Real estate prices in Greece close to historic highs

The rate of growth in house prices exceeds historical highs, as evidenced by data compiled by the Bank of Greece.

In the first quarter of this year, prices rose by 14.5% year-on-year nationwide, and in the two major urban centers the increase was even higher, reaching 16.5% in Attica and 16.1% in Thessaloniki. In other large cities, the growth amounted to about 13.1%, and in other regions of the country, prices increased by 13.1%.

The sharp rise in prices in Attica is such that for the second quarter in a row, the historical maximum of the annual change was exceeded. In the fourth quarter of 2022, annual price growth reached 15.2%, the highest rate in decades. Similarly, in Thessaloniki, growth reached 14.5% in the last three months of 2022.

Now, compared to the first quarter of 2017, prices in Attica recorded a “rally” of 68% and almost reached the peak of the housing market in 2007. In fact, the increase in prices in Attica is much higher than the corresponding increase in the country as a whole, which for the period 2017-2023 (Q1) is 49%.

Significant growth of 12.8% also registered for newly built propertywhile used showed an increase of 15.6% on compared to the corresponding period in 2022. The Bank of Greece also revised its data for the whole of 2022, indicating growth by 11.7% compared to growth by 7.6% in 2021. Similarly, based on revised data, prices for newly built homes rose by 12.2% in 2022 (compared to growth of 8.2% in 2021), and for older apartments the average growth was 11.3% compared to 7.2% growth in 2022.

The sharp rise in prices in the first quarter of this year, especially in Attica, is certainly due to the fact that this region is a key “target” of foreign investors, in addition to domestic demand. Especially this year, there has been an abnormal growth in foreign investment under the program “Golden Visa”due to upcoming changes that will make it more difficult to obtain a residence permit.

In Attica, the historical maximum annual change was exceeded for the second quarter in a row. In particular, the minimum investment threshold will be doubled (from August 1) to 500,000 euros for the purchase of property in the center, northern and southern suburbs, Santorini, Mykonos and the municipality of Thessaloniki. As a result, there is a “hype” of transactions by third-country nationals in an attempt to obtain a residence permit before the increase in the limit.

But, in addition to increased demand, another reason for the increase in real estate prices is low supply, since the absorption rate of real estate significantly exceeds the replacement rate, i.e. number of properties for sale. This is due to two main reasons.

The first is related to low construction activity, although the situation has improved in the last two years. In 2022, the number of new building permits increased by 126% from the low of 2016 to 9,793. However, even so, this figure is about 30,000 new apartmentswhile almost 200,000 apartments entered the market in the mid-2000s.

In addition to the low number of new builds, there is also a shortage of used property as several tens of thousands are stuck in a long-term debt freeze.

These are houses that are collateral for mortgages that have become “red” and are in the hands of debt management companies (mostly) or banks. It turns out that even in cases where there is a consensus decision, i.e. the owner has agreed to an assignment of the property in exchange for a debt cancellation, the property is usually delayed before it goes on sale.

An important factor in the real estate market was the emergence and rapid growth of the real estate market for short term rentalwhich exceeded 30,000 apartments in the metropolitan area alone, thus withdrawing them from the long-term lease turnover, which led to sharp rise in prices on long term rental in Athens and suburbs.

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