First internationally recognised property price index for Cyprus is published
The Royal Institution of Chartered Surveyors has launched a property price index for Cyprus which is aimed at making the real estate market more transparent.
It will track property and rental prices across all districts and monitor changes in residential properties, offices, high street retail and warehouses and be published quarterly.
The first one just published will provide a base index on which all future changes in price and rental levels will be benchmarked.
The first index paints a pretty bleak picture. It says that the beginning of 2010 finds Cyprus in the midst of the global economic crisis, as the economy begins to feel the brunt of the slowdown in economic activity, a decrease in income from taxation, and a severe reduction in property transactions, around 50% lower in 2009 than in 2008.
In particular a massive decrease in the number of overseas buyers has had a severe impact, the report points out. Foreign buyers have decreased by 80% compared with the period from 2005 to 2008.
Banks and other lenders have also cut back on lending to the real estate market and this has also had an impact, the report adds.
The highest prices for high street retail, offices, and warehouses are recorded in the bigger urban centres of Nicosia and Limassol. Warehouses are 18% more expensive in Limassol, probably due to it having the island’s main commercial port.
House and apartment prices are spread evenly across the island, with an average price of €1,865 per square meter for apartments and of €2,001 for houses. The low standard deviation across all cities of only 9% and 10% respectively shows that, excluding tourist areas and areas of special value, the vast majority of homes for locals are evenly priced.
Rental prices vary 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, the report says.
Investment yield is a term rarely used in Cyprus as most companies own their properties instead of leasing it. However, yields are a useful tool showing the relationship between rent and property prices. 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,’ the report adds.
The RICS Cyprus Property Price Index monitors the urban centres of Nicosia, Limassol, Larnaca, Paphos and Paralimni-Famagusta. The Index only tracks prices in Republic of Cyprus’ government controlled area and not in the occupied North.