prices expected to drop further still
News, 7 May 2010
The annual report of the Bank of Greece, issued last week, forecasts
a further decline in property prices in the months ahead but fails
to provide an estimate of its extent, saying that this will depend
on broader economic conditions.
According to the central bank, any recovery in demand and transactions
will depend on households’ expectations regarding employment and their
future income flows as well as on their access to bank loans and on
the economy’s overall performance.
The report also notes that the final decisions regarding taxation,
issues such as the officially determined for tax purposes
"objective" property rates and the arrangements regarding the open
spaces of buildings illegally enclosed ("imiypaithrioi") will be of
key importance for the general state of the property market in the
near future. At the same time, the government needs to send clear messages
regarding the handling of the country's acute fiscal and structural
problems, the report notes.
Market sources estimate that house prices declined about 5-10 percent
on average in the first quarter of the year, depending on the type
of property and area. Another trend emerging from the data is the increasing
trend toward used houses, which are priced more moderately. According
to Aspis Real Estate, 65 percent of recent transactions concerns older
properties, of which the prices appear to be declining faster.
The central bank report said that house prices in general last year
declined 5 percent in Athens and 6.2 percent in Thessaloniki. However,
this decline was unevenly spread, with the prices of old houses falling
5.6 percent on average and those of new ones 3.1 percent - mostly the
result of developers’ efforts to preserve their profit margins. This
stance now appears to be winding down as their expectations are proving
unrealistic. But as prices are starting to look more attractive after
a 10-year rally, the purchasing power of households is being hit and
finance is becoming scarcer. Uncertainties regarding the economy and
employment, and the new property tax regime have a further negative
impact on demand. Transactions, which fell 40 percent last year, now
take place only with discounts of 15-20 percent by developers.
Recent proposals for reviving the market include a 50 percent cut in
the transfer tax for a period of six months.