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Housing price growth in Europe slows. Is Greece next?

This article was updated December 21, 2022.

House prices in most European markets are continuing to rise but at a slower pace than last year, indicating that real estate may be headed for some tough times amidst rising interest rates and soaring energy costs, according to industry data.

In the second quarter of the year, house prices rose in 20 of the 28 European housing markets for which figures were available in Q2 2022, according to figures put together by Global Property Guide and adjusted by

“Yet only 7 countries had stronger momentum in Q2 2022 compared to a year earlier.” adds Global Property Guide.

Greece is one of those countries. The latest figures from the Bank of Greece, the country’s central bank, shows that house prices jumped by 9.4 percent last year, versus gains of 6.9 percent in the same quarter of 2021.

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Inflation distorts prices

Although this looks like price growth accelerated in the 12-month period, this is not the case when the data is adjusted for inflation (or deflation, as was the case last year).

When adjusting for core inflation - which strips out energy and food prices - the real price hikes in Greece's residential property market in the second quarter of 2022 reach just 6.7 percent (versus the headline figure of 9.4 percent as stated by the Bank of Greece).

Housing boom slows in Europe

Key European markets such as Germany and the UK are losing steam while Spain and Italy’s real house prices are now falling.

In Spain, home prices fell by 6.3 percent in the second quarter of the year (adjusted for headline inflation), versus gains of just over 7 percent a year earlier, the data showed.

Despite the weak performance in the real estate market, however, Spain’s economic growth remains robust and is tipped to grow by 4 percent this year.

Meanwhile in Turkey, inflation is also playing havoc with prices.

“Turkey remains the strongest housing market in our global house price survey, buoyed by strong demand from both local and foreign investors,” said Global Property Guide.

“The nationwide house price index rose by a spectacular 45.88% during the year to Q2 2022, far higher than the previous year’s 9.97% y-o-y increase and its best showing in recent history. In fact, in nominal terms, prices skyrocketed by more than 160%,” it added.

Property prospects remain positive in Greece - Alpha Bank

Looking ahead, Alpha Bank said in a recent report that the country's real estate prospects remain positive thanks to subsidies supporting home renovations and energy savings, along with state assistance programs helping lower interest rates for first home buyers aged up to 39 years of age.

"The real estate market is also seen being positively affected by the investments that are expected to be implemented in the context of the National Recovery and Resilience Plan ("Greece 2.0") and concern (a) energy upgrading in public and private buildings, (b) investments aimed at securing the diversification of the Greek tourist product," the bank said.

The Greece 2.0 Plan also targets the implementation of reforms to reduce the complexity of procedures, among others, regarding credit being issued, property registration and the issuing of construction permits.

At the same time, however, the market is also faced with high levels of uncertainty, the bank said, citing high inflation and the high cost of building materials that may slow growth in the sector and harm construction activity.

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