In Greece’s urban areas, house prices dropped 5.47% (4.91% in real terms) y-o-y in 2015, the lowest annual fall in house prices since 2009, based on figures from the Bank of Greece. House prices in Greece’s urban areas dropped 1% (-1.5% in real terms) q-o-q in Q4 2015.
This improvement was also seen in the country’s other major cities.
- In Athens, the average price of apartments fell by 4.9% (-4.34% in real terms) during 2015, an improvement from annual declines of 6.8% in 2014, 11.45% in 2013, 12.91% in 2012, and 8% in 2011, according to the Bank of Greece. Compared to the previous quarter, house prices in Athens fell by 0.44 % (-0.94% in real terms) in Q4 2015.
- In Thessaloniki, the country’s second largest city, house prices fell by 5.9% (-5.4% in real terms) in 2015, the lowest annual decline since 2008. From the previous quarter, house prices fell 1.3% (-1.7% in real terms) in Q4 2015.
- In other cities (excluding Athens and Thessaloniki), there was a 6.1% drop in house prices (-5.6% in real terms) in 2015, an increase on last year's 5.5% annual house price decline, but down from declines of 9% in 2013, 12.2% in 2012. During the latest quarter house prices fell by 1.8% (-2.3% in real terms) in Q4 2015.
- The Bank of Greece has not yet released its house price figures for other urban areas for 2015.
Greek residential property prices are down by 42% (-45.3% in real terms) from the peak year of 2008.
Despite the slight improvement, activity is amazingly depressed. In 2015, the number of residential property appraisals-transactions was down by 24.1% from the previous year. Also, only 13,257 building permits were issued in 2015, a striking contrast from the 70,000 to 80,000 permits issued annually from 2004 to 2007.
“What is happening here is extreme,” says an investor interviewed by consulting firm PwC. “The collapse is so big and has lasted so long that it has totally disorganized the property sector.”
House price falls are expected to continue easing this year, according to local real estate experts. Fitch Ratings projects that Greek house prices will keep falling for another two years.
“The downward trends in house prices are expected to continue in the upcoming period,” said the central bank. “The housing market is expected to recover with a relative time lag, largely depending on the increase in households’ disposable income, a rise in employment, as well as an improvement in bank financing conditions.”
To revive the housing market, the Greek government 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.
Real estate transfer tax was also reduced from 10% to 3%. Moreover, the introduction of a capital gains tax on property, originally scheduled for introduction in summer of 2014, has been pushed back to December 31, 2016.
Contrary to some beliefs that Greece’s economic woes had disappeared, the country is once again on the verge of bankruptcy, as the economy returns to recession, and public debt and deficits remain sky-high. Worse, the political uncertainty and social unrest are aggravating the already miserable situation of the Greeks. The Greek economy contracted by 0.23% in 2015, after meagre growth of 0.65% in 2014 and annual declines of 3.2% in 2013, 7.3% in 2012, 9.1% in 2011, 5.5% in 2010, 4.3% in 2009 and 0.3% in 2008.
Analysis of Greece Residential Property Market »
In the suburbs of Athens, i.e., Ekali, Kifisia, Psychiko, Glyfada, the average price per sq. m. of apartments ranges from around EUR 2,500 to EUR 2,800, while houses cost around EUR 3,300 per sq. m.
We take our prices with a pinch of salt since they are based on a small sample. We are more confident about our yields figures. Gross rental yields on 120 sq. m. central Athens apartments are at about 3.8%. This is not a good yield. It would be difficult to justify becoming a landlord at yields at this level.
As is usual, small apartments in Athens generate slightly higher yields, at 4.3%.
Apartments in Crete cost around EUR 1,900 per sq. m. while villas cost around EUR 4,000 per sq. m. Yields are lower here than in Athens, at least for apartments (for which we have research) at around 3%.
Monthly rents per sq. m. in Athens range from around EUR 9 to EUR 12 per sq. m.
In Crete, monthly rents per sq. m. of apartments range from around EUR 4 to EUR 6.
When buying property, take into account the fact that round trip transaction costs are quite high in Greece. See our Residential transaction costs analysis for Greece and Residential property transaction costs in Greece, compared to the rest of Europe.
Capital Gains: Capital gains realized from the sale of property held for less than 5 years are taxed at a flat rate of 20%.
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.
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.
Greece bounced back to growth in 2014 with GDP rising by 0.6%, after six years of depression. Before this, the country’s real GDP had contracted by 3.8% in 2013, almost 7% in 2012, 7.10% in 2011, 4.9% in 2010, 3.1% in 2009 and 0.2% in 2008, according to the IMF.
The economy is expected to contract again this year by 0.6% before growing by 2.7% in 2017, based on IMF forecasts.
The nationwide unemployment rate stood at 25% in 2015, far higher than the average of just 9.6% between 2001 and 2009. The jobless rate is expected to remain unchanged at 25% this year.
In 2015, Greece was able to sustain a primary budget surplus of around €2.27 billion, up from a surplus of €1.87 billion in 2014, although it fell short of the government’s €3.26 billion target.
In 2013, the country recorded its first primary budget surplus in a decade of €691 million.
However, if the money spent on bank recapitalization is included, Greece’s budget deficit was 7.2% of GDP in 2015, up from 3.6% in 2014.
Greece’s national debt reached 178.4% of GDP in 2015, unchanged from a year earlier but sharply up from 159% of GDP in 2012 and 108.8% in 2008.
Consumer prices in Greece are still declining, with headline consumer price index falling by 1.3% in April 2016 from a year ago, according to the Hellenic Statistical Authority.