| Constructors
            say 'no' to reducing house pricesAthens
          Plus, 19 December 2008
 
 Remarkable resilience to the lack of demand for houses is being displayed
          by constructors, who are keeping prices high to the disappointment
          of potential new buyers.
 
 The question now is not when prices will go down, but rather why prices
          are not going down, in a market that does not follow the fundamental
          law of supply and demand.
 
 "The excessive profits of constructors over the last five to six
          years have created a shield that allows them to endure the existing
          situation," says an anonymous real estate adviser.
 
 "Profit accumulation has allowed the majority of them to work
          using their own capital without resorting to bank loans. This is due
          to the period of crazy sales when the off-contract cost exceeded 50
          percent of the house’s value," he explains. Furthermore,
          operating costs depend on the amount of work builders have: "The
          vast majority of them employ builders only when they have work to do
          and, apart from builders, they have hardly any other employees," says
          the same source.
 
 The low demand for newly built houses, though with some exceptions
          in specific areas and zones, has led to a dramatic contraction in building
          activity. This reduces costs for constructors, allows them to resist
          pressure and assists in absorbing existing stock, albeit at a slow
          pace. At the same time, real estate agents note, profits from the sale
          of even two or three flats per building secure a particularly comfortable
          living for builders.
 
 On their part, constructors argue there is no scope for reducing house
          prices: "The cost of materials has soared, while we keep our prices
          steady. Profit margins have shrunk significantly while land remains
          hard to find and expensive as there have been no new additions to town
          plans," says a builder who is active in Attica.
 
 Several of his colleagues stress the high price they paid for land
          in 2005; they acknowledge their mistake in rushing to purchase then,
          but refuse to pay for the mistake themselves, preferring instead to
          pass the cost on to the consumer. "If I have 40 unsold flats,
          it is in my interest to use them as collateral to take out loans from
          a bank rather than reduce my prices, as that would not give me any
          profit," says one constructor.
 
 n a recent statement, the Association of Construction Enterprises in
          Northern Greece lays part of the blame on the mass media, as they "distort
          the real picture of the property market, misleading the buying public."
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