In Athens, the capital and the country’s largest city, the average price of apartments plunged by 12.6% (-12.6% inflation-adjusted) during the year to end-Q1 2013, according to the Bank of Greece. During the latest quarter, i.e., quarter-on-quarter during Q1 2013, house prices in Athens fell by 2.6% (-0.6% inflation-adjusted).
Almost all cities experienced house price falls:
- In Thessaloniki, the second largest city, house prices dropped 8.3% (-8.2% inflation-adjusted) y-o-y in Q1 2013. House prices fell 1.2% during the latest quarter (which means that they rose by 0.9% in inflation-adjusted terms).
- In “all other cities”, residential property prices plunged 11% (-11% inflation-adjusted) during the year to Q1 2013. Quarter-on-quarter, house prices dropped 2.9% (-0.9% inflation-adjusted).
- In “all other areas”, house prices fell by 10.9% (-10.9% inflation-adjusted) y-o-y in Q1 2013. In a quarterly basis, house prices dropped 0.7% (+1.4% inflation-adjusted) in Q1 2013.
Residential property prices in Athens have been falling since 2008, mainly due to the adverse effects of the global economic and financial meltdown.
- In 2008, residential property prices fell by 0.77% (-3.57% inflation-adjusted)
- In 2009, house prices fell by 4.21% (-6.04% inflation-adjusted)
- In 2010, house prices dropped 5.83% (-10.4% inflation-adjusted)
- In 2011, residential property prices plunged 8% (-10.49% inflation-adjusted)
- In 2012, house prices plummeted by 13.1% (-14.08% inflation-adjusted)
Property demand remains depressed. Residential real estate transactions in Greece fell in number, volume, and value. In the first quarter of 2013, the total number of residential real estate transactions plummeted by 24.5% to 4,976 from the same period last year.
In May 2013, the total amount of outstanding housing loans in Greece dropped 4.9% to €72.56 billion from the same period last year, according to the Bank of Greece.
To revive the ailing housing market, the Greek government has recently offered residence to non-EU investors purchasing or renting property worth over €250,000. The residence plan, which is similar to measures adopted by Hungary, Spain and Portugal, is valid for five years and open to renewal.
Greece has been granted two successive rescue loan packages since May 2010 by European leaders and the International Monetary Fund (IMF) worth €110 billion and €130 billion, tied to a stiff austerity package. The austerity measures imposed by the government include:
- Tax increases
- Spending cuts
- Privatization of government-controlled corporations
- Slashing salaries
- Slashing pensions, especially for high-income retirees
- Taxing low-income earners. The taxable income threshold would be reduced to EUR5,000 from EUR8,000
- Placing about 30,000 public workers in labor reserve
Other reforms include strengthening laws against rampant tax evasion, liberalizing the labour market and selling state assets.
Some of the moves were not accepted by the public, and violent protests, rallies, strikeouts took place in key areas.
In the first quarter of 2013, the Greek economy contracted by 5.3% from a year earlier. The economy is expected to shrink by another 4.2% in 2013. GDP fell by 6.4% in 2012, 7.1% in 2011, 4.9% in 2010, 3.1% in 2009 and 0.2% in 2008.
Analysis of Greece Residential Property Market »
In our survey last year, apartments in the centre of Athens cost on average, EUR 3,800 per sq. m. But in our latest survey, the average price per sq. m. is now around EUR 3,300.
In the suburbs of Athens, i.e., Ekali, Kifisia, Psychiko, Glyfada, the average price per sq. m. of apartments is around EUR 2,600, while houses cost around EUR 3,100 per sq. m.
Apartments in Crete cost around EUR 1,800 per sq. m. while villas cost around EUR 2,400 per sq. m.
Monthly rents per sq. m. all throughout Athens range from around EUR 7 to EUR 9 per sq. m.
In Crete, monthly rents per sq. m. of apartments range from around EUR 4 to EUR 7.
Gross rental yields from properties in Greece, i.e. the gross return on investment in a property if fully rented out, are very poor, ranging from 2.57% to 4.12%.
Capital Gains: Capital gains realized from the sale of property held for less than 5 years are taxed at progressive rates, from 12% to 33%.
Inheritance: Inheritance tax is levied at different rates depending on the relationship between the deceased and the beneficiaries.
Residents: Residents pay taxes on their worldwide income at progressive rates, from 25% to 42%.
Tenant Security: All residential rentals have a minimum legal duration of three years. If a contract for a lesser period is negotiated, the three years period applies to the landlord, but not to the tenant. A contract for three years or longer terminates automatically at the end of the contract period, without need for notice.
In November 2004, however, Greece admitted that it had fudged the figures to gain entry to the eurozone. Since 1999 its budget deficit had never been below the EU limit of 3% of GDP. It was also revealed in early 2010 that Greece had paid Goldman Sachs and other banks to hide the true amount of its debt and borrowing.
Euro adoption led to a cycle of debt-financed growth and deficit spending. Greek sovereign debt spreads fell, allowing it to borrow cheaply. Access to cheap funds allowed it to continually pump-prime the economy, leading to higher growth.
The Greek economy expanded by an annual average of 4% from 2000 to 2007, one of the highest rates in the eurozone. With higher growth, government officials rewarded themselves with higher incomes and pensions and generous leave credits and bonuses. The bureaucracy is also bloated and overstaffed.
In October 2009 Prime Minister George Papandreou took office and revealed that the deficit was much higher than the previous government had claimed. His response? Austerity measures, including slashing salaries and pensions, and increasing taxes, given that around 5 million Greeks (6 out of 10) pay no income tax. These moves were not accepted by the public, but were necessary to obtain the European and International Monetary Fund (IMF) rescue loan packages (worth €110 billion and €130 billion).
Greece is already on its sixth year of recession. In the first quarter of 2013, the Greek economy contracted by 5.3% from a year earlier, the largest decline in the EU. In Q1 2013, tourism receipts dropped by 3.7% from the previous year. Exports of non-oil goods fell by 6.5% y-o-y in Q1 2013, according to the Bank of Greece.
The economy is expected to shrink by another 4.2% in 2013.
In 2012, the country’s budget deficit stood at 6% of GDP, down from a staggering 9.5% of GDP in 2011, 10.5% of GDP in 2010 and 15.8% of GDP in 2009. Greece expects to cut its budget deficit to 4.3% of GDP this year, following debt relief measures imposed by the government.
Greece’s national debt is projected to reach 175.2% of GDP in 2013, up from about 156.9% of GDP in 2012 and 165.3% of GDP in 2011.
In 2012 the country’s current account deficit was about 5.3% of GDP, which is expected to improve to 2.8% of GDP in 2013, and 1.7% of GDP in 2014.
Consumer prices rose by about 1% in 2012 from a year earlier. Greece is expected to experience negative inflation in both 2013 and 2014, of -0.8% and -0.4%, respectively, according to the European Commission.
Unemployment rose to 26.9% in April 2013, the highest rate since ELSTAT started publishing jobless data in 2006. In 2013, the country’s overall unemployment rate is expected to increase to 27%, from 24.3% in 2012.