RICS Cyprus Property Index Q3 2013
This is the sixteenth 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 third quarter of 2013 Cyprus bore the consequences 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 implications of these decisions were unfolding throughout the quarter, with no bank finance being available and deposits being blocked in bank accounts.
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 significant falls across Cyprus’ major urban areas, with prices and rents falling across all districts. Overall, Nicosia and Limassol faired the worst as they were the least affected markets up until the second half of 2012.
Across Cyprus, residential prices for both houses and flats fell by 1.0% and 2.7% respectively, with the biggest drop being in Limassol (3.0% for houses) and Larnaca (5.2% for flats). Values of retail properties fell by an average of 2.9%, whilst those of offices and warehouses fell by 3.6% and 4.3% respectively.
Compared to Q3 2012, prices dropped by 14.6% forapartments, 11.1% for houses, 20.2% for retail, 13.2%for office, and 16.2% for warehouses.
Market Rental Values
Across Cyprus, rental values decreased by 5.2% for apartments, 5.4% for houses, 12.0% for retail units,7.1% for warehouses, and 8.8% for offices.
Compared to Q2 2012, rents dropped by 4.1% for flats, 4.9% for houses, 9.1% for retail, 3.1% for warehouses, and 4.5% for offices.
All 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 at low levels.
Appraisal based initial yields
At the end of Q3 2013 average gross yields stood at 3.8% for apartments, 1.9% for houses, 5.3% for retail, 4.5% 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 Index Q3 2013 publication