Bank savings and cashed up foreigners are financing Greece’s credit starved housing market that continues to hop along.
Fresh data shows that demand for mortgage loans in Greece remains in the doldrums, indicating that the vast majority of houses purchased in the country are done so with cash.
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According to the Bank of Greece, the country’s central bank, mortgage growth in November contracted at a pace of 3%, meaning that more loans were paid back than those issued.
This compares with growth of some 10% on loans issued to businesses, data shows.
Greek banks have been implementing very strict lending practices since taking severe losses during the country’s economic crisis. Saddled with billions of euros of bad debts arising from the decade-long economic turmoil, NPL figures are now reaching single digit levels but lending policies remain doubled down.
Records show that annual mortgage growth in Greece has been in negative territory since 2009, the year the country's economic crisis emerged.
Bank officials have gone to great lengths to explain that the lack of home loans is due to plummeting demand, rather than their practices.
Bankers say that demand for home loans had started to pick up but once again fell sharply due to uncertainty from the Ukraine war and rising interest rates, forcing home buyers to either pay cash for their investment or put off the decision altogether.
Greek housing market hums along
The mortgage data comes in sharp contrast with growth seen in the broader residential market. Prices are rising at a pace of some 11 percent as demand outstrips supply, like in many parts of Europe.
The number of home sales has dipped recently but remains at reasonably high levels.
Apart from Greeks using their savings to buy homes, the property market is being financed by foreign investors.
Data shows that in the second quarter of 2022 capital inflows into Greece for real estate investments market jumped 60% compared to the same period in 2021, reaching 414.4 million euros . For the first six months of 2022, foreign funds being poured into Greek residential real estate rose 70% year-on-year to 788 million euros, with experts forecasting the full year figure to come in at about 1.5 billion euros.
Home prices seen steady in 2023
After moving steadily higher for the last five years, housing prices in Greece look to be flattening out this year.
According to Yiannis Paraskevopoulos, general manager at Danos-BNP Real Estate, higher interest rates, tight bank lending and the reduced disposable income of households have all led to a drop in demand in the residential market.
Buyers are concentrating in specific areas, Paraskevopoulos told Business Daily, referring to houses in the southern suburbs and the city center in Athens and Thessaloniki, while holiday homes in Mykonos, Paros, and Santorini are also drawing investors.
“These areas attract foreign investors, who are looking not only for a place to live in, but also for an investment product,” he said.
Foreign buyers have been a key source of demand for Greek real estate but the factors that boosted their interest in the country are changing. Property prices are dropping in other European markets, providing new investment opportunities, while Greece’s appeal as a cheap destination is losing some of its shine.
Data from Numbeo.com shows that Athens came in 117th place on a list assessing the cost of living among European cities for 2023, climbing 35 positions from 2021. The city of Heraklion in Crete, however, remains a cheaper alternative, as the city is ranked in position number 140.
Prime assets in demand
The energy crisis has shed a new light on Greek property.
Greece’s warm year-round climate provides an appealing alternative to colder winter conditions in northern Europe amidst record high energy costs.
This has led to a spike in interest from buyers located in Germany, France, the Netherlands and UK but supply levels remain low, particularly for newer homes that meet stricter energy requirements.
This segment of the market though is seen as performing strongly in 2023 and being resilient to any economic turbulence that may arise throughout the year.
“Interest in the Greek market, particularly for prime assets, remains high and is expected to continue and be supported by large-scale infrastructure projects in the broader Athens area, as well as infrastructure improvements at a national level,” adds the Bank of Greece in an interim monetary policy report.