The paradox of the real estate market: interest in mortgages is falling, sales are growing

The proportion of cash payments when buying real estate is increasing, as the relevant data show.

The sharp increase in lending rates has sharply reduced the demand for mortgages, however, the number of transactions continues to grow, however, as well as the prices of properties that break one record after another.

According to the Bank of Greece, the flow of housing loan financing decreased by 646 million euros in the first half of this year compared to last year, while in June alone the negative flow of financing reached 38 million euros.

As emphasized by the management of the Bank of Greece, “the decrease in interest in loans is due to rising housing prices, despite the restraint of new interest rates on housing loans offered by banks.”

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In a recent monetary policy report, the Bank of Greece noted that in the first quarter of this year, total new mortgage loans fell by 7.2% year-on-year, compared to a 67.3% increase in the first quarter of 2022. At the same time, after two years of continuous growth in demand for mortgages for four consecutive quarters (until the first quarter of 2023), it has been declining.

However, at a time when data on the home loan rate should reflect more the general backlog of purchase and sale transactions, as well as a slowdown in price growth and even their stabilization, the exact opposite is happening.

According to AADE, electronic declarations for transfer tax (which is paid on every purchase and sale of property) for the first four months of this year amounted to 56,000. The figure corresponds to 168,000 transactions year-on-year, and if confirmed, it would mean an annual increase of 21% compared to 2022.

Thus, it is clear from the facts that there is more money and stocks “spinning” in the housing market at present than in the previous period.

Recall that a few months ago, President of the National Bank Gikas Harduvelis in his speech at the annual conference POMIDA mentioned that 80% of home purchases are made without a bank loan, that is, exclusively at the expense of own capital. If the assessment is confirmed, real estate sales in 2023 will be 21% higher than in 2022.

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This increase in the share of equity spent on the housing market is primarily due to maintaining a high interest in purchases from abroadwhich, of course, is not carried out at the expense of bank lending from the domestic banking system.

According to the Bank of Greece, in the first quarter of 2023, capital inflows from abroad amounted to 497 million euros, an increase of 33% compared to the corresponding period last year, when it reached 374 million euros. Accordingly, from the applications for obtaining the first license of a permanent investor under the Golden Visa program, it follows that in the five months of this year (January-May) purchases and sales were made in the amount of 831 million euros compared to 361 million euros for the corresponding period last year .

It is certain, however, that a significant proportion of real estate purchases are for Greek buyers and are made from both savings and undeclared wealth, i.e. funds obtained, for example, through tax evasion and other illegal activities.

This chronic pathology of the real estate sector (as the “recipient” of such funds) has not been resolved even with the obligation to declare “your income-expenses” (“πόθεν έσχες”) upon purchase. Moreover, there are ways to circumvent this obligation either by accounting methods or by specifying an amount less than the actual amount of the sale when drawing up the contract.

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According to real estate sources, the majority of homebuyers in Greece are freelancers and self-employed, doctors, lawyers or even professionals in the construction industry (eg plumbers, electricians) as well as business executives. The fact that a significant percentage of the above professionals declare incomes below the non-taxable minimum to the tax authorities, represents a very clear indication of the origin of moneyfor which a home is being purchased.

This keeps the demand for housing high and therefore also contributes to the ‘rally’ in prices, making the purchase of real estate more and more unaffordable for employees who have no way to ‘hide’ income.

Based on the price indices of the Ministry of Finance, it is calculated that since the beginning of the housing market recovery, i.e. from Q1 2017 to the end of Q1 2023, the average increase in selling prices in Attica is 68%.

Only in the first quarter of this year, annual growth reached 16.5%, which is a historical high. In the country as a whole, growth for the period 2017-2023 reaches 50% (14.5% in the first quarter).

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The construction company GP CONSTRUCTION has been providing the following services since 2007:

• design and 3D animation/visualization,
• passing and obtaining a construction license,
• turnkey construction,
• issuance of an electronic certificate of the property,
• settlement of illegal buildings in accordance with law no. 4495/17,
• renovation of turnkey properties.

Expertise-control of design and construction works: +30-210- 72-72-752, https://gpconstructions.gr.

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