Property prices continue to tumble, Nicosia hurt most

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.