Bank of Greece Sounds Alarm Over Real Estate Prices
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Loading... - Jeffery Watt
- 28 Jun 2024
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The Bank of Greece's recent report on the real estate market presents a detailed analysis of the current situation, highlighting significant concerns about the sustainability of property prices in relation to disposable income. Over the past seven years, property prices have surged by 66.4%, and they are projected to increase by 10.4% in the first quarter of 2024. This growth rate far outpaces the rise in income, raising alarm bells about affordability and economic stability.
Key Findings
Positive Expectations
The report notes that expectations for the real estate market remain positive, driven by several factors:
- Tourism: Increased demand for hotels and Airbnb accommodations.
- Infrastructure Improvements: Area regeneration projects.
- Modern Constructions: Gradual renewal of the building stock with high-cost, modern constructions.
Upward Trend in Prices
Based on these positive factors, the report estimates that the upward trend in property prices will continue, potentially creating a self-fulfilling prophecy of ongoing price increases.
Core Issues in the Greek Real Estate Market
Investment Demand
The market continues to attract significant investment, particularly from abroad, which pushes prices further up.
Disproportionate Prices
Current price levels are disproportionate to disposable incomes, complicating the acquisition of first homes and driving both house prices and rents upwards. This poses a critical issue for Greek households, affecting not only real estate investors but also borrowers, banks, and professionals in the market.
The Ongoing “Party”
According to the Bank of Greece’s apartment price indices, the upward trend in housing prices persisted in the first quarter of 2024 with significant annual growth rates. The chart from the Bank of Greece shows exponential price increases in recent years, with annual growth rates often exceeding 5%, 10%, or even 15%.
Specific Data from Credit Institutions
- First Quarter of 2024: Nominal apartment prices rose by 10.4% year-over-year (provisional data).
- Full Year 2023: Apartment prices increased at an average annual rate of 13.8% (revised data).
Despite these strong annual growth rates, there has been a noticeable slowdown in quarterly growth over the last four quarters.
Historical Context
It is noteworthy that house prices are now only 4.1% below the all-time high recorded in the third quarter of 2008, just before the financial crisis. Compared to the lowest prices recorded in the third quarter of 2017, prices have increased by 66.4%.
The Bank of Greece’s report underscores the complex dynamics of the Greek real estate market, where rapid price increases driven by various factors pose significant challenges for affordability and economic stability. The discrepancy between property prices and disposable incomes creates uncertainty and impacts the national economy as a whole. While the positive expectations and continued investment drive the market upwards, the disproportionate price levels call for careful monitoring and potential regulatory interventions to ensure sustainable growth and affordability.
