Greek housing market strengthening significantly

Lalaine C. Delmendo | January 19, 2022

Greek house prices continue to rise strongly, despite the economic repercussions brought by the COVID-19 pandemic. In Greece’s urban areas, house prices rose by 8.35% during the year to Q3 2021, sharply up from the previous year’s 3.91% growth and the second best performance since Q1 2007, according to the Bank of Greece. When adjusted for inflation, house prices rose 6.41%. Quarter-on-quarter, house prices in urban areas were up by 2.73% in Q3 2021 (2.94% in real terms).

Greece house prices

This strong growth was mainly seen in the major cities:

  • Athens led with an annual house price increase of 9.76% in Q3 2021 (7.8% in real terms), up from the previous year’s 6.83% growth. During the latest quarter, house prices rose by 2.78% (3% in real terms).
  • In Thessaloniki, the country’s second largest city, house prices rose by 8.74% (6.8% in real terms) during the year to Q3 2021, its biggest y-o-y growth since Q2 2007. Quarter-on-quarter, prices increased 3.23% (3.45% in real terms) in Q3 2021.
  • In other cities (excluding Athens and Thessaloniki), house prices rose by 5.94% (4.05% in real terms) during the year to Q3 2021, in contrast to a y-o-y fall of 0.19% a year earlier. During the latest quarter, prices increased 2.63% (2.84% in real terms) in Q3 2021.

Housing boom and bust

Greece had a great house price boom during the early-2000s. Real estate agents reported 30% to 40% annual price rises for properties near the sea in 2004. In Athens, house prices rose 11.2% in 2006, before slowing to 6.2% in 2007.

Greece price dwellings index

When Greece´s dramatic economic crisis hit, residential property prices began falling dramatically. Between 2007 and 2017, Greece´s GDP per capita fell by a quarter, and house prices in Athens fell by 44.5% (-49.5% in real terms).  Here are the house prices in Athens in the past decade:


Year Nominal Inflation-adjusted
2008 -0.77 -3.57
2009 -4.21 -6.04
2010 -5.83 -10.40
2011 -8.00 -10.49
2012 -12.91 -13.88
2013 -11.45 -9.47
2014 -6.80 -5.04
2015 -4.99 -4.41
2016 -0.91 -0.47
2017 -0.45 -1.27
2018 4.67 3.53
2019 11.86 11.75
2020 6.23 8.45
Sources: Bank of Greece, Global Property Guide

Greece finally emerged from recession in 2017 – growing by 1.5% in 2017 and by 1.9% annually in 2018 and 2019. But the pandemic dragged the economy back to recession, with real GDP shrinking by a huge 9% during 2020.

Fortunately, things are now improving, with the economy projected to expand by 7.1% this year and by another 5.2% in 2022, according to figures from the European Commission.

The housing market started to recover in 2018, having fallen 42.5% (-47.7% in real terms) from 2007 to 2017. House prices in urban areas rose by 3.51% in 2018 and by another 7.56% in 2019. Athens had even stronger house price growth of 11.57% (11.47% inflation-adjusted) in 2019 and 6.23% (8.45% in real terms) in 2020, despite the pandemic.  

Rapid urbanization has led to a sharp dichotomy between urban and rural areas. Based on the 2011 census, more than 35% of the housing stock is vacant, mostly in rural areas. These units are typically dilapidated, or in need of total rehabilitation.

On the other hand, dwelling units in urban areas are amongst the most crowded in Europe. Most children continue to live with their parents after they enter adulthood. The reduction of notary fees from 1.2% to 1% of real estate’s value was clearly insufficient in reducing the high transaction cost, which adds to the burdens of first-time homebuyers.

Moderate rental yields; falling rents

In the centre of Athens gross rental yields on apartments are moderate, at around 4.2% for apartments of 120 square metres (sq. m), but proportionately more for smaller apartments, according to Global Property Guide research.

The gross rental yield for apartments located in suburbs of Athens is slightly higher, at about 4.5%.  Houses in the suburbs have very low yields, ranging from 2.6% to 3.2%.

In Crete, gross rental yields of apartments are around 3%. As in Athens, smaller apartments tend to earn higher yields.

Greece residential rents

Rents have been generally falling in the past decade. From 2010 to Q1 2021, rents in Greece plunged by more than 25%, the worst performance in the European Union, according to the Eurostat. Among the 27 EU member states, only Greece and Cyprus (-3.8%) recorded rent declines over the period.

In Athens, monthly rents per sq. m. range from around €9 to €16 per sq. m., according to Global Property Guide. In Crete, monthly rents per sq. m. of apartments range from around €4 to €7 per sq. m.

