Property prices start to decline, businesses seek cheaper offices

All categories of property prices in the Attica region, except those of industrial premises, are showing signs of recession or a leveling off, after rallying in recent years, according to recently presented data by Propindex, supplied on a monthly basis by Alpha Real Estate, Eurobank Properties, Property Ltd and the Hellenic Evaluators Institute. The data concerns properties listed for sale up to August 2002. The turning point for house prices appears to have been May 2002 and, according to provisional data from January 2003, the general downturn is continuing. Giorgos Halikias, of the Athens University of Economics and Business, who is in charge of the Propindex compilation, said at the presentation that the downward trend will continue in 2003. New house prices rose by up to 140 percent in certain cases between early 1998 and May 2002, a development rather out of step with the purchasing power of most households. Halikias said the capital gains accumulated could not be justified by any inflationary pressures, which were not particularly marked during this period. The strongest downward pressures on prices now are noted in upmarket or mid-range homes, that is, in the northern and southern Athens suburbs. By contrast, in the «cheap» areas and in some parts of the center of Athens, due to considerable demand, prices tend to remain steady or even to have edged still upward. According to Propindex, the factors causing prices to continue to fall are the negative economic climate, the recent rise in mortgage rates (led by Alpha Bank), and the taxation policy of the government, which recently reduced the tax breaks for mortgage interest, further adversely affecting already negative market sentiment. The trend is reflected in rents, which are also showing signs of fatigue, with returns only 2-3 percent above inflation. Office space In the domain of office space or industrial premises, the situation is much clearer. The fall in office rents, which began around mid-2001, is estimated at 30 percent. Propindex attributes the fall to the downturn in economic activity and the crash of the stock market. The situation is not considered likely to be reversed in 2003, as the market expects an influx of a supply of new space. This is likely to be absorbed only if prices fall considerably or, eager for cost cuts, corporate groups look for office relocation in cheaper buildings. The situation as regards warehouses bucks the trend; demand remains strong, as firms are restructuring logistics in an attempt to exploit economies of scale. Supply is short, keeping prices high. Propindex is compiled with data concerning 12,000 and 15,000 properties, depending on supply.