House prices unlikely to slide as construction costs keep rising
Greek real estate prices seem to be reaching a plateau, according to data presented on Monday at a joint conference of the Organization for Economic Cooperation and Development (OECD) and the International Monetary Fund (IMF) on the subject. The rate of price rises in Greek real estate began falling in 2003, after rising steadily for about 10 years. The rate fell to 2.4 percent in 2004, against 14.5 percent in 2001 and 13 percent in 2002. In 2005, there was a departure from the trend, as the government’s intention to impose value-added tax (VAT) on new apartments as of January 1 this year spurred a surge in demand which drove prices up by an average 12 percent. In contrast, the eurozone average has been just over 7 percent in the last three years, (6.9 percent in 2003, 7.2 percent in 2004 and 7.6 percent in 2005). The slowdown in Greece appears to be the result of limited demand and ample supply. «It was fully expected, given last year’s considerable hikes,» said the president of Athens realtor brokers Yiannis Revythis. He takes the view that the trend will remain in 2007, given that prices are already high and there is no more room for increases. Nevertheless, a large number of prospective buyers seem to have adopted a wait-and-see attitude, banking on a fall in prices. But experts believe that this is not very likely. «Undoubtedly, the strongly upward trend in prices has waned and this is partly attributed to rising interest rates and to the fall in demand after the explosion of 2005. The likelihood of a fall in prices is particularly limited given the rise in the costs of construction and the fact that land remains expensive. Besides, the majority of developers has no significant debts to banks that would pressure them to push prices down in order to increase sales,» said Alexandros Koukas of Immoconsult. «The only way to make a decline in prices possible is to bring new areas into town plans and their rational zoning but this will take many years to happen. Otherwise, prices will continue rising in line with the economy’s growth rates,» said Aris Kyratzis, a realty development consultant. In contrast, Dimitris Kapsimalis, chairman of Greece’s Construction Association believes prices will follow the costs of construction. «I consider it certain that part of the rising (construction) costs will be passed on to the buyer. Whoever is ready to buy should do so without delay, as the imposition of VAT will bring new hikes,» he said.