Property values bottoming out as rental prices enter recovery, RICS says

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By Stelios Orphanides

Property prices in the third quarter of 2015 continued to fall in Cyprus, but at a slower pace, accompanied by a recovery in rental prices, according to the Royal Institute of Chartered Surveyors.

The prices of apartments and houses dropped a quarterly 0.4 per cent and 0.5 per cent respectively, RICS said.

RICS Q3“The property price index has recorded drops in most cities and asset classes, while the rate of decrease is less than previous quarters,” RICS said in an emailed statement on Monday. “In addition certain districts indicate signs of stability, as Paphos, Larnaca and Famagusta are progressively bottoming out”.

Prices for flats in Famagusta and houses in Limassol recorded the biggest falls — between July and September they were1.2 per cent and 3.2 per cent lower compared to the second quarter, RICS said. Houses in Nicosia saw their price drop by 0.3 per cent in the third quarter compared to the period between April and June.

Retail property prices fell an average 0.6 per cent in the third quarter compared to the second quarter, while prices for warehouses rose 1.1 per cent respectively, RICS said.

Between July and September, flats and houses were on average 1.9 per cent and 1.3 per cent more affordable compared to a year before, RICS said. Prices for retail properties, offices, and warehouses fell a quarterly 4 per cent, 2.7 per cent and 1.8 per cent, respectively.

Rental prices for apartments and houses rose 0.3 per cent and 1.5 per cent respectively in the third quarter compared to the previous quarter. Rents for offices rose 2.6 per cent, RICS said. Rental prices for retail properties and warehouses fell 1.1 per cent and 0.1 per cent. In the second quarter of 2015, rental prices fell compared to January to March.

Compared to the third quarter of 2014, flat and house rents fell 1.5 per cent and 0.5 per cent respectively in July to September, while those for retail properties, warehouses and offices fell 4 per cent, 2.5 per cent and 0.2 per cent, RICS said.

“At the end of the third quarter 2015, average gross yields stood at 3.9 per cent for apartments, 2 per cent for houses, 5.2 per cent for retail, 4.3 per cent for warehouses, and 4.5 per cent for offices,” RICS added. “The parallel reduction 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”.

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Stelios Orphanides is a journalist at CyprusBusinessMail.com. To contact Stelios Orphanides: [email protected]

  • Lizzy1

    Suspect the slow down in the price drop is due to sellers not facing reality, nothing to do with economic recovery. Property here is way over priced, particularly considering the build quality.

    • Alexander Reuterswärd

      and supply is way higher than the demand 😉

      • pepito

        How can you assess that?
        I mean there is no data concerning how many houses are to sell, and how many people are able to buy…

        • Alexander Reuterswärd

          correct, but drive around in Paphos, Kiti, Tersefanu, Oroklini and look at the massive amount of houses that not is occupied…it is like ghost towns and you can see big brand new complexes from Aristos and all other developers that is just standing there not even finished the constructions.

    • costas

      I prefer apartments to houses, price is just one of the factors, but the best locations are already taken, unless people want a village property

      • Argent

        Quite a few estate agents wont take on properties that are in Villages now. Where I live some of the properties have been on the market for over ten years. A friend of mine is selling her house, really nice, every thing you would want in a house, yet shes is practically giving it away and she still has no takers.

        • peemdubya

          Agree – a couple over the road are returning to UK and trying to sell their 3-bed bungalow (pool, a/c, heating, furnished) and they will go as far down as £200K – that is a massive loss-making investment they made 5yrs ago!!

          • pepito

            real estate works like stock exchange, sometimes you can make a lot, sometimes you can loose everything…Now you’ve got to accept if you want to loose 3/4th or half of your investment by selling now, or everything later…
            I think people selling now at discount prices will be the lucky ones in a very few years.

          • Lizzy1

            Plus they’ll take a double hit by converting back to sterling.

          • Argent

            People wont touch Cyprus now. If you cant trust the lawyers, legal/judicial system this is what happens. Most people I know would rather live in a country with crime, than a lawless society like Cyprus.

        • pepito

          What is a “give away price”? and in which village?

          • Argent

            Its on the market for less than half its value, and its just about perfect. Seek, and ye shall find.

          • pepito

            I see….
            Most of the properties here are sold (at least) twice their actual value….People think that the value of their house is the price they paid for it. (lol)
            1-they don’t want to admit that real estate prices went down a lot (check “BoC index” on internet, and that they are still plumeting.
            2- they don’t want to admit that they”ve got ripped off by a developer who sold a cheap crappy product (bad buillding standards and cheap labour doesn’t sum up to 2000/sqm) at a high price. And they expect that, although now people have realized that, someone is going to show up saying “please ripp me off, it’s my turn” (lol again).
            3- the only value of a house is the price it is sold for…usually in a “normal” real estate market, a property is to be sold in a three month time spa ; if not, it means it’s over valuated.

