The creation of an unbiased measure of property prices and rents has been a long time in the making; it was completed when Royal Institution of Chartered Surveyors ΚÃ?πρου (RICS) in association with the Cyprus Association of Quantity Surveyors and Construction Economists (ΣΕΕΟΚΚ), launched its first quarterly Cyprus Property Price Index. The Index monitors property prices and monthly rents across all districts and property types, namely apartments, houses, office, high street retail, and warehouses. Overall, the Index tracks property prices and rents across 46 locations.
The highest prices for high street retail, offices, and warehouses were recorded in the bigger urban centres of Nicosia and Limassol. Warehouses are more expensive in Limassol by 18%, likely due to the presence of the main commercial port. House and apartment prices are spread evenly across the island, with an average price of €1.865/sqm for apartments and of €2.000/sqm for houses. A low deviation between all cities shows that, excluding tourist areas and areas of special value, e.g. areas with sea views, “named areas”, etc, the vast majority of homes for locals are evenly priced.
The distribution of rents shows the interesting dichotomy between Nicosia and the coastal cities. Compared to Nicosia, rents for office space and for houses are higher in Limassol, by 68% and 13% respectively, probably due the presence of overseas companies. Also, warehouse rents are 78% higher due to the presence of the port. Indeed, Nicosia has the lowest warehouse rental costs across Cyprus.
Investment yield (rental income/price) is a term rarely used in Cyprus as most companies own their real estate instead of leasing it. Initial yields on commercial property stand at 6,1% for retail, 4,7% for offices, and 4,8% for warehouses. These low yields may show that rents are being kept artificially low by the tendency of companies to occupy properties with alternative uses (mainly residential) in order to minimise their costs. An alternative explanation is that property prices are too high due to the lack of land supply and the price boom of the past few years.
Attendees at the launch were addressed by the President of RICS Cyprus, Petros Stylianou MRICS, the vice-President of ΣEEOKK Anna Iacovou FCIArb MRICS, and by the ex-Minister of Finance, Dr Michalis Sarris. Mr Stylianou highlighted the significance of the Index in bringing an identifiable measure of property prices and returns, whilst Mrs Iacovou noted the need for a similar Index on construction costs which identified market trends and the changing economic landscape. Dr Sarris elaborated further on the importance of clarity in times of economic turbulence in order to instil confidence in investors and the public as a whole.
The key speaker was Professor Patrick McAllister of the Department of Real Estate and Planning at the University of Reading, UK. Professor McAllister and Dr Franz Fuerst were commissioned by RICS Cyprus to develop the methodology underpinning theIndex and will continue to be involved in monitoring its findings. Professor McAllister outlined the basis of the index, and explained the merits of the chosen approach in a market like Cyprus where there are few transactions of directly comparable properties and where information can be opaque. The University of Reading’s methodology and the findings of the research are freely available of the RICS’s website www.joinricsineurope.eu/en/na/view/rics-cyprus
