Athenians turn to renting over buying
The real estate market has recently seen a swing from buying to renting houses, according to estate agencies, as the cost of acquiring a new flat is now more than the average family can afford. Market observers estimate that about 20-25 percent of candidate buyers are resorting to renting because the cost of buying a home is too steep. Until recently, the monthly cost of a mortgage loan was not far above the average rent, but this has now changed significantly. The reason for that is the successive interest rate hikes by the European Central Bank (ECB), with the most recent one taking place just a few days ago. The key rate has now risen to 3.75 percent from 3.5 percent before the March rise, making borrowing even more expensive. The seven consecutive hikes by the ECB in the last 17 months have led to rises between 12 and 27 percent in the monthly installment of a mortgage loan, or from -91 to -230, depending on length of the loan. It appears that the greater the length of the loan, the higher the installment. For instance, if the loan is -150,000 euros then the additional monthly burden starts from -136.09 (for a 15-year loan) and goes up to -171.60 for a 40-year loan, compared to rates 18 months ago. Consequently, more and more interested buyers are now turning to renting, which had seen demand go down considerably in recent years. Potential buyers once saw that average monthly rent and mortgage rates were the same; now the average monthly rent is about -600 but the monthly installment for a housing loan is much greater. In most areas of central Athens the monthly rent for an apartment between 80 and 100 sq.m. can range from -450 to -650, with rates rising for many suburbs in the north, south and east to -750–800. There are many examples of people who chose to rent a house in the same area in which they were originally planning to buy a home. Many lodgers from this latest wave are making this move as they expect interest rates to decline within two or three years because the current cycle of rise is forecast to end in the coming fall. Others opt for renting because they fear the bank transaction, since any delays in paying the loan will mean a delay in paying the monthly rent. There are even cases of those who believe that the purchase of a house as an investment right now is not the best possible option. They are mainly entrepreneurs who believe that placing their capital in their company instead of buying a house will clearly give them more added value. The fact that in most areas in the capital the cost of buying a newly built house of more than 100 square meters comes to about -300,000 means that a long-term mortgage loan is required for the majority of those interested in it. As a result, the number of households which are willing to undertake such an obligation is beginning to shrink, with the family budget burdened by other debts, too (credit cards, consumer loans etc). Excessive borrowing combined with the very low cash flow of the majority of households have also contributed to this swing to renting. It is no coincidence that borrowers try to secure the best possible terms for loan repayment when they seek the refunding of their existing loans, as most market professionals acknowledge. This explains the fact that the growth rate in the mortgage loan market remains high, despite the clear decline of the market’s momentum from 2006 onward. The refunding of an existing loan by a bank is recorded by the latter as a new loan even if that is not actually the case. Another factor contributing in the swing toward renting is that the rentals market has reverted to normality, particularly as far as bigger apartments are concerned. They had faced the biggest problems in the previous years due to their high costs. Now many owners appear much more reasonable in their requirements and willing to negotiate, which they would not do in the past. This, along with the sufficiency in the supply of apartments for rent in the majority of areas, contributes toward helping those interested to find what they want.
