The property market has a significant effect on every country’s macroeconomic and financial stability. For most households, a house is their most valuable piece of property and housing loans account for most of their debt burden. Two-thirds of bank loans to households are in the form of housing loans. Lately, there has been a lot of talk about Greece’s housing market being a bubble about to burst, with a coming precipitous decline in housing prices. This has caused great concern to hundreds of thousands of homeowners. Do these rumors have any basis? Are the concerns well founded? A Bank of Greece expert says an emphatic «no.» Theodoros Mitrakos, a member of the central bank’s research department, says that talk of a housing bubble is «baseless scaremongering.» «Just the fact that housing loans are increasing at an annual rate of 30 percent is indicative of a healthy property market. Of course, credit was rising at 40 percent in 2001 and 2002 but, given what has been written (about a likely collapse of the market) the decline in the growth rate is very small,» he says. A boom in property prices in 1999-2001, especially in the Athens area, has been followed by a correction. This, however, is not a worrying sign for Mitrakos, who considers the correction as a normal reaction to the «excessive» rise before it. Mitrakos attributes the acceleration in housing credit expansion (31.2 percent in 2000 and 38.9 percent in 2001) to several factors: the drop in real interest rates; competition among banks; the drop in the stock market, which turned interest to the housing market as a means of investment with lower risk; and a series of tax breaks on housing which «raised expectations for high capital gains.» According to the latest Bank of Greece data, in the Attica region, prices stabilized in August and September. In other regions, which did not experience a boom like Attica’s, housing prices increased 8 percent. Despite the correction in housing prices in Athens, Mitrakos says, all evidence points to a steady rise in households’ disposable income. For those who rent houses, the return on rent is 4.5 percent, higher than the inflation rate. A danger could arise if people failed to repay their loans. Mitrakos doubts that, pointing out that loans account for 25 percent of households’ disposable income, versus 80 percent in most European Union countries. Banks retain provisions for defaulting on loans but there is very little risk in it. Pessimists also point to a possible excess supply of housing after 2004, when construction firms will turn from infrastructure projects to the housing and commercial building sectors. Mitrakos says that this «excess supply» will mostly appear at the upper end, in luxury housing.