Prop­erty prices con­tinue to tum­ble, Ni­cosia hurt most

Financial Mirror (Cyprus) - - FRONT PAGE -

Prop­erty prices con­tin­ued to fall in most towns and as­set classes dur­ing the first quar­ter of the year, down 3-8% from the same quar­ter last year, with sig­nif­i­cant falls be­ing recorded in Ni­cosia, ac­cord­ing to the 22nd RICS Cyprus Prop­erty Price In­dex.

“Given pre­vail­ing eco­nomic con­di­tions and the tur­bu­lence in Cyprus’ bank­ing sys­tem, there were few trans­ac­tions in the first quar­ter although vol­ume was higher on a year on year ba­sis,” the RICS re­port said.

“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 are try­ing to ac­cess bank-fi­nance.

The cap­i­tal is clearly feel­ing the im­pact on the gov­ern­ment and bank­ing sec­tor (the two sec­tors that dom­i­nate the lo­cal em­ploy­ment mar­ket), whilst pro­gres­sively bot­tom­ing out, the RICS quar­terly re­port said.

“The down­trend in prop­erty prices con­tin­ues, but there was in­ter­est for Paphos and Fa­m­a­gusta in the first quar­ter of 2015, where the price falls have sta­bilised, re­duc­ing an­nual losses,” said re­al­tor Char­alam­bos Petrides, MRICS.

“What is in­ter­est­ing is that this first quar­ter, com­pared to 2014 and 2013, has seen an in­crease in trade ac­tiv­ity by about 20%. It seems that the vol­ume of trans­ac­tions has re­cov­ered and the fall in prices has cre­ated in­ter­est in the mar­ket.”

Across Cyprus, move­ments in prop­erty prices ap­pear mix as res­i­den­tial prices for flats fell by 0.4% while an in­crease of 0.6% was noted for houses, ac­cord­ing to the RICS sur­vey. The big­gest drop was in Li­mas­sol (1.0% for flats) and the big­gest in­crease in Lar­naca (3% for houses). Val­ues of re­tail prop­er­ties fell by an av­er­age 1.7%, of­fices by 0.1%, while ware­houses in­creased by 1.3%.

Com­pared to Q1 2014, prices dropped by 3.2% for flats, 3.0% for houses, 8.1% for re­tail, 4.8% for of­fice, and 3.2% for ware­houses.

On a quar­terly ba­sis, rental val­ues de­creased by 0.3% for apart­ments, 1.9% for of­fices, 0.4% for re­tail units and 0.1% for ware­houses; house rents in­creased marginally by 0.3%. Com­pared to Q1 2014, rents dropped by 4.0% for flats, 1.2% for houses, 8.1% for re­tail, 5.9% for ware­houses, and 3.5% 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. Paphos, Fa­m­a­gusta and Lar­naca are show­ing some signs of price sta­bil­ity.

At the end of Q1 2015 av­er­age gross yields stood at 3.8% for apart­ments, 2.0% for houses, 5.3% 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 low lev­els (com­pared to yields over­seas). This sug­gests that there is still room for some repric­ing of cap­i­tal val­ues to take place, es­pe­cially for prop­er­ties in sec­ondary lo­ca­tions, the RICS Cyprus re­port sug­gested.

“Prop­erty prices will con­tinue to fall on an an­nu­alised rate but with smaller losses this year than in 2014. In an­tic­i­pa­tion of de­vel­op­ments in the fi­nance sec­tor, par­tic­u­larly as re­gards the is­sue of non-per­form­ing loans, the stricter lend­ing pro­ce­dures, the high in­ter­est rates and the mat­ter of fore­clo­sures of mort­gaged prop­er­ties, the mar­ket will re­main in a down­fall trend,” Petrides added.

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