          • Argent

            Not this one, they got it for a good price, and they are selling it below valuation just to get out of Cyprus.

    • Mike

      Overpriced by a mile and more Lizzy. Your suspicions are spot on I would suggest.

  • costas

    I haven’t seen any improvement when sight seeing in Larnaca and Paphos when I get time for a day trip. If I were investing now, it would probably a suburb on the outskirts of Nicosia

    • Alexander Reuterswärd

      😉 i would invest in London or anywhere outside cyprus, dont think you can get a good return on investment in the coming years and you would be locked with your funds since it is difficult to sell whatever you buy..

      • costas

        yes the UK government manage the finances and are ahead of quite a number of EU nations especially Cyprus. The UK deal with issues and things holding them back whereas Cyprus well they keep things to their committees and do nothing

      • cherry2

        This is a good time to invest in Cyprus as I think the economy is on the up. Most high return investments are made in difficult times although more risky I suppose .

        • Alexander Reuterswärd

          doubt you will see the same ROI as in UK within the next 5-10 years, there is a massive oversupply and a very low demand…this dont change in a moment..high risk and lucky if you get your money back in 3-5 years (if you can sell it)

          • cherry2

            I agree however for someone wanting a place in the sun and not a 5 year investment this is the perfect time . London is at a peak right now property bubble about to burst , stock exchange overvalued once interest rates increase I predict a strong correction in both markets . You will be hard pressed to find a better Return over the long term than in Cyprus . Remember this is a small economy compared to the UK and much easier to recover in a shorter space of time .

          • peemdubya

            How can Cyprus ever recover while we have the same old Elite in places of power and Unions able to dictate every Government decision?

          • pepito

            You just forget one detail…Cyprus economy survives on loans which can’t be repaid….(50% of NPL)…for how long?

          • Lizzy1

            House prices in UK are still rising according to BBC news recently. The reason being that demand is outstripping supply.

          • pepito

            Yes, I think the problem in Cyprus now is not to sell at a certain price, but just to be able to find someone willing to buy (whatever the price)…
            My neighbour is the owner of a building, one flat out of two is not rented, and he pays more in taxes and maintenance costs than what he gets from the rents….so he accepts only cash for rental…so much that doesn’t go in the state coffers… And so goes the state of the Cyprus economy…

      • Didier Ouzaid

        If you have the cash to invest in Greater London (any slum in now half a mil or smth), there are also other assets that would yield you much higher returns. Unless you only want RE.

        • Alexander Reuterswärd

          I agree bout other options, but in real estate it is more or less impossible to beat the larger capitals all over the world.

      • Argent

        London is to expensive now, further north there are still good deals to be had. Or abroad Florida, Detroit, France, Spain, Greece etc. Cyprus has to many things going wrong and is still not trusted. Weather is still good, but the hotels, restaurant’s, shops are already closing for the winter. How can they afford to.

        • gelert

          Detroit ??

          LOL

          • Argent

            I know, it sounds silly. But the place is being reinvented, remodeled and there’s is quite a bit of investment pouring in. You can pick up a 3 bed, 2 bath, fully renovated house with garage and garden, in a pretty good area for about $30k. They with even guarantee you section eight tenant.

          • gelert

            Does it come with its own M1 ?

          • Argent

            I must admit it can be fun at times.

          • gelert

            I remember, many years ago, when Greektown was like an armed camp in the glory days of Coleman Young. It’s gone a lot further downhill since then.

            “Detroit: An American Autopsy” says it all.

    • Zorbas

      There seem to be a lot less for sale signs about.

  • Mike

    RICS – the eternal optimists, nothing like attempts to talk up a market is there.

  • cherry2

    Good time for those wanting a place in the sun . Prices have fallen the Sterling is doing very well so taking all into consideration properties are been sold at a huge discount !!

  • clergham

    €2m haciendas in Spain now selling for €. 5m

    There needs to be a similar crash in Cyprus for the market to stabilise

    Will only come about when banks are dragged kicking and screaming into foreclosing on their NPLs

  • pepito

    In my view, RICS reports have lost completely their credidbility….For anyone knowing the real estate market in Cyprus, the data used in this article are complete BS…
    What I can see today, on the real cyprus world, is people holding as much as they can to their propertie value, trying desperatly not to loose money on their investment. They look like the guy hanging by his hands over a cliff, and resisting as much as he can to let go…