Greek house price plunge continues for seventh year

15 February 2016
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Greek housing prices fell 5.1 percent in 2015, meaning residential properties are now worth 41.5 percent less than in 2008, before an enduring recession that forced the country close to bankruptcy, official data showed on Monday.

Apartment prices fell by 5.4 percent year-on-year in the fourth quarter, the Bank of Greece said. While that was less than a 5.8 percent drop in the third quarter, there was no clear indication that the price plunge was close to being over.

“The cumulative 41 percent drop is a big price adjustment but to be able to say we are seeing a bottom we need to have stabilisation on three important influencing factors: household disposable income, real estate taxes and improving economic prospects,” said Ilias Lekkos, chief economist at Piraeus Bank.

Property accounts for a large chunk of household wealth in Greece, which has one of the highest home ownership rates in Europe: 80 percent versus a European Union average of 70 percent, according to the European Mortgage Federation.

The housing price decline has eased from 10.8 percent in 2013 and 7.5 percent in 2014, but initial indications of a bigger slowdown at the start of 2015, when prices were down 4 percent year-on-year, were offset by larger falls in the second half.

Apart from their negative effect on personal wealth, falling property prices also affect collateral values on banks’ outstanding real estate loans, a big chunk of which are non-performing.

The real estate market has been hit by property taxes to plug budget holes, a tight credit market and a jobless rate around 25 percent.

Greece’s leftist-led government signed up to a new 86 billion euro bailout package last year and is trying to implement reforms, including an overhaul of its pension system, in exchange for financial aid.

With those policies weighing on investment, exports and consumer spending, the economy shrank 0.7 percent last year and the European Commission projects the same contraction in 2016.

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