Against uncertainties in the domestic and global economy, the upward trend in residential property prices continues. At the same time, however, for many households in Greece, housing costs have become unaffordable even though house prices and rents have not reached the historic highs recorded before the financial crisis.
In more detail, apartment prices (in nominal terms) increased in the second quarter of 2023 by 13.9% on an annual basis, compared to an increase of 11.8% in 2022, according to the financial stability report published by the Bank of Greece.
How are prices moving?
The prices of new apartments (up to 5 years old) in the second quarter of 2023 increased at an average annual rate of 13.8%, while the prices of old apartments by 14.1%.
Disaggregated by geographic region, strong annual rates of increase in apartment prices were recorded in the country’s major urban centers and more specifically in Thessaloniki (16.4%) and other major cities (14.6%), which exceed the corresponding average growth rate for the entire country.
Expectations for the Greek residential real estate market remain positive, despite uncertainties in the domestic and global economy, the Bank of Greece points out.
The reasons for the rise
In the short term, it is estimated that investment interest, mainly from abroad, will remain intense especially for specific privileged positions in the Attica basin and for areas with tourist characteristics.
In the medium term, initiatives related to supporting specific categories of households (e.g. young, vulnerable social groups) through the “My Home” program for the acquisition of housing are expected to contribute to stimulating demand, while corresponding initiatives to renovate old housing (e.g. .eg “Renovate” – “Save” program) are expected to contribute to the improvement of the building stock.
However, it is pointed out that the residential real estate market in many countries of the European Union is already undergoing a significant correction in terms of the number of transactions, prices and yields.
They are still far from the all-time high
In addition, it is reported that house prices in Greece are still far from the historic high recorded before the financial crisis.
Based on the apartment price index compiled by the Bank of Greece for the entire country, the highest value of the index was observed in 2008 (101.7) and then followed a steady downward trend, to record the lowest value in 2017 (59 ). Since then, the apartment price index has been on a steady upward trajectory, reaching 90.6 in Q2 2023, down 11.1% from its all-time high.
The evolution of the level of rents is similar, with the relative index being 98.5 based on the data of the third quarter of 2023, against 94.8 in the fourth quarter of 2022.
The rent index, unlike the housing price index, remains significantly lower than the highest value it has reached historically (124.3, Q3 2011).
Unaffordable housing costs
Despite the increase in household disposable income, Greece is ranked in the worst position among European countries in terms of housing costs.
More specifically, housing costs as a percentage of household disposable income in Greece was set at 34.2% for 2022, compared to 19.9% on average for Europe of 27.
Likewise, the excessive burden due to housing costs index for Greece receives the highest value among the countries of the euro area, as for the year 2022 27% of the country’s population shouldered housing costs that corresponded to a percentage of more than 40% of the disposable income of, when the corresponding percentage of the population in the euro zone was 9.4%.
Greece’s position in the ranking is affected by the low per capita income compared to the rest of the European Union countries.