RICS Cyprus Property Index Q3 2015

This is the twenty-fourth 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 2015 the Cyprus economy showed some signs of stability, with the economys performance being better than expected and tourism mildly outperforming forecasts. Unemployment remained at a historical high level, stabilised at ca 15%, and discussions were ongoing regarding privatisations of state owned enterprises and the foreclosure law was implemented.
Given prevailing economic conditions and the turbulence in Cyprus 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 unemployment is at high levels 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 while the rate of decrease is less than previous quarters. In addition certain Districts indicate signs of stability as Paphos, Larnaca and Famagusta are progressively bottoming out.
Across Cyprus, movements in property prices appear mix as residential prices for flats fell by 0.4% and 0.5% for houses. The biggest drop being in Famagusta (1.2% for flats) and in Limassol 3.2% decrease for houses. A decrease of 0.3% for houses was noted in Nicosia

Market Rental Values

Across Cyprus, on a quarterly basis rental values increased by 0.3% for apartments, 1.5% for houses and 2.6% for office. A decrease of 1.1% for retail units was noted and 0.1% for warehouses.
Compared to Q3 2014, rents dropped by 1.5% for flats, 0.5% for houses, 4% for retail, 2.5% for warehouses, and 0.2% 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 and Famagusta are showing some signs of price stability. Paphos is the only district with positive returns in all asset classes when compared to Q3 2014.

Appraisal based initial yields

At the end of Q3 2015 average gross yields stood at 3.9% for apartments, 2% for houses, 5.2% for retail, 4.3% for warehouses, and 4.5% 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 Price Index Q3 2015 publication