An enig­matic year for prop­erty

Trend to­ward sta­bi­liza­tion could be de­railed by fresh po­lit­i­cal and eco­nomic cri­sis

Kathimerini English - - Focus - BY NIKOS ROUSSANOGLOU

In some cases res­i­den­tial prop­erty prices fell by more than 65 per­cent between the end of 2008 and end2016, one of the worst pe­ri­ods on record for the mar­ket in Greece. To­day, prices have fallen to par­tic­u­larly at­trac­tive lev­els, es­pe­cially when com­pared to those dur­ing the years pre­ced­ing the eco­nomic cri­sis.

For a bud­get of around 40,00050,000 eu­ros, apart­ments of 100 square me­ters in ex­cel­lent con­di­tion can be found in ar­eas such as the Pi­raeus sub­urbs of Ker­atsini, Drapet­sona and Perama; sim­i­lar prop­er­ties cost as much as 120,000 eu­ros in 2008. There’s are also bar­gains to be had in more ex­pen­sive neigh­bor­hoods. In the north­ern Athens sub­urbs of Ekali and Palaio Psy­chico, the av­er­age prices are 160,000 and 200,000 eu­ros re­spec­tively, down from at least dou­ble those fig­ures just a few years ago. Still, such prop­er­ties are strug­gling to find buy­ers, since liv­ing in them en­tails years of ex­pense via Sin­gle Prop­erty Tax (ENFIA) bills.

There are some prop­er­ties to be had for as lit­tle as 3,000-4,000 eu­ros. These are mainly older struc­tures in run-down parts of cen­tral Athens which the own­ers are try­ing to get rid of as quickly as pos­si­ble in or­der to ser­vice other debts. How­ever, ac­cord­ing to mar­ket pro­fes­sion­als, such sales are rare and the prop­er­ties in ques­tion would find it dif­fi­cult to se­cure buy­ers even in a healthy econ­omy.

Ac­cord­ing to data from the Bank of Greece (BoG), the de­cline in res­i­den­tial prop­erty prices eased con­sid­er­ably dur­ing 2016 as the mar­ket be­gan to sta­bi­lize – a phe­nom­e­non that was also ob­served in 2014, be­fore the desta­bi­liza­tion of the coun­try’s po­lit­i­cal scene took its toll on the econ­omy. In the first quar­ter of the year, the year-on-year drop in prices around the coun­try av­er­aged 4.3 per­cent, be­fore slow­ing to 2.6 per­cent in the sec­ond quar­ter, and dip­ping just 1.5 per- cent in the third (the most re­cent for which data is avail­able). In Athens the drop was only 0.9 per­cent in Q3.

Mean­while, the prices of older prop­er­ties com­pared to new-builds are in more pos­i­tive ter­ri­tory. BoG data show that in last year’s third quar­ter, the de­cline in the prices of newly built homes (up to five years old) reached 2.2 per­cent year-on-year, against a drop of around 1 per­cent recorded for older prop­er­ties. In 2015, new-build prices fell by 5.6 per­cent, while older prop­er­ties saw a shal­lower drop of 4.7 per­cent.

That de­vel­op­ment seems nor­mal, since a very high per­cent­age (bro­kers es­ti­mate over 90 per­cent) of hous­ing trans­ac­tions dur­ing that pe­riod con­cerned older build­ings, which are much more af­ford­able than new ones. Also, when the seller is a pri­vate in­di­vid­ual and not a pro­fes­sional prop­erty dealer, the mar­gin for ne­go­ti­at­ing is wider, fa­vor­ing a faster agree­ment between the two sides.

Ac­cord­ing to the lat­est quar­terly sur­vey by in­vest­ment con­sul­tancy firm Global Prop­erty Guide, in the third quar­ter of 2016, house prices in Greece recorded their first, al­beit mar­ginal rise of around 0.03 per­cent com­pared with the pre­vi­ous quar­ter. This out­come was ob­served based on the changes in prices ac­count­ing for in­fla­tion. In nom­i­nal terms val­ues con­tin­ued to de­cline by 0.9 per­cent on a quar­terly ba­sis and 1.53 per­cent com­pared to the third quar­ter of 2015.

What hap­pens next with re­gard to prop­erty prices re­mains to be seen, as the trend to­ward sta­bi­liza­tion in re­cent months could very eas­ily be de­railed by new a po­lit­i­cal and eco- nomic cri­sis. As long as the sec­ond re­view of the third Greek bailout re­mains in­com­plete and the re­newed talk of Grexit con­tin­ues, hous­ing prices are ex­pected to come un­der pres­sure again, caus­ing an­other set­back to the frag­ile mar­ket.

Even if the worst out­comes are avoided, the hous­ing mar­ket will strug­gle to re­cover, at least for this year, as the com­bi­na­tion of high taxes and hous­ing auc­tions con­tinue to weigh on the mar­ket.

In par­tic­u­lar, the un­cer­tainty around tax­a­tion, the im­po­si­tion of ENFIA and its con­tin­u­ous mod­i­fi­ca­tions have worked as a sig­nif­i­cant dis­in­cen­tive for home-own­er­ship, while the mech­a­nism for ob­jec­tive prop­erty valu­ing to en­sure fair charges is subject to on­go­ing de­lays. Ac­cord­ing to the ma­jor­ity of real es­tate mar­ket par­tic­i­pants, equally im­por­tant to re­boot­ing the hous­ing mar­ket is eas­ier ac­cess to bank loans and an im­proved eco­nomic cli­mate.

The de­cline in res­i­den­tial prop­erty prices eased con­sid­er­ably dur­ing 2016 as the mar­ket be­gan to sta­bi­lize, data show.

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