Scant demand for residential real estate

The residential real estate market is experiencing a steady decline while supply is expected to skyrocket over the next few months, with over 150,000 newly built homes remaining unsold and thousands more older properties entering the market as homeowners find themselves increasingly under pressure to sell, either because they can no longer afford the mortgage, need to raise cash, or are unable to pay the recently introduced property taxes.

The nosedive in prices, especially in regard to older properties, is expected to be accompanied by a drop in demand, as few Greeks are currently considering an investment in real estate given the economic crisis and banks? reluctance to issue to new home loans. ?The market is dead,? said one expert. ?You can?t even estimate values because there are no property transfers by which to do so.?

According to recent research conducted by real estate agents RE/MAX for the first half of the year, prices dropped by as much as 20 percent in the capital, and even in some of its most expensive zones.

Overall, the study found, prices declined by 15 percent on average in Athens and Thessaloniki in comparison to the end of 2010, with the main reasons being little if any availability of loans, poor market sentiment and buyer insecurity over the country?s economic prospects.

?We should also add to this the new taxes imposed, especially on property, as well as the prevailing worry that more taxes may be imposed in the future if the fiscal targets are not met,? the report concluded.

Based on sales made through RE/MAX?s network in Greece, buyers? interest in older properties grew during the first half of this year, with over 50 percent of sales involving properties over 25 years of age, compared to 20 percent in sales of new properties. In Attica specifically, properties over 25 years of age made up 60 percent of total sales and new ones just 13 percent, as buyers were put off by the high prices demanded for the latter. Also, 80 percent of the company?s overall sales concerned properties of 110 square meters or smaller. In Attica, the equivalent figure was 72 percent.

Another report, by the National Bank of Greece, has suggested that property prices will decline by a further 10 percent by 2013, which will mean an average drop of 20-23 percent since 2008, when prices were at their highest. One of the factors the bank thinks will precipitate this decline is an increase in the number of seizures by credit institutions due to nonpayment of debts and its belief that a ban on auctioning seized property will be lifted.

However, the bank report concludes that it does not believe that prices have nosedived significantly as Greece had not experienced the real estate bubble of other eurozone countries in the years preceding the crisis. Other factors that have contributed to a damming up of prices are that there is little investor interest in residential real estate in Greece, reduced liquidity, the high cost of transferring titles of ownership and the fact that Greeks have always believed real estate to be a safety net in times of crisis.

Nevertheless, the report warns that citizens? shrinking incomes will put downward pressure on residential property prices through 2012, a projection that is supported by the 31.2 percent decline in new building licenses over the first five months of this year.