Apartment prices continue to rally, recouping losses from the decade-long financial crisis, construction activity appears to be recovering from the shock, but investment in new housing, i.e. new home construction, remains far from 2007 levels.
Residential investment in the first quarter of 2024 is down for the second quarter in a row, raising concerns about the possibility of a further decline after the activation of the stricter conditions for granting the “golden visa”.
The residences
The Bank of Greece records a decline in the rate of change in housing investment. Specifically, the growth rate, from 48.4% in the first quarter of 2023, fell to 45.9% in the second quarter to plunge to 27.5% in the third quarter.
But the last quarter of 2023 was the worst, as the rate of change “turned” negative, falling by 18.7%. The decline continued in the first quarter as well, with the meter reading -14%, according to NEA.
At the same time, apartment prices increased further in the first quarter of 2024 by 10.4% year-on-year, after seven consecutive years of continuous growth, marking a cumulative increase of 66.4% from the third quarter of 2017 (the lowest level).
How will the gap be closed?
Investments in housing represent 1.7% of GDP, compared to 10.8% in 2007, with Greece looking from afar even at the performance of Bulgaria (2.8% of GDP).
To fill this gap, according to a recent analysis by the National Bank, it is estimated that a total of more than 45 billion euros of new investment in residential real estate will be required by 2030 – that is, almost 6 billion euros per year – in order to ensure the balance of demand and offer and to achieve the goal of energy upgrading of approximately 10% of the existing residential building stock.
Risks
In the report on Monetary Policy, the Bank of Greece, although it states that the expectations for the Greek real estate market remain positive, emphasizes that risks are being kept in mind, which may threaten the real estate market, such as:
- Broader geopolitical instability
- Increased inflation
- The high cost of construction
- The deterioration of the purchasing power of households
- Difficult bank lending
To these important factors of uncertainty, should be added according to the Bank of Greece and changes in legislation and taxation are estimated to negatively affect investment and construction activity, in a period when demand is not covered by supply and the values, especially of housing, are increasing at rates significantly higher than household disposable income.
The central bank considers that the recent interventions aimed at limiting investment demand for residential properties in first home areas (short-term leases, Golden Visa) are moving in the right direction, but considers it necessary to take further measures to facilitate and strengthen housing supply affordable value.
Investment interest from abroad
However, foreign investment interest in domestic real estate remains strong.
Bank of Greece data show that in the first quarter of 2024 net foreign direct investment in Greece in the real estate market registered a positive annual rate of change (4.6%) and amounted to 520 million euros, compared to 497 million euros in the corresponding period of 2023.
Last year net receipts for the purchase of real estate from abroad were at a high level as a percentage of all investments in the country (42.5%) and exceeded 2 billion euros, increased by 8% compared to 2022 (2.133 billion . euros, against 1.975 billion euros in 2022).
Is the reduction temporary?
The decline in housing investment recorded in the last quarter of 2023 and the first quarter of 2024 is likely to prove temporary.
According to the latest IOBE survey on the economic climate in June “the index of business expectations in Private Constructions stood at 157.3 points (from 157.7), significantly higher than last year’s corresponding (130.9 points)”.
As noted by IOBE, “optimistic forecasts for the level of planned work fell slightly and were formed at -3 points, while on the contrary, expectations for employment were marginally strengthened, which were formed at +42 (from +40) points. Regarding the rest of the data, the positive estimates for the current course of business operations moved strongly upwards and were formed at +36 (from +26 points the index), while in terms of prices, the inflationary trends were limited slightly (+32 points the relevant balance from +40 in May)’.
All eyes on ‘My House 2’
The environment in which the real estate market develops consists of expensive real estate, high interest rates, “injured” incomes from the successive crises. And while lending has begun to… revive, households do not seem to be participating as those who have available cash do not need to knock on the door of banks while foreigners continue to invest in real estate, especially now that the transition period for the increased Golden Visa limits.
In order to reverse the picture, the government will seek to throw in about 2 billion. euros in the market through the subsidized housing loans of the “Spiti mo 2” program. The new program is expected to open up the range of beneficiaries, as the age limit will be increased to 50 years, instead of the 39 years that was the original program.
At the same time, it is expected that the income limits will be expanded and the criterion of the age of buildings up to 15 years will be lifted, which will be expanded to 30 years, with the aim of being able to cover the needs in housing. It is recalled that through the previous program with a total budget of one billion euros, 6,305 disbursed loans for the purchase of property have been disbursed, while at the end of the year 9,155 new couples will have acquired their own home.
Real estate transfers
Despite the rally recorded by real estate prices, there is mobility on the transfer front, as evidenced by the AADE data. At the forefront are real estate purchases and sales, while parental benefits and donations are on the rise due to the high tax-free limit of 800,000 euros.
Since the beginning of the year, the following have been submitted to the AADE myProperty platform:
• More than 122,000 transfer tax returns relating to real estate purchases and sales with transfer tax ascertained to reach €340 million
• 55,752 parental benefit tax declarations with the tax amounting to 7.3 million euros
• 35,066 donation declarations in which a tax of 75 million euros was assessed
• 61,220 electronic inheritance tax declarations with a tax of 66 million euros.
Real estate “heats” state coffers. Over 20,000 apartments, detached houses, plots of land, commercial properties, plots of land changed hands in the first half of the year with their total value reaching 1.7 billion euros as revealed by the contracts. The data of the Registry of Real Estate Transfers values show the dance of millions that has been set up in the Greek real estate market, the willingness of Greeks and foreigners to invest in real estate and also the jump recorded by commercial prices.
The commercial – objective tab opens
The rise in real estate prices in the market has widened the gap between objective values and commercial values with the biggest differences being found mainly in the expensive areas of the center of Athens, the southern and northern suburbs of Lekanopedi.
In terms of sales, the Municipality of Athens occupies the first place as in the first half of the year 2,818 properties changed hands with the prices listed on the contracts exceeding a total of 230 million euros.
Examples
In many cases the differences between objective and commercial prices are striking:
- Apartment 213 sq.m. of the 1st floor in Kolonaki which was built in 1953 was bought at the price of 1.8 million euros or 8,450 euros per square meter when the objective value in the specific area amounts to 4,250 euros. That is, the particular property was sold at a price twice the objective value.
- In Exarchia, a 119 sqm apartment on the 4th floor built in 1967 was sold for 405,000 euros or 3,403 euros per square meter, while in the area the objective value is set at 2,200 euros/sqm.
- Another 40.60 sqm 1st floor apartment in a 1958 block of flats in the center of Lekanopedi was bought for €200,000 or almost €5,000 per square meter when the zone price in the area is €4,150.
- A 246 sqm 4th floor apartment in Glyfada built in 2012 was purchased under contract for €1.6 million or €6,553 per square meter when the zone price in the area is €4,250.
- In Alimos, an unfinished apartment of 147 sqm on the fourth floor of a 2021 block of flats was sold for 686,134 euros or 4,667 euros per square meter when the zone price in the area is 1,850 euros per square meter.
According to the data from the Registry of Real Estate Transfers, in the first half of the year in the city of Thessaloniki, 1,091 properties were bought and sold, while 881 properties changed hands in the Municipality of Piraeus. Also, Kallithea is one of the regions of Attica preferred by real estate buyers and which by far surpasses Glyfada, Kifissia, Chalandri, Paleo Faliro and Nea Smyrni in transfers.
On the “ice” the objective values
Although in many commercial areas real estate sales contracts are made at multiples of the objective prices, the economic staff of the government has decided not to “touch” the zone price levels even in 2025.
Source: ot.gr
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