This is the twenty-fifth publication of RICS Cyprus’ Property Price Index, a quarterly price and rental index which is primarily based on methodology produced by the University of Reading, UK. The Index tracks property and rental prices across all districts and essential property types.
Introduction & Commentary
During the fourth quarter of 2015 the Cyprus economy showed some signs of stability, with the economy’s performance being better than expected and tourism mildly outperforming forecasts. Unemployment remained at a historical high level, stabilized at ca 14%, and discussions were ongoing regarding privatizations of state owned enterprises. 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. Furthermore, several Districts and asset classes designate 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 0.5% and 0.1% for houses. The biggest drop being in Limassol (1.4% for flats) and in Nicosia 0.8% decrease for houses. An increase of 2.9% for offices was noted in Nicosia.
Market Rental Values
Across Cyprus, on a quarterly basis rental values increased by 0.5% for apartments, 1.1% for houses and 0.2% for office. A decrease of 0.2% for retail units was noted and 1% for warehouses. Compared to Q3 2014, rents dropped by 3.8% for retail, 2.6% for warehouses and 0.2% for offices. On an annual basis an increase of 0.3% and 0.8% was noted for apartments and houses respectively. 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 are showing some signs of price stability.
Appraisal based initial yields
At the end of Q4 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.