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Housing Returns Performance

25 July 2017

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Housing Returns Performance

Based on the published global property guide, Cyprus does not appear to be in the lower scale for having a good return and as such we report:

The local Royal Institution of Chartered Surveyors Cyprus branch, provides every quarter its own statistics on real estate returns and prices. The most recent one which indicates returns on residential apartments of 120 sq.mts. rates are:

All Cyprus

YIELD (p.a.)

LARNACA

4.13%

LIMASSOL

5.29%

NICOSIA

4.01%

 

All Cyprus

Yields

2014

3.80%

2015

3.90%

2016

4.0%

2017

5.00%   (estimated)

Returns (or yields), as we locally interpret, is the income (gross) received per annum compared to the property’s market value.

The returns do not reflect non-payment of rent, property taxes, voids, common expenses etc, and this is rather wrong. So if one is to compare the local returns to those internationally adopted, for the Cyprus local returns one should reduce them by around 10%-15% - i.e. the net income from a property based as a % on its value.

Based on the published global property guide, Cyprus does not appear to be in the lower scale for having a good return and as such we report:

A.A

Country/City

Gross Rents

Long term rating

Yield/year

Investment

1

Austria, Vienna

2.18%

Very Poor

2

Belgium, Brussels

4.87%

Poor

3

Bulgaria, Sophia

5.87%

Moderate

4

Cyprus, Limassol

5.29%

Moderate

5

Czech Republic, Prague

3.74%

Very Poor

6

Denmark, Copenhagen

4.84%

Poor

7

Estonia, Tallinn

4.28%

Poor

8

Finland, Helsinki

4.11%

Poor

9

France, Paris

3.89%

Very Poor

10

Germany, Berlin

2.99%

Very Poor

11

Greece, Athens

4.17%

Poor

12

Hungary, Budapest

6.42%

Moderate to Good

13

Ireland, Dublin

7.18%

Good

14

Italy, Rome

3.36%

Very Poor

15

Latvia, Riga

4.92%

Poor

16

Lebanon, Beirut

4.51%

Poor

17

Luxembourg

4.40%

Poor

18

Malta, Valleta

4.35%

Poor

19

Romania, Bucharest

6.07%

Moderate to Good

20

Spain, Madrid

4.21%

Poor

21

UK, London

3.21%

Very Poor

The quoted gross yield figures are based on the average yields for 120 sq.m. apartment units Long term ratings are based on many factors:

We must say, that in terms of returns, Limassol, based on the publication, is doing well but on the lower end rather than on the top end of apartment prices. There is indeed an upsurge in demand and rental levels in all towns (especially in Limassol) are on the up. Any gross return on residential units showing around (+) 4% is good in our opinion and even with a net return (prior to tax) of 3.5% bearing in mind the positive trend and the positive future of the building industry that has just started to revive (be it in general at a low pace). Our own favorite investment is of course “villa to let” in the Paralimni/Famagusta region mainly 3 bed and in close proximity to the sea (see our previous article on the subject) showing returns in excess of 8% even after the 20%-25% letting fees and maintenance are deducted (see tax avoidance in addition as well as the abolition of the property tax).

For those who want to venture in higher amount of investments in the residential buy-to let sector there appears to be good opportunities from the Banks foreclosures. Whole blocks of apartments (even at a semi completion stage) are on offer. Recently we came up amongst others, a most interesting project at Pyla with good quality houses, with pools etc and other facilities ideal for buy to let.

Let’s hope that this state of affairs will continue at least for the next 2-3 years which will be another boost to the local building industry. Having said that the villas to let is the result of the booming tourist industry and their high occupancy which is the result of the Egypt/Turkey state of the market. Once these markets start to revive, the villa to let may not be as attractive as they are at the moment.

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