Building is shrinking

Construction activity continued its decline for the seventh month in a row in August, reflecting the general picture of the domestic housing market. It posted a 13.5 percent decline from August 2006. The high prices of newly built houses have brought about a considerable decline in demand for them, so the annual decline of 4.2 percent in construction permits issued over the first eight months of 2007 was no surprise. Property market professionals say the decline will continue at an even higher pace, although they stress that the sector is not at all frozen and activity in this period appears satisfactory. The housing market is showing signs of weariness, dominated by the oversupply of ready products. Foreign firms note in their reports that during 2007 there are expected to be just 40,000 new houses constructed, down from 125,000 in 2006, a decline of 68 percent. That deficit has not harmed the activity of construction firms at present, which are proceeding at a slower pace with the completion of buildings so as to manage the slower absorption of their product. However, over the next six to 12 months this slowdown is likely to affect the growth rate of the economy, given that the construction sector feeds more than 40 professions. According to the Greek Constructors’ Association President Dimitris Kapsimalis: «There are many permits being issued and, given the picture of the market, no new constructions are required. This shrinking will affect the economy. As for the tax measures being studied, they can help the market if they are voted in immediately. The problem lies in people’s income, as builders cannot reduce their rates any further given the rising cost of materials and the expensive cost of land.»