Moody's sees Greek housing prices rising in next 18 months

Greek house prices will continue to increase moderately over the next 12 to 18 months, providing a boost to the country's banks, said credit ratings agency Moody's.

House prices increased by an average 1.5 percent in 2018, the first gain in 10 years, mainly due to the improving macroeconomic environment and high foreign investment in Greece's residential property sector. Greece's visa-for-investment program has drawn strong interest from home buyers in China, Russia and Turkey, while the tourism sector is supporting demand for short term property rentals.

"We expect house prices to continue to increase moderately over the next 12 to 18 months, which will be positive for Greek covered bonds, residential mortgage-backed securities (RMBS) and banks," said analyst Miguel Lopez Patron in a statement.

Moody's expects that house prices will increase at a moderate pace, given high property taxes, a declining population, high interest rates on new mortgages and limited expansion in mortgage lending by banks as they continue to focus on reducing bad loans.

Rising house prices will limit the losses in mortgages backing covered bond and RMBS if borrowers default and properties have to be sold to recover unpaid debt, the agency added.

The rise in house prices will bolster banks' efforts to reduce nonperforming exposures (NPEs) by potentially making it easier for them to sell mortgage NPE portfolios, said Nondas Nicolaides, a Moody's Vice President - Senior Credit Officer.

Additionally, rising house prices will increase incentives for borrowers to restructure their mortgage NPEs, given their properties' potentially higher value, underlined Nicolaides.

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