Property prices continued to fall in the last quarter of 2014, at a somewhat slower pace than in the third quarter, according to data provided in the RICS Cyprus Property Price Index.
The 21st quarterly price and rental index, developed in cooperation with the University of Reading, found that average market prices fell by 5.4% for flats, 5% for houses, 8.1% for retail, 6.1% for offices and 5.3% for warehouses, compared to the fourth quarter of 2013.
In the previous quarter, the RICS Cyprus survey had seen average prices drop by 6.3% for flats, 4.4% for houses, 9.6% for retail, 6.3% for office, and 4.2% for warehouses.
Justifying the slowdown in the price fall, the survey recognised that in the fourth quarter of 2014 the economy had shown some signs of stability, with a better-than-expected performance and tourism mildly outperforming forecasts. But unemployment remained at a historical high level, and had stabilised at 16-17%.
“Given the prevailing economic conditions and the turbulence in the banking system, there were few transactions in 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 were unable to access bank-finance.”
The RICS Cyprus Property Price Index recorded falls in almost all towns and asset classes, with significant drops in Nicosia which “is clearly feeling the impact on the government and banking sector that traditionally dominate the employment market, whilst other towns are progressively bottoming out.”
Across Cyprus, residential prices for both houses and flats fell by 1.1% and 0.7%, respectively, with the biggest drop being in Famagusta (3.6% for houses) and Nicosia (1.1% for flats). Values of retail properties fell by an average 1.6%, offices by 1.2%, and warehouses by 1.9%.
Compared to Q4 2013, prices dropped by 5.4% for flats, 5.0% for houses, 8.1% for retail, 6.1% for office, and 5.3% for warehouses.
On a quarterly basis rental values decreased by 1.3% for apartments, 0.2% for houses, 0.4% for retail units and 0.9% for warehouses; office rents increased marginally by 0.2%.
Compared to Q4 2013, rents dropped by 5.0% for flats, 3.1% for houses, 8.9% for retail, 8.8% for warehouses, and 2.9% 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, e.g Paphos and Larnaca are showing some signs of price stability,” the RICS report said.
At the end of Q4 2014, 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 re-pricing of capital values to take place, especially for properties in secondary locations,” the study said.
