By Nikos Roussanoglou

The housing market has completely changed compared to what it looked like three years ago as a result of the intensity of the economic crisis, the widespread decline in incomes and the soaring of property taxes to above the European Union average.

Third-quarter data from the Bank of Greece and a detailed report by Alpha Bank illustrate that the crisis in the housing market has been deepening rapidly in recent months and all signs point to a continuation of this trend in the foreseeable future as most market professionals and analysts believe that the new balance point in terms of prices – where demand meets supply – has not yet been reached.

Alpha’s report suggests that the number of new homes to be completed this year will not exceed 20,000, as only 12,622 had been constructed up until July. Construction activity in the sector has shrunk to less than 20 percent of what it was in 2007, when 103,865 new housing units were built. The signs of the crisis have been evident in the housing market since 2010, when the number of units built dropped to half of that in 2007, at 52,325.

The latest BoG data show an acceleration in the price decline, with the biggest drop concerning newly built homes and to a lesser extent used ones. In the third quarter of 2012 prices dropped by 11.7 percent compared to the same period last year, while the annual decline in the first quarter came to 9.3 percent and 10.2 percent in the second. BoG notes that the drop in prices last year came to 5.4 percent, on the back of a 4.7 percent slide in 2010.

Another trend that has emerged in the market since the start of the year concerns the sharper drop in the prices of newly built apartments compared with older ones, while it had been the other way around in 2011. In the July-September 2012 period, the prices of newly built homes fell 13.5 percent while older ones saw a drop of 10.5 percent on average, which illustrates how construction firms’ resistance to the drop in demand and the high stock of unsold houses is weakening.

The BoG data also point to a greater decline in Athens and Thessaloniki than in the rest of the country. In the capital the decline in prices in Q3 amounted to 12.3 percent year-on-year and in Thessaloniki to 10.6 percent. In the other big Greek cities, however, the drop came to no more than 10.1 percent. According to the revised BoG data, the price slide in Athens over the course of 2011 came to 6.4 percent and in Thessaloniki to 6.9 percent on annual basis.

The number of transactions and property valuations by banks for the issue of loans have also shrunk dramatically this year, pointing to a major decline in home sales. According to BoG, they declined considerably in the third quarter this year to 4,900, from 6,400 in the second and 6,300 in the first. The last quarter’s drop amounted to 48.7 percent compared to the same period last year. In the whole of 2011 their number had come to 42,500, posting then a 42.9 percent drop from the 74,500 in 2010. When one considers the fact that no more than 17,600 transactions and valuations have taken place in the first nine months of this year, it’s easy to understand the extent to which the housing market has contracted within 2012.

Attention is now turning to the taxation changes slated to take place from 2013, as they will set the tune for the market in the years to come. Should the current tax rates continue to apply, a market rebound is not expected for a long time as many taxpayers have been discouraged by rising taxes.