CYPRUS RESIDENTIAL PRICES FOR HOUSES AND FLATS INCREASE
The twenty-sixth edition of the RICS Cyprus Property Price Index issued on July 4, reports that across Cyprus, residential prices for both houses and flats increase by 1.5% and 1.2% respectively, with the biggest increase being in Famagusta 4.1% for flats and Paphos (5.6% for houses). Values of retail properties fell by an average 0.5%, while offices and warehouses increase by 1.5% and 1.2% respectively. Compared to Q1 2015, prices dropped by 0.2% for flats, 1.3% for retail and 2.3% for warehouses; however, an increase of 0.6% for houses and 0.7% for offices was noted. During the first quarter of 2016 the Cyprus economy showed some signs of stability, with the economy’s performance being better than expected and tourism mildly outperforming forecasts. Unemployment remained at high levels, on a downtrend to ca 13% (from the high levels of 17%), and discussions were on going on the implementation of the foreclosure bill. Given prevailing economic conditions and the turbulence in Cyprus’ banking system, there were relatively few 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. Market Capital Values The Property Price Index has recorded increases in almost all cities and asset classes, with significant increases being recorded in Paphos and Famagusta area, whilst other cities are progressively bottoming out. Market Rental Values Across Cyprus, on a quarterly basis rental values increased by 3.6% for apartments, 1.8% for houses, 0.2% for retail, 0.4% for warehouses and office rents increased by 0.6%. Compared to Q1 2015, rents increased by 4.2% for flats, 2.4% for houses and 2.4% for offices. Retail and warehouses dropped by 3.2% and 2.1% respectively. The majority of asset classes and geographies are bottoming out, 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. Appraisal based initial yields At the Q1 of 2016 average gross yields stood at 4% for apartments, 2.0% for houses, 5.2% for retail, 4.3% for warehouses, and 4.4% 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.