The Greek housing market will recover at a slower pace than the Greek economy unless measures to boost demand and reduce oversupply are taken
The Greek housing market collapsed from 2009 onwards, mainly driven by the drop of GDP per capita, the shrinkage of residential lending and the rise in taxation, dragging investments and house prices down.
Approximately €18bn, or 8.2% of GDP, investments in construction were lost within 2008-2015, slowing further down the economic activity.
The Greek housing market currently constitutes an “outlier” of the European markets, demonstrating a 41% decline in house prices between 2008-2015, a 72% drop in transactions volume within 2008-2014, while real estate taxes have grown up by approximately 6 times (€ 3bn) in the five-year period 2010-2015, influencing further the economic downturn, and is also characterised by oversupply. The housing oversupply will hinder the rapid recovery of the house prices, while unless measures to reduce oversupply and enhance demand are taken, the housing market recovery will be slower than that of the Greek economy.
The Greek housing market is characterised by oversupply. Indicatively, in 2002, 64 dwellings corresponded to 100 people, while in 2014 rose to 71 dwellings per 100 people, or 1.7 per family. The housing oversupply will hinder the rapid recovery of the house prices, while unless measures to reduce oversupply and enhance demand are taken, the housing market recovery will be slower than that of the Greek economy.
According to the study, if no necessary actions are taken for the rejuvenation of the house market, in a realistic scenario for Greek economic growth, where GDP per capita returns to pre-crisis levels in 2030, it is estimated that:
- demand and supply in the Greek real estate market will converge at around 2047
- annual investments in real estate market will reach €4.5bn on average, and
- house prices will return to pre-crisis levels after 2050
At this scenario, the housing market does not seem to be able to contribute significantly to the growth of the Greek economy, and the investment gap of around € 14bn per annum should be covered from other sectors of the economy.
For the faster recovery of the Greek housing market, a real annual growth of at least 3.5% would be required, in combination with incentives and policies for the rejuvenation of the market.
To accelerate the balancing of the market it is necessary to:
- Reduce the housing oversupply
- Give incentives to foreign investors and simplify the real estate regulatory framework
- Gradually reduce real estate taxation
- Facilitate transactions and confront issues of fragmented ownership, through the creation of a collection mechanism of ownership rights “Land Bank”