Housing Market In Greece To Face A Slump Despite High Supply
News Posted On: 24 April 2014
Greece's economy has seen a turnaround recently, after maintaining a depressed stature for nearly six years, although the prospects of its effects spreading to the residential market are bleak. The housing market is expected to face a poor year, and while transactions may show a slight improvement, the demand may not reach appreciable levels, predict real estate analysts.
Residential property prices drop in urban localities
Urban housing has been on a downward trend due to multiple factors like reduced demand, extended recession and increased job loss numbers. Revelations from the Bank of Greece claims that residential properties have seen a drop in their prices by over 33 percent from 2008's fourth quarter to 2013's fourth quarter. Property agents argue that the prices have dropped even further estimating it to be 40 to 60 percent in the six year period.
The drop in prices of residential property should no doubt make investments seem more attractive, but in reality it does not drastically benefit the investors. House prices in Greece had almost doubled during the 2000-2007 period, considering which the drop proves to be a correction rather than making it a lucrative price.
Meanwhile, the property oversupply in the real-estate market has almost reached 200,000 or more. Construction companies and property owners have been putting them up for sale due to the burden from property taxes as they vie around for liquidity. The overhang is expected to bring down the prices further, unless the demand picks up.
Market predictions for 2014
A decade ago, mortgage loans had backed price rises in the property market. A growing number of households are weary of approaching banks for loans today, given the uncertain economic scenario and the rising property taxes that have almost shot up by nearly six-folds since 2009.
Mortgage loans are not predicted to increase considerably in the coming year, not bringing about any significant changes in the property prices either. Analysts say that mortgage loans given out by banks today amount to 35 percent of house prices, on an average. The value is nowhere close the 70 or 100 percent provided during 2006-2007.
Bank loans have funded a smaller portion of real-estate transactions in Greece than they did before the economy crashed. Sources report that financing from banks covers under 20 percent of overall transactions in the property market. Before 2008, bank financing accounted to nearly 80 to 95 percent of overall transactions.
Even in a scenario, where mortgage loans are handed out in bigger numbers by banks in the coming months, following the currently employed capital enhancement methods, the number of transactions are not expected to show significant increases during 2014.
Stabilization of disposable incomes and predicted job gains are the only solace for the Greek property market in the coming year, provided they shape up as the forecast. Although, the predictions may not improve the current demand for residential properties in the urban market, which is expected to resume a sluggish pace.
Written by Les Calvert
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