With austerity measures cutting deep into consumer spending and construction, the Greek housing market has taken an especially big hit, with an 80 percent decline in building in the last five years, since the country’s recession began.
Unable to pay even necessities, most Greeks aren’t even thinking of new homes, resulting in developers staying out of the market until demand returns. Making it worse, property taxes have been doubled in a new avalanche of tax hikes and Greeks are avoiding buying homes, while many have defaulted on their mortgages during the crushing economic crisis.
Third-quarter data from the Bank of Greece and a detailed report by Alpha Bank show that the housing crisis is getting worse, fast, with a likely further decline after the government of prime Minister Antonis Samaras pushed through a new package of $17.45 billion in spending cuts and tax hikes.
Alpha’s report estimated only 20,000 new homes will have been built by the end of the year as only 12,622 had been constructed up until July. Construction activity in the sector has shrunk to less than 20 percent of what it was in 2007, when 103,865 new housing units were built. The signs of the crisis have been evident in the housing market since 2010, when the number of units built dropped to half of that in 2007, to 52,325.
The Bank of Greece data showed housing prices are also dropping like a rock as few are buying, In the third quarter of 2012 prices dropped by 11.7 percent compared to the same period last year, while the annual decline in the first quarter came to 9.3 percent and 10.2 percent in the second. BoG notes that the drop in prices last year came to 5.4 percent, on the back of a 4.7 percent slide in 2010.
Another trend that has emerged in the market since the start of the year concerns the sharper drop in the prices of newly-built apartments compared with older ones, while it had been the other way around in 2011. In the July-September 2012 period, the prices of newly built homes fell 13.5 percent while older ones saw a drop of 10.5 percent on average, pushing more developers out of the market with a large inventory of unsold houses in the pipeline.
Athens and Thessaloniki are the worst hit. In the capital the decline in prices in the third quarter amounted to 12.3 percent year-on-year and in Thessaloniki to 10.6 percent. In the other big Greek cities, however, the drop came to no more than 10.1 percent. According to the revised BoG data, the price slide in Athens over the course of 2011 came to 6.4 percent and in Thessaloniki to 6.9 percent on annual basis.
The number of transactions and property valuations by banks for the issue of loans have also shrunk dramatically this year, pointing to a major decline in home sales. According to BoG, they declined considerably in the third quarter this year to 4,900, from 6,400 in the second and 6,300 in the first.
The last quarter’s drop amounted to 48.7 percent compared to the same period last year. In the whole of 2011 their number had come to 42,500, posting then a 42.9 percent drop from the 74,500 in 2010. No more than 17,600 transactions and valuations have taken place in the first nine months of this year, illustrating the big contraction in the market.
Analysts said if taxes keep rising, home building – and buying – will keep falling, and the construction industry will keep shrinking at the same time, hinder the hopes of further development in a critical market.