Understanding booms and busts in real estate markets has been a major area of study among economists, and many of them have developed models seeking to predict boom and bust cycles in housing markets.
There is no model for the boom and bust in the Greek real estate market, or any rational way to explain what has been taking place in this particular real estate market, especially over the course of the last seven years. Housing prices skyrocketed in the late 1990s, but experienced a sharp fall once the debt crisis of late 2009 evolved into an economic crisis of utterly catastrophic proportions.
However, the outlook for the Greek economy somehow improved in late 2014, even though there were no visible changes either in the economy’s performance or on the overall Greek economic environment, and investment prospects for the Greek real estate market shot through the roof, pushing Athens up to the fifth spot among 28 European capitals.
But with Grexit making a comeback and the new government in Athens engaging in a prolonged battle of words with its international creditors, in 2015 “Athens prospects … tumbled dramatically…” and the Greek capital is now at the very bottom of the list of European capitals, occupying spot 27, according to PricewaterhouseCoopers‘ report, “Emerging Trends in Real Estate: Europe 2016.”
In other words, investors are staying away from the Greek real estate market despite the availability of bargain-basement prices, preferring to engage mostly in what PricewaterhouseCoopers describes in the above mentioned report as “window shopping.”
This is not rational behavior, so economists studying real estate markets will surely have their hands full if they try to come up with a model to describe what has been taking place in the Greek real estate market. But it is still another indication of how difficult it will be for Greece to get out of its current crisis.