The Greek economy was estimated to have grown by 1.6% last year and is expected to grow by another 2.5% this year, amidst a tourism upsurge. And after seven years of falling house prices, things are turning around.
In Greece’s urban areas, house prices dropped by just 0.67% during the year to Q3 2017, the lowest annual fall in house prices since Q1 2009, according to the Bank of Greece. When adjusted for inflation, house prices declined by 1.62%. During the latest quarter, house prices in urban areas fell slightly by 0.06% but actually increased by 1.18% when adjusted for inflation.
This improvement was also seen in the major cities:
- In Athens, the average price of apartments fell slightly by 0.44% (-1.39% in real terms) during the year to Q3 2017, the lowest y-o-y decline since Q2. Quarter-on-quarter, prices increased 0.1% (1.34% in real terms).
- In Thessaloniki, the country’s second largest city, there was a slight house price drop of 0.7% (-1.7% in real terms) y-o-y in Q3 2017, an improvement from last year’s 2.1% annual fall and the lowest decline since Q1 2009. Quarter-on-quarter, prices fell by 0.2% (increased 1% in real terms) in Q3 2017.
- In other cities (excluding Athens and Thessaloniki), house prices fell by 1% (-2% in real terms) during the year to Q3 2017, an improvement from y-o-y declines of 2% in the previous quarter and 1.8% a year earlier. On a quarterly basis, prices increased 0.1% (1.3% in real terms) in Q3 2017.
Greek residential property prices have fallen by 42.8% (-45.9% in real terms) from the peak year of 2008.
Property transactions and construction activity are both rising again, but are still far below their peak levels. During the first three quarters of 2017, the number of residential property transfers recorded at the Athens land registry rose by 16.2% from a year earlier.
During the first ten months of 2017, the total number of permits rose by 10% to 11,205 units from the same period last year, according to Hellenic Statistical Authority. But it remains far below the 70,000 to 80,000 permits issued annually from in 2004 to 2007.
To revive the housing market, the Greek government recently offered residence to non-EU investors purchasing or renting property worth over €250,000. The residence plan is similar to measures adopted by Hungary, Spain, and Portugal. The plan is valid for five years and is open to renewal.
However, high property taxes in Greece continue to discourage demand. In fact, property taxes have increased seven times since the global financial crisis. From September 2017 to January 2018 alone, about 6.3 million owners are required to pay €3.15 billion in property tax (ENFIA), up from €3 billion in 2014 and from just €500 million in 2009. Rental taxes have also increased. For the first €12,000 of annual rent revenues, the tax is 15%, up from 11% until 2015. For rent revenues between €12,000 and €35,000 per year the rate soars to 35%.
The Greek economy grew by around 1.6% in 2017, according to the European Commission – in contrast with last year’s 0.2% contraction. After a short-lived recovery in 2014, Greece’s economy returned to recession in 2015, with GDP contracting by 0.2%, amidst the imposition of capital controls and the shutting down of most of its banks. Before this, the country’s real GDP had contracted by 3.2% in 2013, 7.3% in 2012, 9.1% in 2011, 5.5% in 2010, 4.3% in 2009 and 0.3% in 2008, according to the International Monetary Fund (IMF). The recovery is expected to continue this year with a projected real GDP growth rate of 2.5%.