Slowing demand in the residential property market has resulted in an excess of 200,000 newly built homes that will take the market up to three years to absorb, according to industry sources. The recently established Federation of Construction Companies, which represents some 14,000 builders, estimates there is an oversupply of between 150,000 and 200,000 homes that will take between two to three years to be sold, based on current demand levels. From the start of 2007, sales of newly built homes have fallen by 60 percent, according to the group. Rising interest rates and a slowdown in growth of home loans has hit the property market, which had been experiencing solid expansion rates in recent years. This has led to a shift in preferences shown by prospective buyers to smaller, less expensive used homes. «Given the climate that has been shaped generally in the economy, people are behaving more conservatively,» said Yiannis Perrotis, managing director of Lambert Smith Hampton Hellas. «Demand in the residential housing market is expected to remain flat with only investment opportunities generating interest,» he added. Builders say the changing market conditions are putting the squeeze on them as materials and labor costs have risen considerably. In June, prices of building materials jumped by 8.3 percent on an annual basis, while labor costs are estimated to have risen by more than 15 percent. The real estate market is an important area of investment for Greek households. According to industry figures, the value of real estate investment represents 78 percent of total household portfolios, with 15 and 6 percent being placed in bank deposits and shares respectively. Greece’s real estate market accounts for about 23 to 25 percent of the country’s annual gross domestic product (GDP). Meanwhile, a study by the Athens University of Economics and Business showed that more than half of the property markets experts surveyed (57 percent) do not expect any sudden correction in property prices. The study also showed that half of the experts questioned believe that current residential market conditions will persist for the next six months.