Oversupply slashes rents
Smaller apartments, once the real estate market’s «blue chips,» are now witnessing a drop in rents, as demand drops and supply rises. For a number of years, one- and two-bedroom flats used to be an excellent investment, and rents used to be disproportionately higher than the size of the flat. But this is no longer the case. The supply and demand rule has been rather out of action in recent years, with regard particularly to property purchases, with most of the benefits on the side of the renters. A surge in smaller property purchase prices and higher interest rates have had a negative impact on the spread between the amount of rent and the amount of a monthly mortgage payment. Naturally, this alone has made the purchase of small flats unattractive. Pressures on small residency rents are stronger in inner Athens neighborhoods, such as Kyspeli, Koliatstou Square, Exarchia, Ambelokipi, Gyzi, Patissia and Perissos. The rule excludes locations offering a high rate of business premises, such as top-notch Kolonaki and the few blocks around the central Hilton Hotel. According to real estate experts, the decline in rents, estimated to be around 10 percent, was the result of a steep increase in supply at a time when demand was on the down side. Certain changes by the Education Ministry led to some 19,000 positions in higher education remaining vacant, meaning much fewer students looking for a place to live while they study. Many landlords as a result reduced the rent that they asked for smaller flats. «Following the collapse of the stock exchange [Sept 1999], an increasing number of investors adopted the rationale that real estate is a better investment. Large funds were poured into property market investments, with smaller flats being the sector’s blue chips, owing to lower purchase prices at a time when bank borrowing was becoming all the more easy,» explained an official from a major Athens-based real estate firm. In addition, in recent years, many households could find it more economical to buy a small flat instead of renting one for the needs of their studying children. Such places are now up for rent, adding to oversupply at a period of lower demand.
