Prices for residential real estate in Cyprus continued to fall in the final quarter of 2014, spurring buyer interest and boosting transaction volume.
According to the latest house price index from the Royal Institute of Chartered Surveyors (RICS), average house prices in Cyprus declined 1.1% and apartments 0.7% in the final quarter of last year, while already discounted by up to 40% following the financial crisis.
With property prices starting from a very low base, continuing declines have created attractive margin potential for property investors seeking capital appreciation and rental income.
Despite a recorded 5% increase in sales transactions in February 2015, RICS believe that prices will continue falling in 2015, dampened by the strict lending implemented following the island's banking crisis.
The largest quarterly declines were in Famagusta where house prices fell 3.6% in Q4 2014 and Nicosia, down 1.1%.
Cypriot economy showed some signs of stability
The RICS reports states: "During the fourth quarter of 2014 the Cyprus economy showed some signs of stability, with the economy's performance being better than expected and tourism mildly outperforming forecasts. Unemployment remained at historical high level, stabilised at around 17% and discussions were ongoing regarding privatisations of state-owned enterprises and the foreclosure bill".
"Given prevailing economic conditions and the turbulence in Cyprus' banking system there were few transactions during the quarter although volume was higher on a year-on-year basis. Local buyers in particular were the most discerning as the increase in unemployment and the prospects of the local economy maintained the lack of interest", it continues.
"Furthermore, those interested were unable to access bank finance. The Property Price Index has recorded falls in almost all cities and asset classes, with significant falls being recorded in Nicosia. Nicosia is clearly feeling the impact on the government and banking sector, the two sectors who dominate the local employment market, whilst other cities are progressively bottoming out."
According to local real estate firm Fitzgerald Marketing, sales increased by 20% in 2014 compared with the previous year, largely due to more domestic buyers entering the market.
As yet, there is no data available for house prices in Cyprus for 2015 although transactions were recorded as being up 10% in January and 5% in February, suggesting there may be potential uplift in price levels should sales volumes continue improving.