for houses, 23.3% for retail, 14.0% for warehouses, and 15.4% for offices.
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.

Appraisal based initial yields

At the end of Q1 2014 average gross yields stood at 3.9% for apartments, 1.9% for houses, 5.3% for retail, 4.4% for warehouses, and 4.3% 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.

Download the full PDF Cyprus Property Price Index Q1 2014 publication