Cyprus Property News
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Nicosia Property Prices Drop

PROPERTY prices for buyers may be down but so are rents on apartments, warehouses and offices, the latest figures show.

The latest index from the Royal Institute of Chartered Surveyors (RICS) shows “significant falls across Cyprus’ major urban areas, with prices and rents falling across all districts” in the second quarter of 2012.

Over six months, the average rental price of a Nicosia two bedroom apartment went from €555 in March to €535 in June. In Limassol, rental prices for apartments went down from €502 to €479 in the same time period.

In just three months, about €2,631 got shaved off the average buying price of a two bedroom apartment in Cyprus falling from €131,120 in March to 128,484 € in June.

Compared to the second quarter of 2011, prices dropped by 10.2 per cent for apartments, 6.4 per cent for houses, 10.8 per cent for retail, 9.0 per cent for offices, and 12.0 per cent for warehouses, according to the RICS Cyprus property price index.

“[Prices] are going down. The country’s bankrupt and so are the banks. It’s as simple as that,” said member of RICS Pavlos Loizou who is in charge of the RICS Cyprus index.

“Eighty-three per cent of Cypriots own their home so we don’t really have lots of people who want to buy… at this point you have almost 11 per cent unemployment which means that people who want to buy are putting it off,” he said.

Most investors in Cyprus and abroad, such as property developers who would have an interest in buying a property, are “also sitting on the fence waiting to see how they play it out,” Loizou said.

If the state of the economy and property prices were the only thing concerning investors then they might be buying, Loizou said.

What is going on is that no one knows if and what changes there will be in taxes and legal requirements.

Cyprus is due to borrow money from its EU partners and will be asked to restructure its economy and increase its income.

Property developers cannot calculate what their income will be from renting out a property for the following year, since they might soon be asked to contribute a bigger proportion of their turnover, Loizou said.

Or they might not. The point is that no one knows, “there are questions, e.g. are things playing out as they are in Greece?”

So what next for the following year or two?

“Paphos and Famagusta have seen their prices drop for years. Nicosia and Limassol started six months ago so prices for them are dropping at an accelerating rate,” Loizou said.

Nicosia – relying more on the state and the banks – will suffer more in the following year, Loizou said.

“But the fact prices are falling is a sign the market is rebalancing,” he said.

“Between 2004 and 2008 when prices tripled we had just had a decade of stability and employment, banks gave loans out very easily. There was a state of euphoria, as if we were drunk,” Loizou said.

Prices are adjusting to a long-term average, he said.

Loizou said that when rent prices stop falling investors will know how much rent they will get from an investment and it will be a sign that offices are feeling robust enough to pay rents.

But it will be a year and a half before that, he said.

Of course when it comes down to specifics, sweeping generalisations are useless, another member of RICS said.

“The index is a mirror of what is happening now,” she said.

However, unless investors feel they can track their property’s future, they will postpone making choices.

And prices will probably continue dropping.

source: Cyprus Mail