Cyprus property prices falling for over three years
Cyprus property prices have been falling for three and a half years, according to the Royal Institution of Chartered Surveyors.
The RICS Cyprus Property Price Index was introduced in the fourth quarter of 2009. Since then, values have steadily declined across the island, making Cypriot real estate more affordable for bargain hunters.
Photo: Sergey Yeliseev
The falls have been dramatic, the RICS notes, with the average price of a three-bed 250sqm house with a garden down by 25.1 per cent since their records began. The price of a two-bed 85sqm residential apartment has fallen even further, dipping 33.6 per cent.
The decrease in prices actually worsened in the second quarter of this year as Cyprus faced the consequences of the decisions of the Eurogroup in March to “bail-in” the depositors of two of the island’s biggest bank, close down Laiki Bank and impose capital restrictions, explains RICS.
“The implications of these decisions were unfolding throughout the quarter, with no bank finance being available and deposits being blocked in bank accounts. Given prevailing economic conditions and the turbulence in Cyprus’ banking system, there was a lack of transactions during the quarter,” continues the report.
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. Furthermore, those interested were unable to access bank-finance or their deposits.
Overseas transactions reportedly fell as well as domestic sales, according to the Department of Land and Registry. Foreign sales fell 43 per cent compared with June 2012, with Nicosia seeing deals decline by 85 per cent. Paphos, Larnaca and Limassol were more resilient, recording dips of 19 per cent, 17 per cent and 3 per cent respectively. Famagusta recorded zero sales.
The slump follows a positive boost for Cyprus in the wake of the banking crisis as Chinese investors swooped on the island’s cheap real estate to take advantage of low prices and residency schemes.
Indeed, estate agent Sold on Cyprus reported it was “business as usual” in May, highlighting rising non-EU interest from China and also the Middle East.
“We have actually got an agent based in Beijing and yes, there has been interest there, mainly for people who are business clients who wish to travel around Europe freely,” Sales Manager Denise Kay told TheMoveChannel.com. “ I’ve had for the first time ever American and Canadian clients, people from Lebanon, Jordan... We’ve had really mixed interest and that’s helping the international market definitely.”
Since then, though, demand seems to have decreased.
Photo credit: Eric Parker
Speaking to Cyprus Property News, Antonis Loizou FRICS attributed the slowdown to the impact of the Eurogroup decisions and the overpricing of some homes by various developers.
“Developers should be very careful because the Chinese market is the only market left and we should not think that we can exploit them because there are other countries that offer similar incentives,” he warned.
Indeed, China is the main lifeline for Cyprus at present. The only other hope for the island’s struggling economy and housing market is that the prices will continue to fall so that other bargain hunters can snap up low-priced holiday homes.
Indeed, in the second quarter of 2013, the RICS index shows that residential prices for both houses and flats fell 4.2 per cent and 5 per cent respectively. Famagusta saw the biggest drop in flat prices (6.7 per cent), while Larnaca’s house values fell the most (9.2 per cent). Year-on-year, prices fell 12.6 per cent for apartments and 11.2 per cent for homes.
Overall, Nicosia and Limassol fared the worst as they were the least affected markets up until the second half of 2012.
Across Cyprus, rental values decreased by 5.2% for apartments, 5.4% for houses, 12.0% for retail units, 7.1% for warehouses, and 8.8% for offices. All 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. At the end of Q2 2013, average gross yields stood at 3.8% for apartments and 2.0% for houses.
“The parallel reduction in capital values and rents is keeping investment yields relatively stable and at very low levels (compared to yields overseas),” adds RICS. “This suggests that there is still room for re-pricing of capital values to take place.”
“The main business that suffered during the recession was the investment side,” added Kay. “People still came to Cyprus for the weather, the fact that we offer excellent medical facilities... the reasons have remained.”
The one thing that has changed in the island’s favour? It is certainly much cheaper.
Looking for a low-priced holiday home?
Browse our listings of property in Cyprus:
http://cyprus,themovechannel.com/property/all