Local and overseas buyers are shunning the Cyprus property markets with unemployment and worsening prospects for the island’s economy having an affect, according to the Royal Institution of Chartered Surveyors (RICS).
In its latest quarterly price and rental index it says that the first half of 2012 saw investors postpone their decision making and look for safe havens. Property, both commercial and residential, was increasingly viewed as a risky asset and one with negative prospects in the near to medium term.
This led to a reduction in interest from both local and overseas buyers, resulting in low transaction turnover. 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.
Prices for flats fell by 1.2% in the second quarter compared with the first quarter of 2012, while house prices recorded a price fall of 2% with the residential markets in Nicosia and Limassol being affected the most. The biggest drop was in Limassol where apartment prices fell 3.4% for apartments and house prices were down 2.3%.
Values of retail properties fell by an average of 3%, whilst those of offices and warehouses fell by 2.1% and 3.2% respectively.
Compared to the second quarter of 2011 apartment prices have now fallen by 10.2% and house prices by 6.4%. In other markets retail is down 10.8%, office prices down 9% and warehouse prices down 12%.
In the rental markets across Cyprus values decreased by 2.1% for apartments, 0.5% for houses, 2.7% for retail units, 3.4% for warehouses, and 2.4% for offices.
That means that compared to the second quarter of 2011, rents dropped by 4.7% for apartments, 3.3% for houses, 11% for retail, 10.1% for warehouses, and 14.2% 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,’ says the report.
At the end of the second quarter of 2012 average gross yields stood at 3.8% for apartments, 2% for houses, 6% for retail, 4.7% for warehouses, and 4.5% 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,’ the report adds.