This is the twenty-second 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 2015 the Cyprus economy showed some signs of stability, with the economyÂ’s performance being better than expected and tourism mildly outperforming forecasts. Unemployment remained at a historical high level, stabilised at ca 16-17%, and discussions were ongoing regarding privatisations of state owned enterprises and the foreclosure bill. Given prevailing economic conditions and the turbulence in CyprusÂ’ banking system, there were few transactions during the quarter although volume was higher on a year on year basis. Local buyers in particular were the most discerning as the increase in unemployment and the prospects of the local economy maintained the lack of interest. Furthermore, those interested are trying to access bank-finance.
Market Capital Values
The Property Price Index has recorded falls in most cities and asset classes, with significant falls being recorded in Nicosia. 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, movements in property prices appear mix as residential prices for flats fell by 0.4% while an increase of 0.6% was noted for houses. The biggest drop being in Limassol (1.0% for flats) and the biggest increase in Larnaca (3% for houses). Values of retail properties fell by an average 1.7%, offices by 0.1%, while warehouses increase by 1.3%.
Compared to Q1 2014, prices dropped by 3.2% for flats, 3.0% for houses, 8.1% for retail, 4.8% for office, and 3.2% for warehouses.
Market Rental Values
Across Cyprus, on a quarterly basis rental values decreased by 0.3% for apartments, 1.9% for office, 0.4% for retail units and 0.1% for warehouses; house rents increased marginally by 0.3%. Compared to Q1 2014, rents dropped by 4.0% for flats, 1.2% for houses, 8.1% for retail, 5.9% for warehouses, and 3.5% 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 or at the trough, e.g Paphos, Famagusta and Larnaca are showing some signs of price stability.
Appraisal based initial yields
At the end of Q1 2015 average gross yields stood at 3.8% for apartments, 2.0% for houses, 5.3% for retail, 4.3% for warehouses, and 4.4% for offices. The parallel reduction in capital values and rents is keeping investment yields relatively stable and at low levels (compared to yields overseas). This suggests that there is still room for some re-pricing of capital values to take place, especially for properties in secondary locations.
Download the full PDF Cyprus Property Index Q1 2015 publication