By Nikos Roussanoglou

House prices in Greece are set to drop to levels unseen since the turn of the millennium within the next couple of years, as properties are expected to lose up to 40 percent of their market value compared with the third quarter of 2008, their peak period, according to a recent analysis by Fitch.

The report by the international financial services firm showed that prices will drop another 17 percent by the end of 2014 on top of the 20 percent decline seen in the last four years.

The latest Bank of Greece data available, for the second quarter of the year, indicate that the prices of newly built homes have posted a 10.8 percent decrease from the same period in 2011, while older dwellings saw their prices shrink 9.7 percent year-on-year.

This means that builders and construction firms, the main sellers of newly built apartments, have begun to realize they have to lower their asking prices in order to find buyers. Estate agents say that depending on the cost of the house, the area and the financial state of the seller, reductions could reach up to 50 percent of the original price, which translates into an amount of 50,000 to 90,000 euros on average. This reflects the desperate situation many builders now find themselves in.

The head of a major real estate agency told Kathimerini that “most builders do their best to hold on to potential buyers and are therefore willing to enter price negotiations.” In the past that would have been inconceivable, as sellers knew that if a candidate buyer would not agree to their terms, dozens of others would take his place, so they got the money they were asking for. That was the reason why up until the first half of 2011, well after the onset of the crisis, prices had only dropped some 4-5 percent.

Property market professionals attribute this belated change of stance by builders to their efforts to avoid having to pay hefty taxes on the real estate they hold. In the next few weeks they are set to receive property tax (FAP)notices after a two-year delay; this recently drew a reaction from the Federation of Building Contractors and Developers (OMKOEE), which asked that constructors be exempt from the FAP payment.

Even at these lower prices, though, demand remains anemic. According to the Bank of Greece, in the first half of the year home transactions came to no more than 11,800, registering a decline of more than 50 percent compared to the same period last year, when 25,000 transactions were recorded.

Compared with the years before the crisis the decline in transactions has been dramatic, coming to about 80 percent. As a result, an estimated 150,000 homes across the country remain in search of a buyer.