Greece’s red-hot housing market

Greek house prices continue to rise strongly, amidst increasing demand from foreign buyers and continued economic growth in the country.

In Greece’s urban areas, house prices soared by 14.14% during the year to Q2 2023, following year-on-year increases of 15.32% in Q1 2023, 14.75% in Q4 2022, 12.77% in Q3 2022, 11% in Q2 2022 and 10.6% in Q1 2022, according to figures released by the Bank of Greece. When adjusted for inflation, urban house prices rose by 11.33% y-o-y in Q2 2023.

The first half of this year has been the Greek housing market’s best performance in two decades.

Greece’s house price annual change

On a quarterly basis, house prices in urban areas increased by 2.45% (0.38% in real terms) in Q2 2023.

The strong growth was mainly seen in the major cities:

  • In Athens, Greece’s capital city, house prices rose strongly by 14.05% (11.25% in real terms) in Q2 2023 from a year earlier, its eighth consecutive quarter of double-digit growth. During the latest quarter, house prices were up 1.45% (-0.59% in real terms).
  • Thessaloniki, the country’s second-largest city, led the house price growth of 16.37% (13.51% in real terms), up from the previous year’s 11.45% increase. Quarter-on-quarter, prices increased by 3.27% (1.19% in real terms) in Q2 2023.
  • In other cities (excluding Athens and Thessaloniki), house prices rose by 14.63% (11.8% in real terms) in Q2 2023 from a year earlier, the highest y-o-y increase since Q4 2006. During the latest quarter, prices increased 4.46% (2.35% in real terms) in Q2 2023.

Greece Index of Prices of Dwellings graph

Demand from foreign homebuyers is rising strongly. In the first half of 2023, the total value of real estate purchases by foreign buyers, which accounts for 80% to 85% of all real estate purchases in Greece, soared by a huge 39.9% y-o-y to €1.1 billion, following annual increases of 68% for the full year of 2022 and 34.4% in 2021.

Foreign investors have been attracted to Greece, mainly due to the Golden Visa Program, which offers residency to non-EU investors purchasing or renting property worth over €250,000. However, in August 2023, the cost of a Greek Golden Visa was doubled to €500,000 in the most popular areas of the country. The plan is valid for five years and is open to renewal.

The housing market is also buoyed by the country’s strong economic performance. After expanding by a robust 8.4% during 2021, the Greek economy grew by another 5.9% last year, as the government’s National Recovery and Resilience Plan provided significant support to the economy.

The overall economy will continue growing this year, albeit at a slower pace. The International Monetary Fund (IMF) expects the Greek economy to expand by a modest 2.5% this year while the European Commission. released a slightly lower forecast of 2.4% growth.

Foreign interest in Greek tourism real estate surging

The property market accounts for about 20% to 35% share of total FDI in Greece annually. During 2022, net foreign direct investment (FDI) for the purchase of properties rose sharply by 68% y-o-y to nearly €2 billion, following an increase of 34.4% in 2021 and a decrease of 40% in 2020. It is now the highest recorded in two decades.

In the first half of 2023, net FDI in real estate reached €1.1 billion, up by a whopping 39.9% compared to the same period last year, according to the Bank of Greece.

But even before the Covid-19 pandemic, foreign investment in real estate in Greece had been rising strongly. Net FDI for real estate surged by 45.3% in 2016, 86.5% in 2017, 172.1% in 2018, and another 28.5% in 2019.

Greece Real Estate Net FDI graph

According to a 2022 Ernst & Young investment report, Greece remains resilient and attractive to foreign investors, despite the uncertainty of the international environment. Based on data released by the European Investment Monitor (EIM), Greece attracted 30 FDI projects last year, fewer than in 2020 but remains the country’s second-best showing since 2000. The total investment projects in 2020-21 accounted for about 24% of total FDIs over the last 22 years, according to the EY report. During 2022, the Greek real estate market accounted for nearly 22% of the total net FDI of €9.06 billion, based on data from the central bank.

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. However, in August 2023, the cost of a Greek Golden Visa was doubled to €500,000 in the most popular areas of the country. The plan is valid for five years and is open to renewal.

The increased real estate investment requirement would be applied to the northern part of the Hellenic Republic, the central and southern sectors of Athens in the Attica region, and the islands of Mykonos, Santorini, and the Municipality of Thessaloniki.

“In order to increase the affordability of real estate for Greeks, we are now increasing the minimum amount of investment required for the issuance of a golden visa from €250,000 to €500,000 (£434,000, $500,000),” said Greek Prime Minister Kyriakos Mitsotakis.

From 2014 to 2021, 9,610 main applicants received their Golden Visa in Greece. From its inception to December 2021, a total of 28,767 Greek Golden Visa permits were granted to the main applicants and their dependents, which yielded a total investment of more than €2.6 billion into Greece. Then in 2022, the Ministry of Migration and Asylum announced that 2,767 new Golden Visas were issued, up by a whopping 81% from a year earlier and one of the highest ever recorded.

From 2014 to 2022, the highest number of applicants came from China, with a total of 6,159 visas approved which is equivalent to about 62.8% share, followed by Turkey (6.4%), Lebanon (4.5%), Egypt (2.9%), and the U.K. (2.0%).

In the first half of 2023, the number of Golden Visa applications reached 20,103. Of these, 5,822 represent the main applicants and 955 are renewals. The remaining 13,326 applications are related to family members of the main applicants.