Around three fourths of Greeks live in owned homes, with a homeownership rate of 74.6% by 2020, according to Trading Economics. The rental market comprises about 20% of the dwelling stock.

Foreign interest in Greek tourism property increasing

The property market accounts for about 25% to 35% share of total FDI in Greece annually. Though net foreign direct investment (FDI) for the purchase of properties dropped almost 40% during 2020, to just €874.9 million, it remains more than twice the 2017 level. Net FDIs for real estate surged by 45.3% in 2016, by 86.5% in 2017, 172.1% in 2018 and by another 28.5% in 2019.

In fact, according to a 2021 Ernst & Young investment report, Greece is now among the most attractive investment destinations in Europe. “Greece ranks — for the first time — among the 10 most attractive destinations for foreign investment, with 10 percent of respondents mentioning Greece among the three most attractive countries for 2021.”

Greece fdi residential rents

Part of this is due to the Golden Visa Program.  The Golden Visa program was launched in 2013 to revive the housing market from a prolonged slump. It offers residency to non-EU investors purchasing or renting property worth over €250,000, similar to Hungary, Spain and Portugal. The plan is valid for five years and is open to renewal. Since its inception to November 2021, 28,411 residence permits have been given under the Golden Visa program.

But due to the pandemic, the total number of Golden Visa approvals fell sharply to 938 in 2020, from a record of 3,535 in 2019, 1,893 in 2018 and 955 in 2017.

Why Greece had eight years of economic crisis

When the euro was first introduced in 1999, Greece was left out because of its high budget deficit and inflation. Embarrassed by the isolation, Greece appeared to clean up its act and fix its finances and macroeconomic fundamentals. By January 2001, it was able to adopt the euro as official currency, bringing access to cheap funds and allowing the Greek government to pump-prime the economy.

In November 2004, however, Greece admitted that it had fudged its figures to gain entry into the Eurozone. Since 1999 its budget deficit had never been within 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.

When it became clear that the spending spree was unsustainable, creditors and the EU together with other international institutions such as the IMF demanded that Greece cut its spending, including wages and pensions. This was met with severe resistance, manifested in public protests and rioting.

After assuming office in October 2009, Prime Minister George Papandreou revealed that the deficit was much higher than the previous government had claimed. He vowed to downsize the public sector and fight rampant tax evasion.

Greece budget deficit debt

In May 2010, European leaders and the International Monetary Fund (IMF) agreed to a three-year, €110 billion bailout for Greece which was tied to additional austerity measures. These moves lead to a 5.5% economic contraction in 2010, following a decline of 4.3% in 2009.  Violent protests, rallies, and strikes followed.

The continued demand for cuts and more cuts in the face of already-high levels of public misery led to the rise of the radical leftist party Syriza, a coalition of diverse elements. Its leader, Alexis Tsipras, led Syriza to victory and Syriza assumed office on January 26, 2015.

Despite Tsipras having earlier pledged "No more bailouts, no more submission, no more blackmailing," Greece and its creditors agreed a third bailout worth €86 billion in August 2015, imposing further spending cuts. As part of the deal, the government passed a pension and tax reform bill in May 2016, which aimed to raise taxes and increase social security and pension contributions for most Greeks to bring about €5.4 billion in budget savings.

Greece exited bailout program, finally!

The economy started to recover in 2017, registering real GDP growth of 1.5%, followed by expansions of 1.9% annually in 2018 and 2019. In August 2018, Greece finally exited its eight-year bailout program. But it remains subject to scrutiny from its European creditors.

“We have had eight very difficult years, often very painful years, where we have had three successive programmes. But now Greece can finally turn the page in a crisis that has lasted too long,” said Pierre Moscovici, the European commissioner for economic and financial affairs. “The worst is over.”

In the July 2019 elections, centre-right New Democracy party won a landslide victory receiving 39.7 of all votes, defeating Tsipras’ incumbent leftwing Syriza party. Ironically the defeated leftists had improved government finances with surpluses of 0.2% of GDP in 2016, 0.6% in 2017, 0.9% in 2018 and 1.1% in 2019. Public debt also dropped to 180.5% of GDP in 2019, from 186.2% in 2018.

New Democracy´s leader, Kyriakos Mitsotakis, became the new prime minister in 2019. The New Democracy’s victory was mainly attributed to Mitsotakis’ ability to charm centrists, to the conservatives’ ability to obtain votes from Golden Dawn by taking a tough stance on immigration, and on an accord struck by Tsipras resolving a long-running name row over Macedonia, Greece’s neighbor to the north.

