When will the worst be over for Greece's housing market?

As the coronavirus plunges the Greek economy deep into recession, the real estate market is bracing for some tough times. The recovery of the residential housing market seen in recent years has come abruptly to an end as the sector's resilience is being severely tested. The lockdown, which Greece is gradually emerging from, has cast an enormous amount of uncertainty on the sector and the broader economy. Real estate is a business that is closely linked to a country's macroeconomics and this is not good in Greece's case.

According to the European Commission, the Greek economy is forecast to contract by nearly ten percent this year and become the EU's worst performer. The EU's economy is tipped to shrink by 7.5 percent in 2020. The big question marks hanging over Greece's property market are whether there will be a second or third wave of the pandemic and how the country's tourism sector will perform. These factors will largely shape interest from foreign buyers that had been driving Greek real estate prices higher, experts say.

Bank of Greece deputy governor Theodoros Mitrakos believes that it will take several quarters for the dust to settle on the market. Investors are expected to take a wait-and-see stance, suspending or modifying their investment plans as they wait for a return to normal, he said. "In the coming quarters, foreign investors will first assess the situation in their core market, stabilizing their existing portfolio before proceeding with any new investments. Potential heavy losses in their core markets would cause them to postpone, or perhaps cancel, any investment in Greece," he told Greece Investor Guide. Although economies have frozen around the world, the impact on real estate markets varies. In the UK, residential housing prices are expected to drop by up to 10 percent this year, according to Savills, while in Spain, one of the countries hardest hit by the pandemic, some estimates see prices dropping by as much as 20 percent. In Greece, prices have already headed southwards but there is no data out yet confirming this. Themistoklis Bakas, president of E-Real Estates said that the largest price drops have been in areas which were the big winners up until recently, such as Kypseli and Petralona, in central Athens. Bakas sees the market as flattening out by the end of the year. "Based on today's information, we consider that the price drop is expected to peak after the summer season, gradually ending by the start of 2021, and will generally depend on the broader economic environment, the domestic momentum of the middle class that is almost non-existent, the stance of foreign investors and the number of properties for sale and their asking prices", Bakas told Athens News Agency. So far, there have already been some structural changes in the market. Homeowners have been pulling their assets from short term rental platforms at a dizzying pace, putting them back on the market for long term leases. The spike in online shopping seen amidst the lockdown has boosted the need for logistics, while hotels are way out of favor. Other changes possibly in the pipeline include a boost in demand for holiday homes. With health issues topping the list of traveler concerns, a growing number of tourists are seen as turning their back on busy hotels and preferring their own homes, where they can control issues, such as its ventilation and the number of times it has been cleaned. Stelios Bouras, founder of GreekGuru.net, a site that provides writing and media services for the real estate sector, said that a number of market participants are getting ready for a shift in demand to top-end holiday homes. "GreekGuru.net is getting involved in several projects like this. It is a trend that is emerging globally, not just Greece," said Bouras. "It looks like the first signs of life in the Greek real estate market may come from foreign buyers picking up a place by the beach."