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."
- Athens Plus, 19 December 2008 |
