Building a Real Estate Price and Rental Index for Cyprus
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Building a Real Estate Price and Rental Index for Cyprus Pat McAllister School of Real Estate and Planning University of Reading. Why create a property index?. Residential and commercial real estate comprise a large proportion of national wealth.

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Building a Real Estate Price and Rental Index for Cyprus

Pat McAllister

School of Real Estate and Planning

University of Reading


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Why create a property index?

  • Residential and commercial real estate comprise a large proportion of national wealth.

  • Real estate markets affect macro-economic performance and policy-making and the stability of the financial system.

  • Users include government, investors, lenders, market practitioners and the public (Cypriots and non-Cypriots).

  • Demand from users for transparency

    • Measuring and monitoring market change

    • Understanding market behaviour

    • Performance measurement

    • Benchmarking

    • Financial products


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Accepted facts

  • There are numerous options for index construction drawing upon different data sources using different methods.

  • There are no agreed standards or frameworks – each type of index has strengths and weaknesses.

  • Indexes are typically constructed by government agencies, professional organisations, mortgage companies, data specialists and real estate advisors.

  • The construction of commercial real estate indices raises many different issues relative to residential indices.


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Key issues

  • What is the purpose of the index?

  • How much data is available?

  • What are the qualities of the data that is available?

  • What resources are available?


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Commercial property indices

  • Due to thin trading, indices based on actual prices are extremely rare.

  • Indices based on appraisals of actual properties have emerged across the EU. They are expensive and require a substantial presence of institutional investors

  • Indices based on appraisals of hypothetical properties are very common.

  • Provided by global real estate advisory firms – JLL, CBRE, DTZ and CWHB


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Residential real estate indices

  • Much more diverse range of indices across the EU, US and Asia.

    • Main methods – hedonic pricing, repeat sales and simple averaging.

    • Prices or appraisals?

    • Prices – asking prices or recorded prices?

    • Sample – All transactions? Transactions recorded by a single company?

    • Result – measuring different things in different ways and, not surprisingly, producing different measures.

    • This diversity of approaches reflects diversity of purposes, motivations and resources for index construction.


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Key points

  • It is common to have a range of index types in a single market.

  • The optimal solution for the construction of a real estate index is a function of purpose of the index, data availability, data quality and available resources.

  • For commercial property markets, hypothetical property indices are a common solution due to data problems.

  • For residential property markets, large scale price data is more readily available. You need to trust the data and you need to have more resources.

  • Due to inherent lag in price recording, indices based on hypothetical indices can record timing of market change effectively.


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Building the RICS Cyprus Index

  • Monitoring property prices, yields and market rents.

  • Five main urban centres: Nicosia, Limassol, Larnaca, Paphos, Famagusta-Paralimni.

  • 46 different submarkets, for example for apartments in Nicosia: Latsia, Tseri, Acropolis, Engomi, etc.

  • For a range of hypothetical properties,

    • E.g. A 150 square meter shop on Makarios Avenue, Nicosia with 100 square metre ground floor and 50 square meter mezzanine.

  • Three RICS accredited valuers per urban centre, each providing data for that district only, i.e. 15 valuers in total.

  • Properties are to be valued every quarter and the results published by RICS Cyprus.


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Findings – Prices per sqm

Highest Retail and Office Prices

Lowest prices across all sectors

Highest Warehouse Prices

Most expensive apartments


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Findings – Monthly rent

Highest Retail and lowest Warehouse rents

Lower than average rents across all sectors

Higher than average rents across all sectors

Second highest warehouse rents


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Findings – Initial yield

Highest Retail and lowest Warehouse yield

Highest warehouse yield

Lowest retail and officeyield

Highest retail and lowest office yield


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Interpreting the Numbers

  • The distribution of residential prices shows no substantial variation between the major urban centres. Possibly consistent with the distribution of income across the country?

  • Not unexpectedly, however, the highest prices and rents are found in the largest urban centres.

  • Retail rents in Nicosia appear to be very high relative to the other major centres. Due to a very limited supply? Justified by higher turnover?

  • Large variation in initial yields across urban centres and across sectors. Suggests imperfect market? Due to restricted supply of investments for sale?

  • Compared to other major EU markets, initial yields appear low.



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