RICS: Property prices down in 2Q, mainly Nicosia-Larnaca
Property prices were down 0.4% for apartments and 0.3% for homes in the second quarter, according to the latest index produced by RICS Cyprus. The areas that saw the biggest quarterly drops were Nicosia and Larnaca.
The 23rd edition of the RICS Cyprus quarterly Property Price Index said that the biggest drop was in Larnaca (-1.2% for flats and -3% for houses). An increase of 0.6% for house prices was recorded in Nicosia, while the values of retail properties fell by an average 0.1%, offices by 1.4%, and warehouses by 2.4%, the survey said.
Despite the Cyprus economy showing some signs of stability, compared to 2Q 2014 prices dropped by 2.6% for apartments, 2.3% for houses, 5.5% for retail, 1.4% for office, and 2.4% for warehouses.
Across Cyprus, quarterly rental values decreased by 0.3% for apartments, 2% for houses, 1.1% for offices, 2.1% for retail units and 1.4% for warehouses. Year-on-year, rents dropped by 3.0% for flats, 2.9% for houses, 6% for retail, 2.8% for warehouses, and 3.6% 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 bottom, with Paphos and Famagusta showing some signs of price stability, the RICS report said.
At the end of the second quarter, average gross yields stood at 3.8% 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 low levels (compared to yields overseas). This suggests that there is still room for some repricing, with the economy performing better than expected and tourism mildly outperforming forecasts.
Unemployment remained at a historical high level, stabilised at 16%, and discussions were ongoing regarding privatisations of state-owned enterprises, foreclosures and the turbulence in 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 the increase in unemployment and the prospects of the local economy maintained the lack of interest. Furthermore, those interested are still having trouble to access bank-finance.
The Property Price Index has recorded falls in most towns and asset classes, with significant falls recorded in Nicosia and Larnaca. Nicosia is clearly feeling the impact on the government and banking sector (the two sectors that dominate the local employment market), whilst Paphos and Famagusta are progressively bottoming out.