Aside from the Golden Visa program, several other measures introduced by Mitsotakis have buoyed the housing market recently:

  • Suspension of VAT payments on new building permits: Mitsotakis announced in October 2019 a three-year suspension of VAT payments on any new building permits and unsold properties built after January 1, 2006.
  • Reduction of the single property tax (ENFIA): The ENFIA for individuals was reduced in 2019: 30% reduction for properties valued up to €60,000; 27% for those valued up to €70,000; 25% for those valued up to €80,000; 20% for those valued up to €1 million; and 10% for properties valued more than €1 million. A further 10% reduction, on average, was applied on all property owners from the year 2020.
  • Tax relief for real estate: last year the government ended real estate tax in 26 islands.

High property taxes had discouraged many potential buyers, because property taxes had increased seven times since the global financial crisis.

Reducing taxes has been one of the priorities of the Mitsotakis government.

Economy improving, unemployment continues to fall

After four years of surpluses, Greece recorded a huge budget deficit in 2020, equivalent to about 10.1% of GDP, due to massive stimulus packages to mitigate the impact of the pandemic. The shortfall is expected to remain high at 9.9% of GDP this year, according to the European Commission.

As a result, the country’s debt surged to about 206.3% of GDP in 2020, sharply up from 180.9% in 2019 and 184.8% in 2018. Public debt is projected to fall slightly to 202.9% of GDP this year.

Greece unemployment

However the economy is projected to expand by 7.1% this year, after shrinking by a huge 9% during 2020 due to the pandemic, according to figures from the European Commission.

“The recovery of the Greek economy is gaining traction, primarily driven by domestic demand and the better-than-expected tourist season,” said the European Commission.

“The impact of the pandemic is expected to gradually soften, while the accommodative fiscal and monetary policy, coupled with the strong boost from the Recovery and Resilience Plan, are set to sustain the momentum going forward.”

Greece gdp inflation

Unemployment fell to 13% in September 2021, down from 13.9% the previous month and 16.5% a year earlier, according to the Hellenic Statistical Authority - Greece’s lowest in more than 11 years but one of the EU´s highest.

Inflation accelerated to 4.8% in November 2021, the highest level since January 2011, according to the Hellenic Statistical Authority. Inflation is projected at 0.1% in 2021, from -1.3% in 2020 and o.5% in 2019, by the European Commission.

Mortgages: the new loans market has virtually collapsed, despite very low interest rates

Total housing loans outstanding fell sharply by almost 25% to € 36.86 billion in October 2021 from a year earlier, following declines of 12.6% in 2020 and 7.2% in 2019.  New housing loans fell by 9.7% y-o-y to €473.5 million during 2020, according to Bank of Greece, continuing the declines of recent years, though in the first ten months of 2021, new housing loans were up about 32% from the same period last year. Yet this rise is nothing compared to the €6.6 billion new loans in 2010 and €15.4 billion new loans in 2006.

Greece new housing loans

This is paradoxical because average interest rate for new housing loans with initial rate fixation (IRF) of up to one year stood at 2.43% in October 2021, far lower than the interest rate of 5.92% in October 2008. (Since the second half of 2009, 70% or more of new housing loans have had interest rates adjustable at least annually).  For new housing loans with IRF of 5-10 years, the average interest rate was 3.38% in October 2021, down from 3.46% a year earlier and 5.48% in October 2008.  Clearly interest rates are not the only factor aftecting the housing market. 

Greece interest rates

Since the global financial crisis, cash-basis property transactions have accounted for about 80% of all transactions with only 20% relying on bank loans, according to the Bank of Greece, resulting in a continuous decline in the size of the mortgage market

Greece housing loans

Construction continues to rise

Despite the weak mortgage market, residential construction in Greece is rising again, after almost a decade of declining activity. In 2020, building permits rose by 8.9% y-o-y to 18,768 units, following annual growth of 13.5% in 2019, 10.1% in 2018 and 9% in 2017. Despite this, it remains far lower than the 70,000 to 80,000 permits issued annually from in 2004 to 2007.

Greece number of permits

The recovery continues this year, despite the ongoing pandemic. During the first eight months of 2021 (based on figures from Hellenic Statistical Authority):

  • Number of permits: 13,125 units, up 11.2% from a year earlier
  • Floor space: 3.52 million sq. m., up 42.3% from a year earlier
  • Volume: 13.96 million cu. m., up 28.8% from a year ago

Construction activity has partly been buoyed by Mitsotakis’ announcement of the suspension of VAT on new properties and on unsold properties built after January 1, 2006. The suspension runs for three years, between December 12, 2019 and December 31, 2022.

The VAT exemption is also applicable to situations known as “antiparochi”, where owners provide land to builders in exchange for a number of future apartments.


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