ECONOMY

Property market set to see further decline in prices

Property prices are set to decline further in 2012, with the most conservative estimates putting the drop at between 5 and 10 percent. The impact is expected to be greater regarding older properties, which are in increasing supply.

It is worth noting that, according to a recent Eurobank EFG report, Greek property prices are 14 percent down from their peak in the first quarter of 2008. Prices are now at 2005 levels, the report said.

According to a recent survey conducted by Knight Frank real estate agents, the price drop in the Greek property market over the past three years matches that of Ireland in the past year. Meanwhile, the decline in the prices of newly built properties (up to five years old) since the onset of the crisis is just 10.4 percent, compared to 15.8 percent for older properties.

Scant demand, which is often the result of reluctance rather than financial weakness, inspires little optimism for the future of the local property market, given that bank loans are also becoming less accessible. Rather than approving new housing loans, banks are rather concentrating their efforts on collecting debts from borrowers.

If one thing is certain, however, it is that people who took out housing loans over the past seven years, when property prices reached their highest, are now in a very difficult position. They are seeing their incomes squeezed at a time when taxes and unemployment are on the rise. Combined with the precipitous rise in maintenance costs as a result of the government?s emergency property tax, this situation has forced many owners to sell their properties and not necessarily old ones. People are trying to get the loans off their backs and avoid extra maintenance costs resulting from the new taxes.

The problem, of course, is that it?s not easy to sway buyers these days, even though owners are more open to bargaining.

At the same time property developers are still sitting on another 150,000 unsold houses. Developers are still living off the mega-profits made in the previous decade when property prices went through the roof and are still reluctant to lower their asking prices.

Meanwhile, a recent report by the Bank of Greece sees no overpricing in property values. The report said that the price-rent ratio has gradually decreased in the past three years. But the price drop is likely to continue in the coming months, while an resurgence in the property market will depend on the improvement of expectations in businesses and households, the financing of the market by the banking system, and the broader prospects of the Greek economy, the report said.