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The crisis has depreciated Greek real estate by €500 billion

16 November 2014 / 19:11:36  GRReporter
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According to recent data from tax returns, the overall nominal value of Greek real estate has hit €1 trillion by 2007 prices. But based on today's prices, all Greek properties together amount to less than €600 billion. If we take into account that before the crisis properties’ nominal values were 20%-30% below their market prices, this implies that back in 2007 Greek real estate actually stood at 1.2 -1.3 trillion euro. Therefore, it lost half of its value over a period of 5-6 years.

Greeks have traditionally invested in immovable properties, which is why the percentage of ownership is over 80%. Every 6/10 Greeks own at least one property: a home, an office or a piece of land. By 2007 prices, the average property value was €93 456.

Seven out of every 10 Greeks own a property with a nominal value of up to €100,000. 50% of homeowners (2,769,177 taxpayers) own a small property with a value below € 50,000, and the average value of these properties is €22 954.80 in 2007 nominal prices. Around 114,793 people (2% of owners) possess urban properties with values exceeding € 500,000 in 2007 nominal prices. 291,322 owners will pay an additional amount this year on top of the basic property tax as the nominal value of their real estate is over € 300,000.

27,198 owners have properties with a nominal value above €1 million, and 492 owners have urban properties worth over € 5 million. The latter's overall value is €4.1 billion, while their average value is €8,466,889.08 in 2007 nominal prices.

The data shows that Greeks have an intimate relationship with their properties – because they are perceived either as secure shelter for their families or as a prudent investment, which can be rented out and become a source of permanent income. Pundits say such owners are prone to holding onto their properties rather than selling them; they also typically hand them down to their children.

And this was the only game in town until the crisis hit. And since it did, thousands of owners have put their properties – outside their living places – up for sale to get some cash out of them and avoid high taxation.

Sellers however were in for a hard landing as their properties had meanwhile melted in value. Possessions, which had swallowed their life savings, were now selling for just one third of their buying price just a few years ago. An increasing number of apartments are now sold got between €5000 and €10,000, with most of them having been bought at much steeper prices not so long ago. And if a great deal of these are old housing, there are thousands of others, which have been built over the last 10 years, but their prices have fallen sharply no less due to a receding cohort of buyers.

According to data of the Bank of Greece, the crisis has depreciated Greek housing by 42% in market prices and by 36.4% in nominal prices. And if 2014 alone saw prices truncated by another 6-8%, the overall devaluation would reach 50% – or even higher in some areas. Here are some examples experts have given of how cheap housing can go despite having just been built or being less than 10 years old:

  • A maisonette in Pallini, 110 m², sold for €330,000 in 2007, its nominal value € 200,000. Now out on the market for € 150,000, at the same nominal price, but there are no takers.
  • A villa in the northern suburbs, with a pre-crisis price of €12 million, sold in 2013 for €7 million.
  • An apartment of 100 m², built three years ago in Nikaia and bought for €160,000, on sale today for less than €100,000.
  • A newly built 70 m² apartment in Eleusis, was priced at €100,000, now on sale for €65,000.

Business properties, owned by thousands of Greek families, have seen an even steeper slump. Plenty of offices or shops were rented out before the crisis to prop up family budgets.

For example, huge demand before the crisis pushed prices of shops on Ermou Street or in Kolonaki, Kifissia or Glyfada up to the incredible heights of € 300 per sq.m. But the recession boarded up thousands of retailers. Now their owners have practically worthless properties on their hands, with taxes having multiplied meanwhile.

The collapse of the real estate market has resulted in thousands of owners wishing to sell their properties, but finding no demand, or letting them out for a humiliating rent. While 215,000 property sales were carried out in 2005, only 35,000 properties changed hands in 2014. 2013 saw 48,000 property deals, 13,000 more than this year. 46,000 properties changed hands in Athens in 2005, while projections for this year amount to roughly 10,000.

Under these circumstances, and given that 900,000 housing estates were built over the last 10 years according to ELSTAT, the industry will be struggling to recover during the next 3 years. But even with partial recovery, property values are not projected to go anywhere close to pre-crisis levels.


Tags: real estate depreciation nominal value market value
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