Property price fall slows down in 3Q
During the third quarter of he year, the economy showed some signs of stability, with the performance being better than expected and tourism mildly outperforming forecasts, effectively helping to slow down a fall in property prices.
Given prevailing economic conditions and a continued turbulence in the banking system, there were few transactions during the quarter although volume was higher on a year-on-year basis, according to the latest survey by RICS Cy[prus.
Local buyers in particular were the most discerning as unemployment is at high levels and the prospects of the economy maintained the lack of interest. Furthermore, those interested are trying to access bankfinance.
The RICS Property Price Index recorded falls in most towns and asset classes while the rate of decrease is slower than previous quarters. In addition, certain districts have shown signs of stability as Paphos, Larnaca and Famagusta are progressively bottoming out.
Across Cyprus, movements in property prices appear mixed as residential prices for flats fell by 0.4% and 0.5% for houses. The biggest drop was in Famagusta (-1.2% for flats) and in Limassol -3.2% for houses. A decrease of 0.3% for houses was noted in Nicosia.
Values of retail properties fell by an average 0.6%, offices were stable at the same level, and warehouses increased by 1.1%.
Compared to Q3 2014, prices dropped by -1.9% for flats, -1.3% for houses, -4% for retail, -2.7% for offices and -1.8% for warehouses. On a quarterly basis, rental values increased by 0.3% for apartments, +1.5% for houses and +2.6% for offices. A decrease of -1.1% for retail units was noted and -0.1% for warehouses. Compared to Q3 2014, rents dropped by -1.5% for flats, -0.5% for houses, -4% for retail, -2.5% for warehouses and -0.2% for offices.
The majority of asset classes and regions continue to be affected, with areas that had dropped the most early on in the property cycle now nearing or at the trough. Paphos and Famagusta are showing some signs of price stability. Paphos is the only district with positive returns in all asset classes when compared to Q3 2014.
At the end of Q3 2015 average gross yields stood at 3.9% for apartments, 2% for houses, 5.2% for retail, 4.3% for warehouses and 4.5% 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, said the RICS Cyprus report.
“The economy, that was an upgrade by Fitch, is gradually recovering, despite the non-performing loans and unemployment remaining problems that require time and serious effort,” said RICS Cyprus board member Jennifer Petridou Sharpe.
“Despite the smaller number of transactions in the third quarter, trade volume was up on an annual basis as the fall in prices has created new interest in the market,” she added.