Greece’s real estate market is picking up fast as the economy recovers from the pandemic but growth is threatening to push property assets out of reach for many in the country as wages remain low and jobless levels high.
At a time when fears of a new real estate bubble are growing in Europe, a rise in prices is also on the cards for Greece despite ongoing structural problems in the economy, holding back job growth amidst tight bank lending. In the last 18 months in Greece, house prices have shown strong resilience, surprising many in the market. The momentum seen before the onset of the pandemic is continuing to drive prices higher even though buyers remain limited.
Data from the Bank of Greece show that price growth in property accelerated to 3.2 percent in the first quarter of the year from 2.5 percent in the fourth quarter of 2020. For the whole of last year, apartment prices increased at an average annual rate of 4.3 percent, compared to an increase of 7.2 percent in 2019. Prices kept climbing in 2020 even though the economy shrunk by 8.2 percent due to the pandemic.
For 2021, everyone more or less agrees that prices will continue to rise due to the limited supply of new homes and major infrastructure and renovation projects that are spur buying interest in certain areas. As the market continues to pick up, problems in the labor market, however, remain enormous. Unemployment remains high, falling to 16.3 percent in 2020 from 17.2 percent last year, but will stay at current levels this year. In 2022, the European Commission sees unemployment in Greece at 16.1 percent.
Among those in employment, data from statistical authorities shows that income levels are dipping while housing prices move higher.
According to the latest data, wage labor income levels in the last quarter of 2020 fell to 17,682 euros from 17,854 euros a year earlier, in a downward trend that is likely to have continued in 2021.
Market officials point out that buying interest at the moment comes mainly from foreigners and entrepreneurs, with most transactions taking place in Athens. Buying activity is expected to increase when travel patterns resume with the country's attractive Golden Visa program also acting as a drawcard.
These developments are threatening to squeeze out workers from the market. Although there is no risk of prices overheating, as seen in Europe, acquiring property in Greece is turning into a dream for workers, unless the labor market significantly improves and banks turn the lending tap back on. It is worth pointing out that in Greece there are no supply concerns, as is the case in European markets where fears of price bubbles are growing, in countries like Belgium and the Netherlands.
The housing stock in Greece is large though it is old and needs renovation. Also, fears of the market being hit with a big shock from homes being sold off due to problem loans seem to be over the top as the number of forced auctions look to be gradually restarted this summer.
At the moment, only sellers in the market are feeling an increased sense of confidence. "As the economy recovers, so do the demands of owners. They generally are not in a rush to sell, with most preferring to wait before deciding to drop their prices," said a senior market official. "In Athens, the strongest interest remains in the southern suburbs and the historic center. Now we are also seeing more buyers turn to the northern suburbs, areas that are attracting more foreigners. They are investor who have done their homework and conducted thorough market research as they bid aggressively on assets," he added.