High property prices helped households offset ASE losses

The property market acted as a kind of parachute for households otherwise hurt by the precipitous decline of the Athens Stock Exchange, the Bank of Greece’s annual report reveals. The report shows that property prices flared up, especially in the region of Athens. However, it also detects a declining trend, which began last May. During the period from 1995 to 2002, housing prices more than doubled. This, combined with a big increase in the prices of bonds in 2001 and 2002, more than compensated for the losses by households’ on the Athens Stock Exchange, the Bank of Greece says. The Athens Stock Exchange reached its peak closing of 6,355.04 points on September 17, 1999. Although it has recently risen somewhat, it was still 74.12 percent off its peak at yesterday’s closing. According to the Bank of Greece, housing prices in Greece’s main urban centers rose an average of 11 percent per year in the period 1995-2001. This rise was even higher in Athens – with an average of 13.3 percent. By contrast, consumer prices rose an average 5.2 percent in the same period. The latest available data shows that, in cities other than Athens, the rise in house prices accelerated in 2002, to 9.8 percent, from an average of 8.7 percent in previous years. In Athens, during the first half of 2002, housing prices were rising at an extremely fast 17.4 percent annual pace. However, according to the Bank of Greece, there was a clear deceleration beginning in May 2002. This first affected the city’s most expensive areas, such as Psychico. In fact, the housing price index in Athens declined from 208.7 in April to 203.4 in August. In any case, the Greek housing market appears lately to be following European trends. This is unusual, because, until now, the Greek market, as a whole, has never experienced a full cycle; prices have been rising continuously, to the dismay of would-be buyers, who have now been heartened by the recent decline. According to data released by a European Central Bank (ECB) study, «Structural Factors in the EU Housing Markets,» the average annual price increase of houses during the last decade was in double digits in most European Union countries, with few exceptions, notably Germany. Among the countries where prices rose steepest were Spain, Ireland, Holland and the UK. Lately, in each of these countries, a trend toward decline has appeared, although the decline is mostly slow. The ECB study recognizes that the high cost of acquiring a house and, conversely, the gains from owning and renting one, is one of the factors that hinders work force mobility within the EU.