House prices beginning to turn in Greece!
Last Updated: March 15, 2015
- In Athens, the average price of apartments fell by 6.65% (-4.90% in real terms) during the year to Q4 2014, according to the Bank of Greece. Compared to the previous quarter, house prices in Athens dropped by 1.46% (-0.78% in real terms) in Q4 2014.
- In Thessaloniki, the country’s second largest city, house prices fell by 6.89% (-5.15% in real terms) y-o-y to Q4 2014. From the previous quarter, house prices were almost the same, slightly declining by only 0.33%. When adjusted for inflation, house prices actually rose by 0.35% from the previous quarter.
- In other cities (excluding Athens and Thessaloniki), there was a 5.86% drop in house prices (-4.10% in real terms) during the year to Q4 2014. During the latest quarter house prices fell by 1.94% (-1.26% in real terms) in Q4 2014.
- In other urban areas (excluding Athens), residential property prices declined by 1.80% (-0.38% in real terms) y-o-y in Q2 2014. Quarter-on-quarter house prices slightly rose by 0.39%, although they actually fell by 0.87% when adjusted for inflation in Q2 2014.
Alpha Bank A.E.’s Theodoros Kalantonis is optimistic that home lending will revive soon, saying this year will be a turning point for the Greek mortgage market as buyers realize that prices won’t decline any further.
Despite green shoots, activity is amazingly depressed: Residential property appraisals-transactions were 33.20% down on the previous year in 2014; dwelling permits fell 19.3% from January to November 2014 compared to the same period in 2013; total new floor space, measured in square metres, was down by 13.9% y-o-y as of November 2014 - large falls in an already cataclysmically depressed housing market (see below).
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, which is similar to measures adopted by Hungary, Spain and Portugal, is valid for five years and open to renewal.
The Greek Finance Ministry also announced last December that a capital gains tax on property, originally scheduled for introduction in summer of 2014, will be pushed back to December 31, 2016.
The misery in Greece continues: falling prices, yet poor rental yields.
In our latest survey, the average price per square metre (sq. m.) in Central Athens ranges from around EUR 2,700 to EUR 4,000.
In the suburbs of Athens, i.e., Ekali, Kifisia, Psychiko, Glyfada, the average price per sq. m. of apartments ranges from around EUR 2,500 to EUR 2,800, while houses cost around EUR 3,300 per sq. m.
We take our prices with a pinch of salt since they are based on a small sample. We are more confident about our yields figures. Gross rental yields on 120 sq. m. central Athens apartments are at about 3.8%. This is not a good yield. It would be difficult to justify becoming a landlord at yields at this level.
As is usual, small apartments in Athens generate slightly higher yields, at 4.3%.
Apartments in Crete cost around EUR 1,900 per sq. m. while villas cost around EUR 4,000 per sq. m. Yields are lower here than in Athens, at least for apartments (for which we have research) at around 3%.
Monthly rents per sq. m. in Athens range from around EUR 9 to EUR 12 per sq. m.
In Crete, monthly rents per sq. m. of apartments range from around EUR 4 to EUR 6.
When buying property, take into account the fact that round trip transaction costs are quite high in Greece. See our Residential transaction costs analysis for Greece and Residential property transaction costs in Greece, compared to the rest of Europe.
Income tax is moderate to high in Greece
Rental Income: Rental income is taxed at progressive rates, from 10% to 33%.
Capital Gains: Capital gains realized from the sale of property held for less than 5 years are taxed at a flat rate of 20%.
Inheritance: Inheritance tax is levied at different rates depending on the relationship between the deceased and the beneficiaries.
Residents: Residents pay taxes on their worldwide income at progressive rates.
Total transaction costs are moderate in Greece
The total roundtrip transaction cost, i.e., the cost of buying and selling a property, ranges from 6.88% to 11.04%. Transfer tax is levied at a flat rate 3% as of 01 January 2014.
Tenant protection laws are neutral in Greece
Rent: Rents are freely negotiable between the tenant and the landlord. There is no legal limit on the deposit.
Tenant Security: All residential rentals have a minimum legal duration of three years. If a contract for a lesser period is negotiated, the three years period applies to the landlord, but not to the tenant. A contract for three years or longer terminates automatically at the end of the contract period, without need for notice.
Recession is over, better growth outlook in 2015After six years of depression, Greece has bounced back to growth with GDP rising by 0.6% in 2014. Before this, the country’s real GDP had contracted by 3.8% in 2013, almost 7% in 2012, 7.10% in 2011, 4.9% in 2010, 3.1% in 2009 and 0.2% in 2008, according to the IMF. During the 4th quarter of 2014, GDP fell by 0.4% as compared to the previous quarter, but is still 1.3% higher than the previous year.
2014’s GDP growth, although meagre, suggests that Greece is likely to be a happier place in coming years. In 2015, Greece's GDP growth is forecast at around 2.9%, followed by 3.7% growth in 2016. According to the Bank of Greece, it is likely that the economy will return to a steady growth path in coming years.
The central bank warns, however that the political uncertainty in the country, in relation to the recent elections, might cause a negative spillover. According to Bank of Greece Governor Yannis Stournaras, political uncertainty was already affecting local markets. “There is a risk that the growth that has only just started to resume may be halted, but there is also a large risk of irreversible damage being done to the Greek economy,” said Stournaras.
In 2014, Greece was able to sustain a primary budget surplus of around €1.9 billion, although it fell short of the government's €4.9 billion target. This was an improvement from the €691 million budget surplus recorded in 2013, the first primary budget surplus in a decade, and the €3.46 billion deficit in 2012. In 2015, Greece is aiming to attain a primary budget surplus of around 2.9% of GDP, slightly down from the bailout deal’s 3% target.
The country’s budget deficit is expected to decline to just 0.2% of GDP in 2015, down from 1.3% of GDP in 2014. The country’s overall budget deficit stood at 2.2% of GDP in 2013, far lower than the budget deficits of 6% of GDP in 2012, 9.5% in 2011, 10.5% in 2010 and 15.8% in 2009.
Greece’s national debt reached 176.3% of GDP in 2014, slightly higher from the 174.9% of GDP in 2013 and 156.9% of GDP in 2012. National debt is expected to fall to around 170.2% of GDP in 2015.
Consumer prices in Greece are still declining, with prices falling 2.2% during the year to February 2015, less than the 2.8% annual deflation in January 2015 and 2.6% in December 2014, according to the Hellenic Statistical Authority (El. Stat.).
Unemployment was 26% in December 2014, down from 27.3% in December 2013, according to El. Stat.