Greek house price falls continue

Greece continues to endure double-digit year-on-year house price falls, with the Greek economy facing its sixth year of recession. It is expected to contract by another 4.2% during 2013.

In Athens, the capital and the country’s largest city, the average price of apartments plunged by 12.6% (-12.6% inflation-adjusted) during the year to end-Q1 2013, according to the Bank of Greece. During the latest quarter, i.e., quarter-on-quarter during Q1 2013, house prices in Athens fell by 2.6% (-0.6% inflation-adjusted).
Almost all cities experienced house price falls:

  • In Thessaloniki, the second largest city, house prices dropped 8.3% (-8.2% inflation-adjusted) y-o-y in Q1 2013. House prices fell 1.2% during the latest quarter (which means that they rose by 0.9% in inflation-adjusted terms).
  • In “all other cities”, residential property prices plunged 11% (-11% inflation-adjusted) during the year to Q1 2013. Quarter-on-quarter, house prices dropped 2.9% (-0.9% inflation-adjusted).
  • In “all other areas”, house prices fell by 10.9% (-10.9% inflation-adjusted) y-o-y in Q1 2013. In a quarterly basis, house prices dropped 0.7% (+1.4% inflation-adjusted) in Q1 2013.

Residential property prices in Athens have been falling since 2008, mainly due to the adverse effects of the global economic and financial meltdown.

  • In 2008, residential property prices fell by 0.77% (-3.57% inflation-adjusted)
  • In 2009, house prices fell by 4.21% (-6.04% inflation-adjusted)
  • In 2010, house prices dropped 5.83% (-10.4% inflation-adjusted)
  • In 2011, residential property prices plunged 8% (-10.49% inflation-adjusted)
  • In 2012, house prices plummeted by 13.1% (-14.08% inflation-adjusted)

Property demand remains depressed. Residential real estate transactions in Greece fell in number, volume, and value.  In the first quarter of 2013, the total number of residential real estate transactions plummeted by 24.5% to 4,976 from the same period last year.

In May 2013, the total amount of outstanding housing loans in Greece dropped 4.9% to €72.56 billion from the same period last year, according to the Bank of Greece.

To revive the ailing housing market, the Greek government has recently offered residence to non-EU investors purchasing or renting property worth over €250,000.  The residence plan, which is similar to measures adopted by Hungary, Spain and Portugal, is valid for five years and open to renewal.

Greece has been granted two successive rescue loan packages since May 2010 by European leaders and the International Monetary Fund (IMF) worth €110 billion and €130 billion, tied to a stiff austerity package. The austerity measures imposed by the government include:

  • Tax increases
  • Spending cuts
  • Privatization of government-controlled corporations
  • Slashing salaries
  • Slashing pensions, especially for high-income retirees
  • Taxing low-income earners. The taxable income threshold would be reduced to EUR5,000 from EUR8,000
  • Placing about 30,000 public workers in labor reserve

Greece house pricesOther reforms include strengthening laws against rampant tax evasion, liberalizing the labour market and selling state assets.

Some of the moves were not accepted by the public, and violent protests, rallies, strikeouts took place in key areas.

In the first quarter of 2013, the Greek economy contracted by 5.3% from a year earlier. The economy is expected to shrink by another 4.2% in 2013. GDP fell by 6.4% in 2012, 7.1% in 2011, 4.9% in 2010, 3.1% in 2009 and 0.2% in 2008.

source: Analysis of Greece Residential Property Market

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