House prices continue to slide

By Nikos Roussanoglou

The local housing market experienced the second-biggest annual price drop in the eurozone and the third greatest in the European Union during the last quarter of 2013, according to data released on Thursday by Eurostat.

Using figures compiled by the Bank of Greece for comparison with the rest of the EU, the European Commission’s statistics agency showed that the decrease in the prices of residential property in Greece in the October-December 2013 period reached 8.5 percent on an annual basis, behind Cyprus’s 9.4 percent and Croatia’s 14.4 percent slide.

Most analysts expect the price decline to continue in the coming years, albeit at a slower pace. A recent Alpha Bank analysis stated that “the slowdown in the price drop of houses and commercial properties is expected to strengthen further over the course of 2014, when apartment sales by necessity – to cover liquidity needs – will be contained with the contribution of the economic recovery prospects and the smaller tax burden on property owners.”

According to a recent BlackRock report, prices are expected to go down by 6.2 percent on average this year, while the decline will ease further to 2 percent in 2015 ahead of an expected stabilization in 2016. Of course if the Greek economy recovers at a faster rate, then the improvement will also be speedier in the housing market too. The total decline in house prices at the end of 2013 compared with the peak observed during the second quarter of 2008 amounted to 33.8 percent.

The bubble resulting from the overpricing of houses in the preceding period, from 2000 to 2008, had been so big as to generate a 91 percent average rise in those eight years, when the respective growth in gross domestic product was much smaller, according to the Alpha Bank analysis.