Tax, loans pressure to grow on homeowners

The pressure on property owners is set to grow further as those who can pay their taxes will face an even higher tax bill next year while those who are unable to pay off their mortgages are facing a growing risk of having their homes repossessed by banks as of 2014.

Almost 6 million property owners, including those with farms and plots of barren land, will be asked to pay a total of 4.15 billion euros next year, according to the plans of the International Monetary Fund’s technical experts. Of that, the government can realistically expect to collect some 2.9 billion euros, or about 70 percent, which means the majority of homeowners will be forced to pay more tax with the introduction of the Single Property Tax as of January.

The remaining 1.25 billion euros will be branded expired debts, according to the IMF experts, and tax authorities will have to collect them by putting pressure on taxpayers, even if that means resorting to property confiscation.

The original plan had been for the state to ask property owners to pay 3.27 billion euros, with the expectation of collecting 2.7 billion euros of that, but the country’s creditors considered that target too optimistic.

Meanwhile the socially and politically sensitive issue of repossessions has arisen anew, as the creditors have put pressure on the government not to renew the ban on repossessions that has applied in the last few years as far as mortgage loans from banks are concerned. The ban on auctions of main residences worth up to 200,000 euros expires at the end of 2013.

The creditors are insisting on the radical change to legislation and the lifting of barriers, such as the auction ban, so that banks can deal with the huge volume of nonperforming loans. The IMF report issued this week stressed that banks will need to start cleaning up the problematic elements in their portfolios in order for the economy to receive a cash boost.

The most recent Bank of Greece data showed that nonperforming loans amounted to 27.8 percent of all loans at the end of March. Consumer credit has suffered the most, with 42.4 percent of loans being considered as bad, against 22.9 percent in mortgage loans and 27.5 percent in corporate credit. Consequently the sum of loans that are not being serviced comes to 63.5 billion euros, equal to 34 percent of the country’s gross domestic product. This breaks down to 12.5 billion euros in NPLs in consumer credit, 16.8 billion euros in housing loans and 30.3 billion euros in corporate credit.

Bank officials have told Kathimerini they do not expect any dramatic changes in auctions, at least for the first half of next year. After that, however, they do expect a shift, albeit limited, given how sensitive this issue is. What they consider most likely is a gradual reduction in the threshold from 200,000 euros, which could drop by 25,000 or 50,000 at first, with further decreases to come later on. It is possible that other limitations and protection clauses will be introduced for sensitive social groups.

Banks say that the auction process is very costly and has an uncertain outcome given the state of the property market. However, the introduction of a stricter framework and the threat of repossessions might help restore discipline among borrowers and spur them to fulfill their obligations, having used the crisis as an excuse to refrain from paying even when they could do so. Lenders are eager to see an end to the recessionary cycle and for the level of NPLs to stop rising, as that would allow them to release funds currently dedicated to provisions.