The government is facing a daunting task in adjusting the so-called objective values (the property rates used for tax purposes) to market levels by the end of the year, as its bailout agreement dictates.
The huge slump in transactions and the forced sales of properties due to their owners’ debts do not lead to any safe conclusions for the values per area. One in four sales are conducted with prices that lag the objective value by 60-70 percent, and the prices of 2008 by 70-80 percent.
The Finance Ministry must overcome all the obstacles to bring to Parliament all the necessary adjustments and regulations. Moreover, once the objective values are brought in line with market rates, the government will have to maintain the same amount of revenues from the Single Property Tax (ENFIA) either by raising the tax’s rates or by introducing a new tax in the form of the old Large Property Tax.
Furthermore, once the objective values are reduced by 40-50 percent to match the going prices, banks’ may see problems with their capital adequacy, as lenders will incur losses by having to revise the collateral they get.
Mortgage loans in Greece amount to 59.44 billion euros, of which 42 percent, or 25.4 billion are nonperforming.