The biggest drops were in Larnaca (1.4% for houses) and Nicosia (6.8% for flats). Values of retail properties fell by an average of 3.2%, whilst those of offices and warehouses fell by 1.4% and 0.7% respectively. “Nicosia is clearly feeling the impact on the government and banking sector (the two sectors who dominate the local employment market), whilst other cities are progressively bottoming out,” said the RICS report.

Compared to Q4 2012, prices dropped by 13.3% for apartments, 10.5% for houses, 19.8% for retail, 12.8% for office, and 15.4% for warehouses. Across Cyprus, on a quarterly basis rental values  decreased by 1.0% for apartments, 1.3% for houses, 3.0% for retail units, 1.4% for warehouses, and 1.6% for offices. Compared to Q4 2012, rents dropped by 13.3% for flats, 12.3% for houses, 29.4% for retail, 18.0% for  warehouses, and 18.8% for offices. At the end of Q4 2013 average gross yields stood at 3.8% for apartments, 1.9% for houses, 5.3% for retail, 4.5% for warehouses, and 4.3% 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, said RICS.

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. Only properties in Famagusta district showed a marginal increase in both capital values and rents, as the market there appears to be  stabilising, the report added.

RICS attributed the drop to prevailing economic conditions and the turbulence in Cyprus’ banking system. “There was a lack of transactions during the quarter. Local buyers in particular were the most discerning as the increase in unemployment and the worsening prospects of the local economy led to a sharp reduction in interest,” it said. “Furthermore, those interested were unable to access bank-finance or their deposits.” RICS is a quarterly price and rental index which is based on methodology produced by the University of Reading, UK. The Index tracks property and rental prices across all districts and main property types.

Source: Cyprus Mail