Stable property rates
The convergence of market prices with the so-called «objective values,» i.e. those used for tax purposes to determine the value of a property, will be made gradually, assures the Economy Ministry, clarifying that in 2007 a new rise of the objective values and a greater burden for taxpayers must be expected. The threat of increased taxes in 2007 combined with the higher supply of houses where value-added tax (VAT) is not imposed are the two main arguments of those who predict that this year will be dominated by price consolidation in the current high levels and by an undoubtedly lower demand compared to 2005. Virtually everyone in the property market brands last year’s high demand as artificial, indicating that this market is always upset when objective values are about to be adjusted. At least this year the confusion and nervousness of 2005 are not expected to continue, as consumers are now aware about the changes in taxation, while the current prices do not allow for a new rally. Within 2005 the rise in housing prices at flats with high demand (80 to 100 square meters) is estimated at an average of 15 to 20 percent depending on the area. The high rise of prices has absorbed to a great extent the increase in objective values, at least regarding the gap between them and the market prices. Particularly in the lower-priced areas with bigger scope for a rise, the difference between market prices and objective values remains massive. The biggest difference is found in Perama, west of Piraeus, where the highest objective value is 153.3 percent lower than the higher price of sale, as the former increased by 27.8 percent to 750 euros per square meters while the market price reached 1,900 euros/sq.m. – 36.3 percent higher than 12 months earlier. The picture is similar all across the capital. For instance, in Petroupolis, west of Athens, the difference between the highest objective values and market prices is at 108.3 percent, in Zografou at 93.1 percent, in Haidari at 77.8 percent, in Peristeri at 73.9 percent and in Vrilissia at 76.5 percent. On the contrary, this difference diminishes in more expensive areas: In Psychico it stands at just 12.4 percent, in Ekali at 14.3 percent and in Glyfada it comes to 40.3 percent. Real estate market professionals believe that the decline in demand in the current year will help the consolidation of prices in their levels at the moment as the scope for further significant increases appears very limited. On the other hand, the possibility of «auctions» between consumers for the purchase of newly built houses that are exempt from VAT seems remote due to the product’s high supply. «The stabilization of prices expected this year combined with the new rise in objective values in 2007 that is almost certain will bring objective values very close to market prices, paving the way for the proper application of VAT on newly-built houses,» a high-level estate agency official told Kathimerini. Professional properties Market experts are much more worried about the new objective values formed for professional properties and office spaces. As property consultant Nikos Yiannoulelis points out, «the objective values for offices at Stadiou and Panepistimiou streets [in central Athens] with thousands of old and small offices are far higher than the real prices. There have been cases where objective prices are higher by 228 percent than the market ones.» He argues objective values do not function in favor of society «as in contrast to what happens with the old offices in Athens city center, for the super-luxury offices of multinational companies on Kifissias Avenue the new objective values are particularly low.» The owner of an office of just 110 square meters that is 40 years old or more in the city center has to pay Large Real Estate Tax (FMAP), while the owner of a super-lux office up to 260 sq.m. at Kifissias Avenue does not have to, as the latter is below the tax threshold, says Yiannoulelis, adding that «it was at the most expensive spot of Kifissias Avenue (in Neo Psychico) that we saw the smallest rise in objective prices, just 12 percent.» Property consultants believe that if office objective values remain as they are the market will freeze completely in properties where objective values are above the market prices; in the case of the Stadiou and Panepistimiou street offices, that would amount to madness. It would lead to a considerable reduction in transactions in the areas where objective values and market prices are near or equal. The market will remain alive in areas where objective values are much lower than real prices, as the view that the worst is yet to come will spread. «This is an extreme intervention and distortion in the real estate market with unpredictable consequences in the future, such as creating a bubble in certain properties and a capital loss in others,» Yiannoulelis said.
