Property still promising

Homeowners look set for another good year in 2005 with property prices expected to rise by some 5 percent this year, according to the country’s largest bank, while upcoming changes to taxes applicable to real estate are seen as being only a minor hiccup for the market. National Bank of Greece said in a report yesterday that the medium-term outlook for the property market remains favorable despite strong price gains in recent years. «House prices, in real terms, are expected to grow by 5 to 6 percent this year and remain broadly flat in 2006,» the report pointed out. Following the downturn in the stock markets in recent years, a growing number of investors have been turning to property as a means of securing safer returns on their capital. Low interest rates, the country’s solid economic growth and increased competition from banks have been a few of the factors behind strong demand in the property market. Prices between 2001 to 2003 rose by 7.6 percent per year on average. The team of economists at the National Bank were reassuring about what many consider to be excessively inflated property prices. «The Greek real estate market overall… does not appear to be overvalued and thus is in better shape to face interest rate increases without detrimental repercussions to its real economy,» the report stated. One of the factors that had made investors in the market jittery recently are the upcoming changes to taxes applicable in the property market. The Finance Ministry will impose a 19 percent value-added tax on new buildings as of January 1. There will also be a gradual reduction in transfer taxes – from between 9 and 11 percent to 5 to 7 percent. Additionally, there will be a 1 percent transaction duty imposed on property value. The government argues that the changes will target tax dodgers and speculators. National Bank said the tax changes have resulted in buyers bringing purchases forward to 2005 but added that the effects on the market will be temporary.