Property prices and rental values are continuing to fall in Cyprus but there are much fewer sales than normal due to the banking crisis, according to the latest quarterly index report from the Royal Institution of Chartered Surveyors.
The Property Price Index has recorded falls in almost all cities and asset classes, with significant falls being recorded in Nicosia. RICS says that Nicosia is clearly feeling the impact on the government and banking sector, which dominate the local employment market, whilst other cities are progressively bottoming out.
Across Cyprus, residential prices for both houses and flats fell by 1.6% and 0.5% respectively in the fourth quarter of 2013. The biggest drop was in Larnaca where house prices were down1.4%, and Nicosia which saw a 6.8% fall in prices for flats.
Values of retail properties fell by an average of 3.2%, whilst those of offices and warehouses fell by 1.4% and 0.7% respectively.
Compared to the fourth quarter of 2012, prices dropped by 13.3% for apartments, 10.5% for houses, 19.8% for retail, 12.8% for office, and 15.4% for warehouses.
Across Cyprus, on a quarterly basis rental values decreased by 1% for apartments, 1.3% for houses, 3.0% for retail units, 1.4% for warehouses, and 1.6% for offices.
Compared to the fourth quarter of 2012, rents dropped by 13.3% for flats, 12.3% for houses, 29.4% for retail, 18.0% for warehouses, and 18.8% 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. Only properties in Famagusta district showed a marginal increase in both capital values and rents, as the market there appears to be stabilizing,’ the report says.
At the end of 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 report points out that 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,’ it adds.
The report also points out that during the fourth quarter of 2013 the Cyprus economy began stabilizing 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,’ it concludes.
This article was republished with permission from Property Wire.