The RICS index, which tracks property and rental prices across all districts and main property types, shows that in the fourth quarter of 2012 the property market bore the consequences of the slowdown in the economy, the increase in unemployment and the on-going turbulence in the banking and financial sectors.
Indeed, year on year GDP contracted by 3.3%, unemployment rose by 14.7% and there was a pronounced slowdown in mortgage and corporate lending.
RICS says that there was a dearth of investment transactions during the second half of 2012. ‘Property, both commercial and residential, is viewed as a risky asset and one with negative prospects in the near to medium term. 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,’ the report says.
The Property Price Index has recorded significant falls across Cyprus’ major urban areas, with prices and rents falling across all districts. Overall, Nicosia and Limassol faired the worst as they were the least affected markets up until the second half of 2012.
Across Cyprus, residential prices for both houses and apartments fell by 1.1% and 3.1% respectively, with the biggest drop being in Famagusta, where apartment prices fell 7%, and Limassol where house prices fell by 2.5%.
Values of retail properties fell by an average of 3.8%, whilst those of offices and warehouses fell by 1.8% and 1.6% respectively.
Compared to the fourth quarter of 2011, prices dropped by 7.9% for apartments, 5.7% for houses, 15.5% for retail, 10% for office, and 9.3% for warehouses.
Rents are also falling. Across Cyprus, rental values decreased by 3.3% for apartments, 2.6% for houses, 5.5% for retail units, 4.3% for warehouses, and 2.5% for offices.
Compared to the fourth quarter of 2011, rents dropped by 7.6% for apartments, 8.1% for houses, 14.4% for retail, 11.8% for warehouses, and 9.1% for offices.
It was thought that areas that had dropped the most early on in the property cycle would now nearing the trough, but the current banking crisis means that more falls in prices seem inevitable.
