“In the short term, real estate prices are estimated to continue their upward trend at least as long as foreign demand remains strong,” as judged by the Bank of Greece in yesterday’s report without, however, hiding her concern about the turn things have taken in the real estate market.
Escalating construction costs, years of sluggish activity in the construction industry, but also the “withdrawal” of properties from the market due to auctions, have created a “cocktail” that pushes prices up, raises rents and lowers rates home ownership in the country. And what should be done? The Bank of Greece speaks openly about the necessity of state intervention. Not only with support programs such as those that have been announced (e.g. social compensation) but also other interventions in the direction of strengthening supply.
The Ministry of Finance is aware of the problem and in September, after the end of the summer season, we expect new announcements of measures. It is likely to further tighten the framework for short-term lettings, which are currently depriving tens of thousands of properties of long-term leases, pushing up rents. However, if there is something we should pay special attention to from the comments of the Bank of Greece, it is that real estate prices have not yet “caught” the historical highs of 2008. And even more so, that rents are also far from what they were before. crisis levels.
According to data from the Bank of Greece, apartment prices (in nominal terms) increased in 2023 by 13.4% on an annual basis, compared to an increase of 11.9% in 2022. The prices of new apartments (up to 5 years old ) in 2023 increased at an average annual rate of 12.4%, while the prices of old apartments by 14.2%. Disaggregated by geographic region, strong annual growth rates in apartment prices were recorded in major urban centers and in particular in Athena (13.7%), at Thessaloniki (16.2%) and in other large cities (14.5%), which exceed the corresponding average growth rate for the entire country.
“Expectations for the Greek real estate market for the next period remain moderately positive, as the uncertainties related to geopolitical instability at the global level are still significant,” state the authors of the BoE report. As they add, the conditions of increased inflation and construction costs, but also high interest ratesnegatively affect the investment profit margin, which may gradually affect the prices of the domestic market, which in recent years has been significantly fueled by foreign investments.
In the short term, however, prices are expected to continue their upward trend as long as foreign demand remains strong. At the same time, the problem of housing costs has worsened in recent years, as a result of the extensive investment exploitation of the residence, the sluggish activity in the construction industry in previous years that did not allow for the smooth replenishment of the real estate stock, and the withdrawal from the real estate market that secure non-performing loans and are intended for auction.
This raises important issues to consider for possible state action. In this context, initiatives related to support for the acquisition of housing by specific categories of households (e.g. young, vulnerable social groups) as well as the renovation of old homes (e.g. “Social Compensation” and “Renovate – Rent” program) are expected to contribute to the improvement of the building stock, but also to the strengthening of the financial situation of these households.
In addition, it is pointed out 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 until 2017 (59). Since then, the apartment price index has recorded a steady upward trend, reaching 92.0 in 2023, 9.7% lower than the highest value it has taken.
The evolution of the level of rents is also similar, with the relative index standing at 99.6 based on the data of the fourth quarter of 2023, against 94.9 in the fourth quarter of 2022. The rent index, in contrast to the index of housing prices, remains significantly lower than the highest value it has received historically (124.3 in the 3rd quarter of 2011).