Greece Golden Visa Approvals graph

Measures to boost the housing market

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

  • Suspension of VAT payments on new building permits: Mitsotakis announced in October 2019 a suspension of VAT payments on any new building permits and unsold properties built after January 1, 2006. The suspension originally runs from December 12, 2019, to December 31, 2023. But in September 2022, Mitsotakis announced an extension of the tax relief for another year – until the end of 2024.
  • Tax relief for real estate: the government ended real estate tax in 26 islands in 2020.
  • 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 to all property owners from the year 2020. Then in February 2022, Mitsotakis announced a new 13% reduction in the ENFIA.

Starting from 2022, the main rates of the new ENFIA are as follows:

Property zone rates Old ENFIA New ENFIA
€751 to €1,500 €3.70 per sq. m. €2.80 per sq. m.
€1,501 to €2,500 €4.50 to €6 per sq. m. €3.70 per sq. m.
€2,501 to €3,000 €7.60 per sq. m. €4.50 per sq. m.

Moreover, the new system expands the 30% ENFIA discount for properties up to €100,000 euros each and the 25% discount expands to properties of €100,001 to €150,000. The new law also provides for the payment of the single property tax in up to 10 interest-free monthly installments, up from six tranches in 2021.

“Under the new rules eight out of ten property owners will pay an even lower rate,” PM Mitsotakis said. “A fair share will pay the same contribution, while a small minority, around 6 percent, will see a reasonable increase.”

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.

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.

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 15 years:

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
2021 11.61 6.86
2022 16.57 7.67
Sources: Bank of Greece, Global Property Guide

Greece finally emerged from the recession in 2017 – growing by 1.1% in 2017, 1.7% in 2018, and by 1.8% in 2019. 

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 7.46% in 2019. Athens had even stronger house price growth of 4.67% and 11.86% over the said two years.

And, despite the fact that the pandemic dragged the economy back to recession, with real GDP shrinking by a huge 9% during 2020, the housing market remains resilient. House prices in Athens rose by 6.23% (8.45% in real terms) y-o-y in 2020.

Fortunately, the overall economic conditions have since improved, with the economy growing strongly by 8.4% in 2021 and another 5.9% in 2022, mainly driven by the easing of pandemic-related restrictions and the low-base effect from the prior year.

As such, house prices in Athens soared by 11.61% (6.86% in real terms) in 2021 while prices in urban areas increased by 10.81% (6.09% in real terms) over the same period. In 2022, house price growth in Athens accelerated to 16.57% (7.67% in real terms) and to 14.75% (5.98% in real terms) in urban areas.

Rapid urbanization has led to a sharp dichotomy between urban and rural areas. Accordingly, 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

Gross rental yields in Greece averaged 5.22% in Q3 2023, according to a Global Property Guide research conducted in August 2023. In central Athens, specifically Athens Historical Center and Kolonaki - Lykavittos, gross rental yields range from 3.45% to 7.71%.

Smaller apartments tend to have higher rental yields than larger ones.

Rents have been generally falling in the past decade. From 2010 to H1 2023, rents in Greece plunged by about 21%, the worst performance in the European Union, according to the Eurostat. Among the 27 EU member states, only Greece recorded rent declines over the period.

Currently, the monthly rents for two-bedroom apartments in Athens range from €550 to €1,550, based on the Global Property Guide research. In Thessaloniki, a similar apartment rents for about €460 to €600 per month.

Around three-fourths of Greeks live in owned homes, with a homeownership rate of 72.8% this year, down from 73.3% in 2022, 73.9% in 2021, and 75.4% in 2020, according to Eurostat. The rental market comprises about 20% of the dwelling stock.

Greece Homeownership Rate graph

Mortgage interest rates rising

Mortgage interest rates in Greece are now rising, following the move of the European Central Bank (ECB) to hike its key rates to rein in inflationary pressures. In September 2023, the ECB raised its repo rate further by 25 basis points to 4.50%, its tenth consecutive rate hike since July 2022, when the repo rate was at a record low of 0%.

As a result, the average interest rate for new housing loans rose to 4.29% in September 2023, up from 3.36% in the previous year and 2.87% two years ago, according to the Bank of Greece. For new housing loans with a floating rate or up to one-year initial rate fixation (IRF), which accounts for more than 77% of all new housing loans drawn this year, the average interest rate was 4.42% in September 2023, up from 3.5% in September 2022 and 2.33% in September 2021. 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 over 5 and up to 10 years, the average interest rate increased to 4.3%, up from 2.95% a year earlier and 3.35% two years ago.

For outstanding housing loans with a maturity of 1-5 years, the average interest rate increased to 5.2% in September 2023, from 4.12% a year ago and 4.06% two years earlier. Likewise, the interest rate for loans with maturity of over 5 years rose sharply to 4.42%, from just 2.73% in the previous year and 2.02% two years ago.

Greece Interest Rates graph

Mortgage market continues to shrink

The size of the mortgage market continues to shrink, amidst rising interest rates. During 2022, the mortgage market was estimated to have contracted to just about 14.2% of GDP, down from 16.9% of GDP in 2021 and 39.5% of GDP in 2012. 

The mortgage market is poised to contract further to just about 12% of GDP this year.

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 Outstanding graph

In the first three quarters of 2023, new housing loans fell by 13.3% y-o-y to €442.7 million, according to the Bank of Greece. This is far from the average of €14.17 billion new housing loans recorded annually in 2005-08 and €5.4 billion annually in 2009-13.

In Q3 2023, total housing loans outstanding fell by 5% to € 28.37 billion from a year earlier, following declines of 3.7% in 2022, 33.3% in 2021, 12.6% in 2020 and 7.2% in 2019.