With property values in Greece plummeting during a crushing economic crisis in which buyers are scarce, the ratings agency Fitch is again revising how bad it is, estimating a 42 percent drop in values.
More than 110,000 businesses have closed in the last three years and Greek cities are peppered with empty storefronts and vacant properties attracting little interest, even with cut-rate rents.
Fitch had estimated the decline in worth at 33 percent but had to sharply upgrade that projection ahead of the government allowing the foreclosure and sale of thousands of homes of mortgage holders who can’t afford payments because of big pay cuts, tax hikes and slashed pensions.
Fitch said the more Greeks who lose their homes the better it will be for the banks who can foreclose on the properties and build their balance sheets back even if they obtain homes that have little value in the current market. Fitch said the seizures will help homeowners by increasing cash flows and to reduce the staggering 66 billion euros ($87.26 billion) in non-performing loans (NPL’s).
Any positive influence on securitizations will be cancelled from the even biggest decline in residences’ prices, because of the flood of property that will emerge in the market, as the agency pointed out.
“Banks will probably try to find a balance between the auctions’ beginning and the market’s flood with properties for sale. And while this may limit the variability in residences’ prices, it is likely to cancel the benefit for the average time of seizure (which has been significantly increased due to the moratorium). The confiscations’ times may be lengthened as well, depending on the extent to which restrictions will be lifted in the auctions,” the analysts noted.
In each case, Fitch expects additional information on the government’s plan in order to make specific estimations for the auctions’ effects. “Despite the fact that the recent statements of senior politicians in Greece seem that the moratorium will not be extended beyond the end of 2013, the matter is politically controversial,” the analysts explain.
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