Greek property prices are headed for a further fall of around 17 percent over the next two years, Fitch credit rating agency forecast in a report last week. This would bring the cumulative decline since 2009 to 37 percent, given that values have dropped by some 20 percent on average.
Fitch bases its prediction on the assumption that the intensity of both the recession and the austerity program will abate in 2014. If this is not realized, then the fall in prices will be even steeper.
The agency predicts that the recession will show the first signs of abating in 2013, after a projected 5 percent fall in GDP this year. The same goes for unemployment, which is seen climbing further before declining to 18 percent in 2014. The jobless rate averaged 17.3 percent in 2011 and rose to 23.9 percent in May 2012.
Fitch says that the decline in property prices will accelerate considerably if Greece exits the eurozone, leading effectively to a free fall whose extent in terms of magnitude and duration cannot be predicted. Moreover, it considers that the suspension of auctions that is currently in force for mortgage holders who cannot repay and whose residence is valued at up to 300,000 euros will be extended by at least a year, that is until the end of December 2013.
Since June 2008, when house prices reached their highest point, prices have declined by an average of 20 percent in Athens, 25.7 percent in Thessaloniki and 17.8 percent in the rest of the country.
In the first quarter of this year, prices in Athens were 10 percent lower than the respective period of 2011 and 2.4 percent compared to the fourth quarter of 2011. In Thessaloniki, the decline was 10.1 percent on an annual basis and 2.8 percent on a quarterly basis. As regards other cities, the fall was 8.8 percent and 4 percent on annual and quarterly bases respectively, which points to an acceleration.
According to a recent report by Eurobank, prices fell 19.8 percent between the third quarter of 2008 and the first quarter of 2012, returning to the levels of early 2005. According to the report, the decline has been steeper for old apartments (more than five years old), amounting to 19.7 percent against 18.3 percent for new constructions.
Transactions have also plunged, from 39,700 in the first quarter of 2009 to 5,900 three years later. At the same time, the large stock of unsold homes (old and new) seems to have stabilized after the decline in building activity in 2010 and 2011.
All indications are that the declining trend in prices will continue as neither developers nor buyers are showing any optimism. The majority of the former say they will further reduce the asking prices in the next quarter and buyers appear unwilling to invest.