The real estate market retains its momentum even though residential property prices have increased in real terms, after inflation, by 63 percent over the last seven years, according to a report by the National Bank of Greece. The report for June-July 2003, which was made public yesterday, notes that house values now exceed 650 billion euros and account for 605 percent of disposable income, compared with the 390 percent average in the eurozone. This increase in value is estimated to have contributed 0.6 percent to the growth rate in 2001-2002. The bank said that a similar phenomenon occurred in the real estate markets of other industrial countries, with increases of 3-8 percent per year in real terms over the same period. In Greece, despite a slowdown the second half of 2002, the upward trends remain strong, the report stressed. This estimate is based on the relatively small degree of borrowing for housing loans, the Greek tendency to own property (with 80 percent owning their own homes and 30 percent having holiday homes), and the extra demand created by immigrants who have moved into low-income districts and displaced locals moving to more expensive areas. The bank noted that in the past two years real estate values have risen by over 10 percent per year in real terms. «The large increase in house prices that has occurred in Greece during the past seven years (for which data is available) appears to be sustainable,» the report said. «House price increases reflect several factors that distinguish Greece from most other industrial countries (though Ireland, Portugal, and Spain share some of the same characteristics). First, entry into EMU has resulted in a sustainable and very large reduction in interest rates. Second, the inflation differential with most euro area countries pushes real interest rates to even lower levels, and this differential will be maintained during the period in which Greece catches up to the productivity levels of the euro area. Third, Greek GDP will grow at a much faster pace than that of the euro area – nearly double – as the per capita income converges with that of the euro area. Finally, demand for housing will also reflect changes in the behavior of Greek households, such as the move to larger size apartments.» The report noted several risks, though they «appear to be relatively balanced.» An increase in supply of houses may exert downward pressure on prices, it said.