House prices expected to drop further still
Athens 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.