After nine years of falling house prices, the Greek housing market is now growing strongly again amidst improving economic conditions and market expansionary measures.
In Greece’s urban areas, house prices rose by 9.32% during the year to Q3 2019, far higher than the previous year’s 2.35% growth and the highest annual increase in house prices since Q4 2006, according to the Bank of Greece. When adjusted for inflation, house prices increased by 9.39%. Quarter-on-quarter, house prices in urban areas were up 2.23% in Q3 2019 (3.46% in real terms).
This sharp improvement was also seen in the major cities:
- Athens led with an annual house price increase of 11.91% in Q3 2019 (11.99% in real terms), the capital’s best performance since Q2 2006. During the latest quarter, house prices rose by 2.21% (3.43% in real terms).
- In Thessaloniki, the country’s second largest city, house prices rose by 8.52% (8.59% in real terms) y-o-y in Q3 2019, a sharp improvement from last year’s 1.32% annual rise – the highest growth since Q2 2007. Quarter-on-quarter, prices increased by 0.7% (1.9% in real terms) in Q3 2019.
- In other cities (excluding Athens and Thessaloniki), house prices rose 6.87% (6.94% in real terms) during the year to Q3 2019, an improvement from y-o-y rise of 0.8% a year earlier. During the latest quarter, prices increased 2.5% (3.7% in real terms) in Q3 2019.
Greek residential property prices fell 40.8% (-45.1% in real terms) from 2008 to 2018.
Demand is now surging, with residential property transfers in Athens rising by double-digit figures in the past four years. Construction permits soared 24.5% to 11,744 units during the first nine months of 2019, following annual rises of 10.1% in 2018 and 9% in 2017, according to the Hellenic Statistical Authority, though the total remains far below the 70,000 to 80,000 permits issued annually from 2004 to 2007.
To revive the housing market, the Greek government has offered residence to non-EU investors purchasing or renting property worth over €250,000, similar to Hungary, Spain and Portugal. The plan is valid for five years and is open to renewal.
Other measures introduced by newly elected Prime Minister Kyriakos Mitsotakis of the centre-right New Democracy party:
- Suspension of VAT payments on new building permits: PM Mitsotakis announced in October 2019 a three-year suspension of VAT payments on any new building permits and unsold properties built after January 1, 2006.
- Reduction of the single property tax (ENFIA): The ENFIA for individuals was reduced last year: 30% reduction for properties valued up to €60,000; 27% for those valued up to €70,000; 25% for those valued up to €80,000; 20% for those valued up to €1 million; and 10% for properties valued more than €1 million. A further 10% reduction, on average, will apply on all property owners from the year 2020.
- High property taxes had discouraged many potential buyers, because property taxes had increased seven times since the global financial crisis. In 2018, ENFIA tax revenues amounted to €3.15 billion, up from €500 million in 2009.
- Reducing taxes has been one of the priorities of the Mitsotakis government.
- The Greek economy grew by around 2% in 2019, according to the International Monetary Fund (IMF) – slightly up from last year’s 1.9% expansion and the highest growth since 2007.
Moderate rental yields; stable rents
In the centre of Athens gross rental yields on apartments are moderate, at around 4.2% for apartments of 120 square metres (sq. m), but proportionately more for smaller apartments, according to Global Property Guide research.
The gross rental yield for apartments located in suburbs of Athens is slightly higher, at about 4.5%.
The real estate market in Greece’s largest cities recorded an impressive increase in the price of sales and rentals in 2019, according to the accumulative data published by Spitogatos, one of the country’s largest real estate websites.
The marked uptick in both rental and sales prices made the Greek real estate sector one of the fastest-growing markets in the entire south of Europe.
Of course, these developments are negative for those on the side of renting or buying, since the cost of renting or buying a home in Greece has been steadily increasing for several years now.
The highest increase in selling prices in 2019 was recorded in the city center of Greece’s second-largest city, Thessaloniki.
There, according to the data released by the Spitogatos website, an average real estate price increase of 28 percent was recorded in 2019 compared to 2018 figures.
Athens’ city center followed Thessaloniki closely, with an average price increase of 27.8 percent.
The city of Piraeus came in third, experiencing a 16.3-percent increase in 2019.
Rental prices followed an overall rising trend as well in 2019, with prices in Piraeus this time topping the list for the largest increases. Rents in Piraeus rose by 25.2 percent on average in 2019, compared to the previous year.
Additionally, rental prices on the islands of the Saronic Gulf, the island of Corfu, the city of Trikala and Athens’s central and western suburbs recorded impressive increases, from 19 to 23.1 percent.
These increases have brought prices in many parts of Greece back to pre-crisis levels, similar to prices recorded in 2008.
At the same time, rather surprisingly, several counties and cities on the Greek mainland’s periphery experienced significant declines in real estate prices last year.
For example, the region of Grevena in West Macedonia recorded a reduction of 19.4 percent in its real estate selling prices in 2019.
The regions of Trikala, Boeotia, Phocis and Drama followed, experiencing declines from 5.9 to 8.2 percent.