Prop­erty prices con­tinue to fall in Q3

Financial Mirror (Cyprus) - - FRONT PAGE -

Prop­erty prices con­tin­ued to fall in the third quar­ter of the year, with year-on-year val­ues drop­ping by as much as 4-6%, ac­cord­ing to the RICS Cyprus Prop­erty Price In­dex.

The 20th edi­tion of the in­dex, based on prices as at the end of Septem­ber, saw price falls in almost all towns and as­set classes, with Nicosia drop­ping the most.

“The cap­i­tal is clearly feel­ing the im­pact on the gov­ern­ment and bank­ing sec­tor (the two sec­tors that dom­i­nate the lo­cal em­ploy­ment mar­ket), whilst other ci­ties are pro­gres­sively bot­tom­ing out,” the RICS sale and rent re­port said.

Across Cyprus, res­i­den­tial prices for both houses and flats fell in the third quar­ter by 1.6% and 1.0% re­spec­tively from the pre­vi­ous quar­ter, with the big­gest drop be­ing in Nicosia (3.4% for houses) and Li­mas­sol (1.5% for flats). Val­ues of re­tail prop­er­ties fell by an av­er­age of 2.0% and of­fices by 1.4%, whilst those of ware­houses re­mained sta­ble.

Com­pared to Q3 2013, prices dropped by 6.3% for flats, 4.4% for houses, 9.6% for re­tail, 6.3% for of­fice, and 4.2% for ware­houses, RICS Cyprus said.

“Dur­ing the third quar­ter, the econ­omy showed some signs of sta­bil­ity, with the econ­omy’s per­for­mance be­ing bet­ter than ex­pected at the end of 2013 and tourism out­per­form­ing forecasts. Un­em­ploy­ment re­mained at a his­tor­i­cal high level, sta­bilised at about 17-18%, fur­ther de­creases in salaries were recorded, and dis­cus­sions were on­go­ing re­gard­ing pri­vati­sa­tions of state owned en­ter­prises, the re­vised Im­mov­able Prop­erty Tax, and the fore­clo­sure bill. At the same time Bank of Cyprus raised an ad­di­tional 1.0 bln euros to shore up its cap­i­tal base.”

The re­port ex­plained that “given pre­vail­ing eco­nomic con­di­tions and the tur­bu­lence in the bank­ing sys­tem, there was a lack of trans­ac­tions dur­ing the third quar­ter. 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 were un­able to ac­cess bank-fi­nance or their de­posits.” The Prop­erty Price In­dex also saw a de­te­ri­o­ra­tion in rents. Across Cyprus, on a quar­terly ba­sis rental val­ues de­creased by 1.2% for apart­ments, 0.9% for houses, 3.2% for re­tail units, 0.4% for ware­houses and 0.9% for of­fices.

Com­pared to Q3 2013, rents dropped by 4.7%


flats, 4.1%

for houses, 11.2% for re­tail, 9.2% for ware­houses, and 4.6% for of­fices, the RICS re­port said. “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,” the re­port added.

At the end of Q3, av­er­age gross yields stood at 3.9% for apart­ments, 1.9% for houses, 5.2% 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 very low lev­els (com­pared to yields over­seas). This sug­gests that there is still room for re-pric­ing of cap­i­tal val­ues to take place,” the RICS re­port con­cluded.

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