180,000 forced home sales to cool market

The forced sale of some 180,000 homes tied to unpaid bank loans is likely to cool rising real estate prices in Greece, with some experts warning that the spike in supply could even send prices sharply lower.

Greek banks have been offloading nonperforming loans left from the country's crisis on their balance sheets at a rapid pace in recent months, selling them to funds at steep discounts. The funds then take possession of any assets tied to the bad debt and sell it in a bid to recover unpaid loan amounts.

In coming years, banks are expected to sell loans tied to 180,000 residential and commercial real estate assets across the country. With such a large number of properties going under the hammer in an economy where bank credit is scarce and domestic demand remains weak, prices are seen retreating from recent highs.

The pace at which Greece's real estate market has recovered in the last year or so has caught many by surprise.

In some parts of central Athens, particularly around the Acropolis, prices have returned to pre-crisis levels even though the broader economy remains in poor shape. The latest data shows that apartment prices jumped 7.7 percent in the second quarter of the year after adding 4.9 percent in the previous three month period.

Bad loans currently held by Greece's top four lenders - Piraeus Bank, National Bank, Alpha Bank, and Eurobank - stand at some 80 billion euros, amounting to nearly half of the loans on their books. So far, they have passed onto funds three tranches of bad loans tied to some 10,000 properties. However, very few of these properties have hit the market as the process of preparing the foreclosed asset for sale takes up to two years.

German rating agency Scope says that a large scale sell-off of homes due to unpaid mortgages may drive prices sharply lower in Greece and force banks to take losses, reports BusinessDaily.gr.

As an alternative, Scope suggests that banks restructure loans or even offer customers a generous haircut, a reduction on the amount owing, to avoid putting downward pressure on the market. Mortgages in default in Greece amount to a very high 15 percent of gross domestic product, adds Scope.

Featured homes for sale in Athens from Epsilon Team:


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