ECONOMY

Greek residential property price slide gains pace in second quarter

greek-residential-property-price-slide-gains-pace-in-second-quarter

Greek residential property prices declined at a faster pace in the second quarter than the first, data showed on Tuesday, as Greece's slide back into recession hit household incomes and employment.

Property accounts for a large chunk of household wealth in Greece, which has one of the highest home ownership rates in Europe – 80 percent versus a European Union average of 70 percent, according to the European Mortgage Federation.

Bank of Greece data showed that apartment prices fell by 5.6 percent in the second quarter of 2015 from a year earlier.

The annual pace of decline accelerated from 4.1 percent in the first three months of the year. The pace of price declines had begun to ease after a 10.8 percent drop in 2013 up until the first quarter of 2015.

Residential property prices have dropped by 40.5 percent from a peak hit in 2008, when the country's recession began.

The real estate market has been hit by property taxes which the government imposed to plug budget deficits, a tight credit market and a jobless rate hovering near 27 percent.

Apart from their negative wealth effect, falling property prices also affect the collateral value on banks' outstanding real estate loans.

Greece's economy shrank by 0.2 percent in the first three months of the year compared with the last quarter of 2014, after emerging from a six-year recession last year.

The European Commission projects Greece will fall back into recession in 2015, with gross domestic product contracting by 2 to 4 percent.

[Reuters]