Greek property left out in the cold by ENFIA tax cut
Greece's move to reduce the Enfia property tax by 13 percent is expected to give the market an additional push and provide some relief to home owners struggling with rising energy costs. With this decision, however, the government is addressing a structural problem with a quick fix solution that fails to tackle what is making the energy crisis even worse for most residents in the first place: energy poverty.
According to announcement made by Prime Minister Kyriakos Mitsotakis, the tax cut will cost the state 350 million euros, will be effective as of this year and will come with softer payment terms.
Rising inflation, driven by record high power costs, prompted the decision as the government tries to offset the impact of the energy crisis and keep the country's economic recovery on track. The decision also means that the government has delivered on a key pre-election promise when elected in 2019 to reduce the levy by 30 percent. The 13 percent reduction comes after an initial cut of 20 percent in Enfia in 2020.
Reforms to the tax mean that it is being implemented in a fairer manner, experts admit, in changes that will cost a total of nearly one billion euros to the government budget.
There is no doubt that the news will be welcomed by the five million home owners who will see a drop to their annual tax bill as rising energy prices eat away income, posing a large threat to living standards.
Like many other countries, Greece is at the mercy of the global energy market but it could do more to fix what is within its reach and take more drastic action in boosting the quality and value of homes, making them more energy efficient.
Energy poverty occurs when energy bills represent a high percentage of consumers' income, affecting their capacity to cover other expenses. It can also occur when consumers are forced to reduce the energy consumption of their households, and consequently, this affects their physical and mental health and well-being. This is the case for some six in ten homes in Greece though some estimates put this number much higher.
The country’s ten year economic crisis played a major role in the deteriorations of Greek residential properties. For years, steep recession and high unemployment prevented home owners from upgrading the asset in line with energy needs and the climate crisis.
Badly maintained homes that are not well heated, or cooled, is perhaps the biggest problem facing the sector which doesn’t need another push right now. Prices are already rising strongly on the back of improving demand from local and foreign buyers, showing resilience to the economic woes caused by the pandemic.
The cost of acquiring a home is already moving out of the reach of many Greek households, prompting some in the market to say that a further boost to the market will only benefit speculative buying.
To be sure, the Greek government has provided other benefits to help households pay the higher power bill. Also, there are state programs that help subsidize costs to upgrading the energy performance of buildings, such as improving insulation and introducing solar powered hot waters systems.
But these energy programs need larger budgets, easier access and simpler procedures in order have a substantial impact on the market. Also, authorities need to encourage Greek banks - who were major recipients of state aid during the country's ten-year economic crisis - to provide increased lending in this direction.
Policies need to shift from handouts that tick political boxes to providing more determined action and sustainable solutions. Stronger measures that support the energy performance of houses is also being called for by Brussels in a green policy issue that goes beyond economic sense.