House price decline is biggest in the eurozone

By Nikos Roussanoglou

House prices in Greece posted the steepest decline in the eurozone during the first quarter of the year, as a comparison of data compiled by the Bank of Greece with figures published on Thursday by Eurostat indicates.

According to the country’s central bank, the drop in local house prices amounted to 7.5 percent on a yearly basis in the January-March period, while the second-largest decline in the rest of the eurozone was seen in Cyprus, at 5.7 percent. Elsewhere in the EU only Croatia witnessed a bigger slide, amounting to 9.7 percent.

A recent survey by the Association of Estate Agents and Chartered Surveyors of Greece found that this year the average price of a used apartment was 110,000 euros (based on the transactions monitored by the survey), while in 2009 the same price had stood at 181,000 euros. This represents a total decline of 38 percent.

Similarly, the average price for new properties bought this year came to 130,000 euros, against 200,000 euros five years ago. Consequently the total drop in the prices of new residences stands at 34 percent.

BoG reports paint a similar picture, showing the total drop of property prices across Greece from the start of the financial crisis to the first quarter of this year to have reached 34 percent. In 2013 the annual decline from 2012 came to 10.3 percent, while in 2012 prices fell by 11.7 percent from 2011.

According to central bank analysis, the declining trend in house prices could continue in the coming quarters, too, but at a slower pace. The BoG estimates that the recovery of the residential market will come with some delay, as it depends mainly on the steady growth of disposable household incomes, increasing employment and the opening up of the credit system.

The trend in the local housing market is in line with that in rest of Europe, as the price decline has recently been slowing. In the last quarter of 2013 the annual decline in house prices in Greece amounted to 8.5 percent, against a 7.5 percent drop in the next quarter, illustrating how the slide is being contained.

That was also the pattern seen in almost all European Union countries where prices have in the last few months headed south. Across the eurozone prices fell by 0.3 percent in the first three months of the year on an annual basis, compared with a 1.5 percent shrinkage rate in the last quarter of 2013.