In Athens, the capital and the country’s largest city, the average price of apartments plunged by 10.87% (-8.89% inflation-adjusted) in 2013 from a year earlier, according to the Bank of Greece. On a quarterly basis, house prices in Athens fell by 4.23% (-4.69% inflation-adjusted) in Q4 2013.
Almost all cities experienced house price falls:
- In Thessaloniki, the second largest city, house prices dropped 7% (-4.9% inflation-adjusted) in 2013 from the previous year. But house prices actually increased by 2.2% (1.8% inflation-adjusted) q-o-q in Q4 2013.
- In “all other cities”, residential property prices plunged 8.2% (-6.2% inflation-adjusted) during 2013. Quarter-on-quarter, house prices dropped 2.5% (-3% inflation-adjusted) in Q4 2013.
- In “all other areas”, house prices fell by 4.6% (-2.5% inflation-adjusted) in 2013 from a year earlier. In a quarterly basis, house prices dropped 1.4% (-1.8% inflation-adjusted) in Q4 2013.
Residential property prices in Athens have been falling since 2008:
- In 2008, house prices in Athens fell by 0.77% (-3.59% inflation-adjusted)
- In 2009, house prices fell by 4.21% (-5.99% inflation-adjusted)
- In 2010, house prices fell by 5.83% (-10.45% inflation-adjusted)
- In 2011, house prices fell by 8% (-10.46% inflation-adjusted)
- In 2012, house prices plummeted by 12.91% (-13.89% inflation-adjusted)
The number of residential property appraisals-transactions in Greece fell by 23.1% in 2013 to 23,801 transactions, according to the Bank of Greece. The number of building permits dropped 27.7%. Likewise, total new floor space, measured in square metres, fell by 28.3%.
To revive the ailing 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.
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 stronger laws against tax evasion, liberalizing the labour market and selling state assets.
However, these huge bailouts have been insufficient to solve the country’s financial problems. By 2013, it was identified that Greece needs a further €10 billion to cover the funding gap.
Some of the moves were not accepted by the public. Violent protests, rallies, strikeouts have taken place.
The Greek economy shrank by about 4.2% in 2013, after GDP contractions of 6.4% in 2012, 7.1% in 2011, 4.9% in 2010, 3.1% in 2009 and 0.2% in 2008, according to the IMF.
The economy is expected to grow this year, with GDP growth forecast at 0.6%.
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 a flat rate of 15%.
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.
In November 2004, however, Greece admitted that it had fudged its 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 GDP growth rates in the eurozone. Government officials rewarded themselves with higher incomes and pensions and generous leave credits and bonuses. The bureaucracy also become 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).
The Greek economy shrank by about 4.2% in 2013, its sixth year of recession. The country’s real GDP contracted by 6.4% in 2012, 7.1% in 2011, 4.9% in 2010, 3.1% in 2009 and 0.2% in 2008, according to the IMF. After a prolonged recession, the economy is expected to grow this year, with GDP growth forecast of 0.6%.
In 2013, Greece posted its first primary budget surplus in a decade. The government recorded a budget surplus of €691 million, in sharp contrast with the €3.46 billion deficit in 2012. This means that Greece has fulfilled a key condition set by its international creditors, a year ahead of schedule.
The country’s overall budget deficit stood at 2.2% of GDP in 2013, far lower than the budget deficits of 6% of GDP in 2012, 9.5% in 2011, 10.5% in 2010 and 15.8% in 2009. In 2014, the overall budget deficit is projected to widen slightly to 2.3% of GDP.
Greece’s national debt reached 175.5% of GDP in 2013, up from 156.9% of GDP in 2012 and 165.3% of GDP in 2011. In 2014, the national debt is expected to drop slightly to 174.8% of GDP.
Greece posted a current account surplus of €1.2 billion in 2013, in contrast with deficits of €4.6 billion in 2012 and €20.6 billion in 2011, thanks to the country’s tourism boom, according to the Bank of Greece.
In January 2014, consumer prices in Greece fell by 1.4% from a year earlier, after deflation rates of 1.8% in December 2013, 2.9% in November, and 1.9% in October, according to Eurostat.
Unemployment stood at 27.5% in December 2013, up from 26.3% the same period last year, according to the National Statistical Service of Greece.