Bank troubles worsen property market woes

PROPERTY PRICES saw a “disappointing” drop in the first quarter of 2012, according to the latest figures released by the Royal Institute of Chartered Surveyors (RICS). 

The tenth publication of RICS’ Cyprus survey notes: “The Property Price Index has recorded a disappointing behaviour in property prices across Cyprus’ major urban areas, with prices and rents falling across all districts.” 

Overall, Limassol fared the worst as it was the least affected market until the second half of 2011 and the one that has experienced the greater reduction in interest by overseas buyers.

Residential prices for both houses and flats in the first quarter of the year fell by 2.4 per cent and 2.6 per cent respectively compared to the previous quarter, with the biggest drop seen in Limassol (6.5 per cent for apartments and 5.3 per cent for houses). Values of retail properties fell by an average of 3.0 per cent, while office and warehouse prices fell by 3.1 per cent and 2.1 per cent respectively.

A year-on-year comparative analysis shows that prices dropped by 10.8 per cent for apartments, 6.3 per cent for houses, 12.0 per cent for retail, 9.0 per cent for office, and 10.7 per cent for warehouses.

Across Cyprus, rental values decreased by 2.2 per cent for apartments, 2.2 per cent for houses, 1.8 per cent for retail units, 2.8 per cent for warehouses, and 4.3 per cent for offices. 

Compared to the first quarter of 2011, rents dropped by 5.7 per cent for apartments, 1.5 per cent for houses, 12.3 per cent for retail, 11.1 per cent for warehouses, and 13.9 per cent for offices. 

RICS concludes that “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”.

According to Pavlos Loizou, member of the RICS board in Cyprus: “During the first quarter of 2012, Cyprus’ economy continued to bear the consequences of the decoupling of the Greek economy and of the ‘haircut’ in Greek government debt. 

“The above had a significant impact as they led to a pronounced slowdown in mortgage and corporate lending and a rise in the rate of unemployment. The combination of the above, along with uncertainty surrounding Cyprus’ banking system, led to a further slowdown of the economy.”

He noted that while the first half of 2011 saw some signs of muted economic growth, the second half of the year and the first quarter of 2012 saw investors postpone their decision-making. 

“This led to low transaction turnover and reduced interest, especially by local buyers, as they were more affected by the increase in unemployment and the decrease in credit,” he said.