House prices on the rise

An additional 10 percent rise in house prices is possible due to the imposition of value-added tax (VAT) on new buildings, combined with the new adjustment of prices officially determined for tax purposes, according to a survey by the Athens University of Economics and Business. The survey, which analyzes expectations for the real estate market for the second half of the year, has found that 61 percent of respondents expect the imposition of VAT to raise the prices of houses between 5 and 15 percent, averaging in at 10 percent. Commercial properties are also set for a rise of between 3 and 10 percent, while plots of land will not see a rise above 5 percent. Generally, most real estate experts throughout Greece do not seem particularly optimistic about the July-December 2006 period. The General Real Estate Index, which measures the experts’ confidence in the market’s prospects, rose to 47.1 points, going up by 0.11 points compared with the previous survey for the first half of the year, yet it remains firmly below 50 units, which signifies deterioration. The index of confidence in the housing sector declined by two points to 47 points, while that of the commercial property sector moved up to 47.2 points. The majority of respondents (59.68 percent) agree that a significant surplus of new apartments is being created in the housing market but at the same time this is not expected to affect prices, which are expected to remain stable (by 54.84 percent). This contradiction proves that the law of supply and demand prevails in the Greek housing market but is revoked when it favors the rise of prices. A similar picture of fewer sales, steady prices and a rise in demand also can be seen in the commercial property sector, according to the same market experts. As for the usual question of a possible bubble, most experts are not worried. They believe that the trends in the housing market are normal and can be explained by the general financial situation.