Property prices continued to fall in the third quarter of the year, with year-on-year values dropping by as much as 4-6%, according to the RICS Cyprus Property Price Index.
The 20th edition of the index, based on prices as at the end of September, saw price falls in almost all towns and asset classes, with Nicosia dropping the most.
“The capital is clearly feeling the impact on the government and banking sector (the two sectors that dominate the local employment market), whilst other cities are progressively bottoming out,” the RICS sale and rent report said.
Across Cyprus, residential prices for both houses and flats fell in the third quarter by 1.6% and 1.0% respectively from the previous quarter, with the biggest drop being in Nicosia (3.4% for houses) and Limassol (1.5% for flats). Values of retail properties fell by an average of 2.0% and offices by 1.4%, whilst those of warehouses remained stable.
Compared to Q3 2013, prices dropped by 6.3% for flats, 4.4% for houses, 9.6% for retail, 6.3% for office, and 4.2% for warehouses, RICS Cyprus said.
“During the third quarter, the economy showed some signs of stability, with the economy’s performance being better than expected at the end of 2013 and tourism outperforming forecasts. Unemployment remained at a historical high level, stabilised at about 17-18%, further decreases in salaries were recorded, and discussions were ongoing regarding privatisations of state owned enterprises, the revised Immovable Property Tax, and the foreclosure bill. At the same time Bank of Cyprus raised an additional 1.0 bln euros to shore up its capital base.”
The report explained that “given prevailing economic conditions and the turbulence in the banking system, there was a lack of transactions during the third quarter. 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 were unable to access bank-finance or their deposits.”
The Property Price Index also saw a deterioration in rents.
Across Cyprus, on a quarterly basis rental values decreased by 1.2% for apartments, 0.9% for houses, 3.2% for retail units, 0.4% for warehouses and 0.9% for offices.
Compared to Q3 2013, rents dropped by 4.7% for flats, 4.1% for houses, 11.2% for retail, 9.2% for warehouses, and 4.6% for offices, the RICS report said.
“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 the trough,” the report added.
At the end of Q3, average gross yields stood at 3.9% 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 very low levels (compared to yields overseas). This suggests that there is still room for re-pricing of capital values to take place,” the RICS report concluded.