House prices marginally up in 2Q
Residential prices for both houses and flats increased by 0.3% and 0.2%, respectively, in the second quarter with the biggest increase being in Larnaca (1.1% for flats) and Paphos (1.1% for houses), according to the 26 th RICS Cyprus Property Price Index.
Values for holiday homes increased by 2.7% (flats) and 1.1% (houses). The holiday home Index is published for the first time.
Compared to Q2 2015, prices increased by 0.5% for flats, 1.1% for houses, 2.8% for offices, while warehouses were stable. A decrease of 0.8% for retail was noted.
During the second quarter of 2016 the economy showed some signs of stability, with the performance being better than expected and tourism mildly outperforming forecasts. Unemployment remained at relatively high levels, on a downtrend to about 12% (from the high levels of 17%).
Given prevailing economic conditions and the turbulence in Cyprus’ banking system, there were relatively few property transactions during the quarter although volume was higher on a year on year basis. Local buyers in particular were the most discerning as unemployment and high debt for locals maintained lack of interest. Furthermore, those interested are trying to access bank-finance.
The Property Price Index has recorded increases in almost all cities and asset classes, with significant increases being recorded in Larnaca area, whilst other towns are progressively bottoming out.
Across Cyprus, on a quarterly basis rental values increased by 0.4% for apartments, 0.5% for houses, 1.5% for retail, 0.6% for office while warehouses rents decreased by 0.4%.
Compared to Q2 2015, rents increased by 4.9% for flats, 4.9% for houses, 0.5% for retail and 5.2% for offices. Warehouses dropped by 1.2%.
The majority of asset classes and geographies are bottoming out, the RICS survey said, with areas that had dropped the most early on in the property cycle, e.g Paphos, Famagusta and Larnaca, are showing some signs of price stability.
Second quarter average gross yields stood at 4% for apartments, 2.0% for houses, 5.3% for retail, 4.3% for warehouses, and 4.5% for offices. The parallel reduction and/ or stabilisation 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 re-pricing of capital values to take place, especially for properties in secondary locations.