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Rents highest in Limassol, shops in Nicosia, says RICS Cyprus.

The highest prices for high street retail shops, offices, and warehouses were recorded in the bigger urban centres of Nicosia and Limassol, according to the first quarterly Cyprus Property Price Index conceived by the Cyprus branch of the Royal Institution of Chartered Surveyors (RICS).

The creation of an unbiased measure of property prices and rents has long been in the making and was recently completed when RICS Cyprus and the Cyprus Association of Quantity Surveyors and Construction Economists (SEEOKK), launched their first quarterly index that monitors property prices and monthly rents across 46 locations.

House rents are highest in Limassol with an average price tag of 1,226 euros, followed by Larnaca (EUR 800) and Nicosia (EUR 729), while an average 2-bedroom apartment are dearest in Nicosia and Limassol at EUR 560 a month.

A high street retail shop, about 100 sq.m. with mezzanine costs about EUR 7,000 a month in Nicosia, EUR 4,239 in Limassol, EUR 3,433 in Larnaca, EUR 2,383 in Paphos and EYR 1,525 in the Famagusta- Paralimni area.

Warehouses are more expensive in Limassol, likely due to the presence of the main commercial port, followed by Larnaca and Famagusta area. House and apartment prices are spread evenly across the island, with an average price of e1/41.865/sqm for apartments and of e1/42.000/sqm for houses. A low deviation between all cities shows that, excluding tourist areas and areas of special value, e.g. areas with sea views, "named areas", etc, the vast majority of homes for locals are evenly priced.

The distribution of rents shows the interesting dichotomy between Nicosia and the coastal cities. Compared to Nicosia, rents for office space and for houses are higher in Limassol, by 68% and 13% respectively, probably due the presence of international companies.

Investment yield (rental income/price) is a term rarely used in Cyprus as most companies own their real estate instead of leasing it. Initial yields on commercial property stand at 6,1% for retail, 4,7% for offices, and 4,8% for warehouses. These low yields may show that rents are being kept artificially low by the tendency of companies to occupy properties with alternative uses (mainly residential) in order to minimise their costs. An alternative explanation is that property prices are too high due to the lack of land supply and the price boom of the past few years.

During the launch of the Index, the President of RICS Cyprus, Petros Stylianou, highlighted the significance in bringing an identifiable measure of property prices and returns, whilst the vice-President of SEEOKK Anna Iacovou noted the need for a similar index on construction costs which identified market trends and the changing economic landscape. Former Finance Minister Michalis Sarris elaborated further on the importance of clarity in times of economic turbulence in order to instil confidence in investors and the public as a whole.

The key speaker at the launch was Professor Patrick McAllister of the Department of Real Estate and Planning at the University of Reading. Prof. McAllister and Dr Franz Fuerst were commissioned by RICS Cyprus to develop the methodology underpinning the Index and will continue to be involved in monitoring its findings. McAllister outlined the basis of the index, and explained the merits of the chosen approach in a market like Cyprus where there are few transactions of directly comparable properties and where information can be opaque.

The University of Reading's methodology and the findings of the research are available on the RICS website .

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Publication:Financial Mirror (Cyprus)
Geographic Code:4EXCY
Date:Feb 5, 2010
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