Property prices go up

House prices increased significantly in early 2006, both in Athens and in other Greek regions, according to data provided by market experts and the central banks. The Bank of Greece announced yesterday that house prices outside Athens increased 13.4 percent in the first quarter of 2006, compared to the same period last year. Big real estate agencies estimate that prices in Athens have increased at about the same pace. Over the past five years, house prices have increased 30.5 percent in Athens and 50 percent in other Greek regions. But Athens prices witnessed a boom just before this period, especially between 1999 and 2002. Overall, house prices in Athens have risen 164 percent in the past decade. Real estate professionals estimate that contracts to acquire new houses have dropped 50 percent so far this year. A comparable decline has hit transfers of older properties. Experts attribute the decline to changes in taxation, such as the raising of the so-called «objective value» used to assess property taxes and the introduction of value-added tax (VAT) on new construction from last January 1. Changes in taxation spurred demand toward the end of the previous year, leading to this year’s decline. However, the decline in demand has not been accompanied by a parallel drop in the prices of new buildings. New changes in property taxation being considered by the government may impact on demand heavily, especially if a planned further hefty increases in objective values take effect from January 1, 2007. In that case, many may rush to buy a property ahead of the new value hike. The great increase in the sale or transfer of properties seen last year benefitted the state significantly: it earned almost 1 billion euros in taxes, compared to 646.29 million in 2004. Further Bank of Greece data show that the outstanding balance of housing loans stood at 48.1 billion euros at the end of July 2006, up from 37.2 billion in July 2005. Most of the increase was due to the refinancing of mortgages or loans taken out to refurbish property.