The necessity to reduce property rentals

  Article By : Marinos Kineyirou|  Published at : Politis Newspaper| 03-06-2012

Marinos Kineyirou: Vice-president of the Cyprus Association of Estate Agent Entrepreneurs, President of the Real Estate Agent Entrepreneurs Association of Larnaca- Famagusta and Property Auctioneer.

 

The necessity to reduce property rentals

Marinos kineyirou Manager of Marinos Estate Agencies LTD

Marinos Kineyirou Manager of Marinos Kineyirou Estate Agencies LTD

Even though there has been a decline in the rental prices for houses, apartments and offices in all urban areas, the Cyprus Association of Estate Agent Entrepreneurs, noticed that there are problems concerning the existing tenants with both business premises and houses and apartments’ prices. In contrast to the new tenants, the average rental rate for apartments, houses, shops and offices throughout Cyprus, has been decreased. Real estate owners’ approach, has been formed because their oversupply of properties, lead them to reduce the rental prices. It is now clear that the areas which had rental price reduction, are reaching stabilization.

Nevertheless, the existing tenants face a problem with the business premises, as there is a decrease in rental prices, which is not the expected price reduction. For the new customers / tenants who are looking to house their business, there is a price reduction, but not the expected one.  This is the result of a large supply and of low demand which has led the owners to reduce the prices. As far as the existing renters of business premises are concerned, there is a problem with regards to the fact that during the period of the great rise in property prices they rented with large amount of rents, while banks were granting loans to entrepreneurs, because of the significant prospects that emerged. However, with the advent of the financial crisis, access to loans has become almost impossible, which creates a domino effect influencing all sectors of work.  As a result of this situation, businesses are struggling to survive and ‘For Rent’ signs are found more often in contrast to “air for sale” signs which are rarely seen.  Furthermore, a big problem for the existing tenants of business premises is the fact that a rent is increased every 2 years, from 0% to 8%. But, there are still some shop owners who look for ‘air for sale’ for their shops. However, the changes that have occurred in the market are huge and they seem to overcome this phenomenon except from certain cases such as cafes. This is the reason why a new tenant would like to be in a certain post where there are no empty shops, for example in tourist areas.

Unlike the business premises rentals, the apartments and houses rentals have been reduced. A large number of real estate tenants want to cancel their contract in order to find a lower price rent. In these cases, there is usually a compromise formula between the tenant and landlord to reduce the rent. The wide availability of properties contributed to the reduction of rental rates and real estate owners must realize that it is better to have a prompt, low rent paying tenant, than a bad, high rent payer.Since last year, a tenant asking for rental reduction has become a usual phenomenon and for those who do not succeed in doing so by the end of their contract, they leave. In relation to an immovable property rental, the negotiation between the tenant and the owner is easier than the rentals of business premises, and this is due to the fact that it is much easier for a tenant to be moved, than for a business.

The Cyprus Association of Estate Agent Entrepreneurssuggests not only the reduction of the rental increase up to 8%, but also the reduction of other existing rents, to give breath to the tenants of business premises and avoid businesses’ closure. It should be understood that in such cases the first losers will be the owners themselves.

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