Real estate: why are prices rising – when will they hit the ceiling? [πίνακας] – Financial postman

The rise in house prices in different areas of Attica seems to be endless. In fact, research shows how new construction in popular areas has reached the point where it has surpassed the historic record set in 2008. On the contrary, market factors are lowering their tunes, indicating that the upward trend appears to be approaching a level higher. end. Others talk about a new “bubble.”

What’s really going on? Is there still room for upside and what is fueling the rise in prices?

Talking to after that President of the Association of Realtors of Athens-Attica, Lefteris Potamianos, reported that the cycle of double-digit percentage increases in housing prices has now passed and that prices will move to single-digit percentages in the coming period.

Which real estate markets show the best prospects? [έρευνα]

Analysts explain that the first signs of market “fatigue” have begun to appear now, as it appears that high prices have begun to cause a decline in transactions.

The latest analysis conducted by the Bank of Greece (BoG), answers the question of how to measure the imbalance between supply and demand?

According to the study’s calculations, construction activity reached its peak in 2005 with the issuance of 66,000 building permits, equivalent to 195,000 homes. Since then the decline has continued, leading to historically low levels of construction activity in 2012 and beyond, with annual permits issued for about 16,000 homes annually. Thus, between the 2001-2011 census, an increase in the number of dwellings is recorded by 917 thousand dwellings, while in the following decade 2012-2022 we estimate that only 155 thousand were added. At the same time, on the demand side, during the period 2001-2011, an increase in the number of households was recorded by 582 thousand households, while in the period from 2012 to 2022, we estimate the creation of only 197 thousand households. In addition, a new feature that has emerged in recent years is the increased demand for housing for short-term rental. This demand, which works in addition to the demand for housing in local families, now reaches 170,000 homes.

So in conclusion, the imbalance identified by the study is nothing more than the product of the distance between the 155,000 new homes we estimate were built in the past 10 years out of the total demand for 367,000 new homes (197,000 new homes plus 170,000 short-term rentals). Accordingly, this shortfall in supply to demand by about 212 thousand homes is what led to a cumulative rise in housing prices by 14% in excess of the growth justified by the level of income growth. Given the size of the gap between supply and demand, house price growth rates are expected to be moderate but not negative.

Bell from the IMF as well

On the other hand, the International Monetary Fund noted that the Greek real estate market appears to have entered “bubble” territory, after a six-year “rise” in prices that began in 2017.

As the Fund’s analysis shows, today’s property prices highlight a risk factor for the Greek banking system. Although systemic risks are relatively limited, according to the IMF, due to low leverage in the private sector, they have increased since last year and the banking sector faces major challenges regarding its future. While the debt burden on both firms and households remains low compared to the euro area average, the costs of servicing household debt are among the highest in the euro area, while higher interest rates could at the same time increase the cost of servicing debt. Household debt, which would lead to a deterioration in the quality of banks’ assets, thus hindering their internal ability to generate capital.

The IMF notes that macroeconomic risks associated with further fiscal tightening, combined with slower growth amid overvaluation of house prices, could lead to deterioration of bank balance sheets and house price corrections, with a vicious cycle of negative interactions in the real economy.

What do the numbers say?

According to data from the Bank of Greece, in the first quarter of 2024, the annual rate of change in apartment prices in the entire country reached 10.4%.

Based on the age of the property, the annual rate of change in prices for new apartments was 10.8% and for old apartments was 10.1%.

Based on geographic location, the annual rate of change in apartment prices was 9.4% in Athens, 12.2% in Thessaloniki, 10.3% in other major cities, and 12.1% in the rest of the country.

Based on available provisional data, it is estimated that in the first quarter of 2024, apartment prices (in nominal terms) increased on average by 10.4% compared to the corresponding quarter of 2023. For 2023, apartment prices increased at an average rate An annual rate of 13.8% (adjusted figures), compared to an increase of 11.9% in 2022.

In more detail, the percentage of price increases in the first quarter of 2024 compared to the corresponding quarter of 2023 was 10.8% for new apartments, that is, up to 5 years old, and 10.1% for old apartments, that is, those that are more than 5 years old. Based on the revised data, the average annual rate of increase in prices for new apartments for the year 2023 reached 12.7%, compared to an increase of 12.5% ​​in 2022, while the average annual rate of increase for old apartments reached 14.5% in 2023. An increase of 11.6% in 2022.

From analyzing the data by geographical region, it appears that the increase in apartment prices in the first quarter of 2024 compared to the corresponding quarter of 2023 amounted to 9.4% in Athens, 12.2% in Thessaloniki, 10.3% in other major cities and 12.1%. . % in the rest of the country. For the whole of 2023, the increase in prices in the same areas compared to 2022 was 13.8%, 16.5%, 15.0% and 11.4%, respectively (revised figures). Finally, for all urban areas of the country, apartment prices in the first quarter of 2024 increased on average by 10.8% compared to the first quarter of 2023, while the average annual increase for 2023 reached 14.1% (adjusted figures).