The alarm for the conditions forming in the real estate market is sounded by Bank of Greecebecause it provides continue to increase prices at a faster rate than income.
It also warns of effects of ever-increasing construction costsO deterioration of household purchasing powerbut also she limited access to bank loans.
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Recent government interventions are positive, but…
The Bank of Greece, by incorporating a special capital for real estate in the monetary policy report on the evolution of the real estate market, characterizes as positive the recent government interventions aimed at limiting short-term rentals, in golden visa grants etc. But he calls for more measures to “facilitate and reinforce the supply of affordable housing”, as he sees the risk of purchasing a main residence becoming prohibitive for more and more families.
The Bank takes a particular position on the issue of investments in the real estate market for investment purposes and not for hedging purposes. housing needs. Thus, as mentioned, in the first months of 2024 there was also a positive rate of foreign investment for the acquisition of real estate, despite the fact that global real estate investment was reduced.
In particular, in the first quarter of 2024, net foreign direct investment in Greece for the real estate market recorded a positive annual growth rate (4.6%) and amounted to EUR 520 million, compared with EUR 497 million in the corresponding period of 2023. At the same time, total residential investment (seasonally adjusted ELSTAT data at constant prices) decreased by 14.0% year-on-year in the first quarter of 2024 and remains at a low level as a percentage of GDP (1.7%). This opposite trend reflects the fact that, while foreign buyers are showing increasing interest (albeit for investment purposes), domestic demand related to meeting housing needs continues to decline.
In 2023, but also in the first months of 2024, the rise in property prices continued at a high rate, especially in the upper segment of the market. The property market saw the biggest price increases, with demand for investment properties remaining high and the supply of quality or new stock limited. In the commercial real estate sector, the shift of companies and investors towards sustainable development and bioclimatic real estate has intensified differences in market price levels, but at the same time has also had an upward influence on the prices of conventional properties in highly commercialized local regions.
In the housing market, according to apartment price indices published by the Bank of Greece, the upward trend in prices continued during the first quarter of 2024, with high annual growth rates. According to estimated data collected by credit institutions, in the first quarter of 2024 the nominal prices of apartments were increased annually by 10.4%while for the entire year 2023, based on the revised data, apartment prices have increased significantly, at an average annual rate of 13.8%although on a quarter-on-quarter basis, despite strong year-on-year growth rates, there has been a slowdown in the last four quarters.
4 sources of danger
In its report, the Chamber of Commerce points out four important sources of risk for the real estate market:
- Rising interest rates contributed to a decline in mortgage demand for nearly two years, according to data from the Bank Lending Survey. During the first quarter of 2024, mortgage demand remained unchanged compared to the previous quarter and, according to the same survey, is expected to remain unchanged in the next quarter as well.
- The IOBE index of business expectations for housing construction, during the first five months of 2024, registered a marginal decline (-0.2%) compared to the same period in 2023.
- The total construction cost of new residential buildings (ELSTAT data) during the first quarter of 2024 continues to increase (4.0% on an annual basis), however, slowing down significantly compared to the corresponding period of 2023 (8%).
- Continued price growth, fueled by external demand, and rising construction and borrowing costs are pushing price levels out of proportion to disposable income, making first-time homeownership more difficult and pushing up subprime housing prices and rents.