Drop in demand for Airbnb hurts home market in Crete; prices hold firm

Housing prices in Crete’s urban centers came under pressure in the first half of the year due to a drop in demand for short term rentals but any increase in supply levels is expected to be easily absorbed by the market, say consultants Danos and Melakis.

“Demand for housing in Chania and Heraklion is consistently higher than the supply and this will not change easily. Temporarily some buyers may postpone or stop their searching as a result of the uncertainty (from the pandemic),” the report on real estate in the area says.

"Even if many new houses enter the property market in the coming months, they will simply meet the long-standing demand. If there is a pressure on prices, it will mainly concern expensive properties, i.e. either large houses or those that are priced above the average euro/sqm.,” it adds.

Greece’s largest island and the fifth largest in the Mediterranean, Crete is a popular second homes market for foreign buyers from central and northern Europe and welcomes some five million tourists per year. A series of large scale infrastructure projects are moving ahead on the island, such as a new international airport and privatizations projects, like the Gournes project.

The report went on to say that the effects of the crisis are expected to be reflected in both house prices and rents, with significant variations at a local level.

“In the short term, it is estimated that the market for apartments, especially in urban centers, will come under pressure, mainly due to the reduction of interest in short-term rental through platforms like Airbnb,” it added.

On the upside, Danos and Melakis point to several factors supporting the housing market in Greece.

Aside from the Golden Visa program, several other measures introduced by the Greek government have buoyed the housing market recently:

- Suspension of VAT payments on new building permits and unsold properties built after January 1, 2006.

- Reduction of the single property tax (ENFIA): The ENFIA for individuals was reduced: 30% reduction for properties valued up to 60,000 euros; 27% for those valued up to 70.000 euros; 25% for those valued up to 80.000 euros; 20% for those valued up to 1 million euros; and 10% for properties valued more than 1 million euros.

“At this point, we have to note that high property taxes had discouraged many potential buyers, because property taxes had increased seven times since the global financial crisis,” the report highlighted.