Growing demand for older homes as buyers opt for size
A key question which a large number of property buyers these days have to consider is whether to purchase an older residence or a newly built one. Clearly, the answer to the question is provided by their financial position. With higher interest rates, households are now paying a little more for loan repayments, and should the Bank of Greece decide to further tighten its fiscal policy, the cost of mortgages will certainly increase. Although property prices have stabilized, albeit at high levels, housing needs do not appear to be particularly elastic. And this basically explains why a large number of buyers end up opting for an older, but larger home. By way of indication, in the Athens suburb of Galatsi, the sum of -200,000 suffices for either a newly built property with a floor space of 75 sq.m. to 95 sq.m., or alternatively an older apartment (around 20 years), considerably more spacious, of between 100 sq.m. and 125 sq.m. Such differences become even more striking when the area/location factor is taken into consideration. According to real estate agents, property buyers now have a much clearer picture about what exactly they want, particularly compared to 2005, when the prevailing attitude was, «I want a place and I want it now.» Nowadays, the vast majority of buyers start off with market research for a newly built home (usually an apartment), but in the course of things realize that they cannot afford what they want in terms of location and size. Agents say that many buyers are not prepared to negotiate their area preference and often make do with a cheaper solution in the same area, i.e. not a newly built but an older, previously lived-in apartment. Bank officials cite the borrowing capacity of prospective buyers as the key factor in their choice of whether to buy old or new. At present, with interest rates moving upward, a crucial deciding factor is the amount of the monthly mortgage repayment and the burden it places on a family’s monthly budget. However it is true that – depending on the area in question – the difference in the final cost between a new and an old apartment of the same size may be as high as 30 percent. A recent survey by a real estate chain found that the new-old demand ratio has dropped to 6-to-4. A year ago, that ratio stood at 8-to-10. This shows that demand for older places has been steadily growing in the past year or so, mainly as a result of the relatively high prices of newly built apartments. This turn toward older homes has also been facilitated by the more favorable taxation on such residences, as compared with newly built properties that are subject to VAT (at 19 percent). Older properties The greatest demand for older properties is observed in central Athens and the northern suburbs. According to data from a survey by consultants N. Giannoulelis & Associates, commissioned by Kathimerini, the purchase of an older apartment effectively increases the floor area of the property by at least 30 sq.m., and in many cases by up to 40 sq.m. Nevertheless, a more expensive newly built flat comes with an array of advantages, including better construction quality, modern design, integrated spaces, and, of particular importance for car-jammed Athens, a parking space. To a certain extent, such advantages justify the higher price paid for new apartments. Meanwhile, the growing demand for older apartments has had its impact on prices, which are currently showing a slight upward trend. According to the latest (June 2007) study by the statistics faculty of the Athens University of Economics, prices of old properties are edging up in all areas of Attica. The largest price increase of 7.3 percent, year-on-year, was recorded in the eastern Attica district of Mesogeia, especially in coastal locations, where the cost per square meter now stands at -2,257.
