House prices feed on investment shortage

House prices feed on investment shortage

House prices have returned to where they were before the crisis, but the same has not happened with investments in the sector, which still deviate dramatically from the levels of 2007. Combined with the slow issue of housing loans, this has led to a reduced supply of properties, keeping the cost of housing high.

“The low supply of quality realty across the market has given impetus to construction activity, which has not developed at a pace that would allow the complete decompression of demand, especially in the case of housing. Under current conditions, it is estimated that price increases will continue until a relative balance is restored, although at a slower pace than in the previous period,” the Bank of Greece acknowledged in its interim report for 2024.

According to a study by the Foundation for Economic and Industrial Research (IOBE) on the construction sector, total residential investment amounted to just 3.3 billion euros in 2022 compared to €25.2 billion in 2007 – a decrease of 87% – to represent 1.6% of GDP against 10.8% before the crisis. Although in 2023 and 2024 this percentage exceeded 2%, Greece still occupies the last place in the European Union.

“This collapse in investments is directly linked to the collapse in mortgage loans – fewer than 14,000 in 2023 compared to 115,000 in 2008. In fact, a large part of them in the last year concern beneficiaries of the ‘My Home’ program and the demand for loans outside the program still remains low,” observes the Institute of Demographic Research and Studies at the University of Thessaly.

Based on the distribution of housing in the last census, in the decade 2011-21 an annual addition of only 26,000 new housing units was recorded nationwide and 4,500 in Attica. In the decade 2001-2010 an annual addition of 91,500 and 30,500 was recorded respectively.

“Investments in housing in the entire country recorded a decrease of 4.6% in the first nine months of 2024, on an annual basis, and remain at a low level as a percentage of GDP (2.3%). Also, bank financing is at low levels, despite the increase recorded on an annual basis in the total amount of new housing loans in January-October 2024 (21.8%),” the Bank of Greece pointed out, adding that construction costs rose 3.8% annually in January-September.

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Source / Read More Kathimerini