Bubble deflating as real estate prices drop in some areas
The real estate «bubble» of recent years, when housing prices of the more up-market residences were running up to 5,800 euros (2 million drachmas) per square meter, appears to be deflating along with the stock market recession, as a result of the long-term negative economic climate as well as the bourse’s extended slump. Realtors are claiming that the unrealistic prices being asked for, partly as a result of increased demand, were also due to the stock market boom when it was a seller’s market. In more expensive areas of Attica, such as Kifissia, Kolonaki, Ekali and Palaio Psychico, where skyrocketing property prices were attributed solely to well-heeled Athenians’ killings on the stock market, the fall has been spectacular. According to market experts, prices in these areas have dropped by as much as 20 percent recently, with a further drop expected. It appears that the market recession has combined with a small rise in interest rates to negatively affect the property market, which has always mirrored the general economic situation. On the other hand, in up-and-coming areas where infrastructure works might not even be completed, prices are expected to rise considerably. These include Aghia Paraskevi, Ambelokipi, Neo Iraklion and Peristeri, where homes are currently being sold for 20 percent more than in February 2001. The market for business properties has also been hit. On Kifissias Avenue, prime office space has dropped from 4,400 to 3,520 euros (1.5 to 1.2 million drachmas) per square meter. Rents have gone down by about 12 euros (4,000 drachmas) per square meter to around 26 euros (9,000 drachmas) per square meter. A year ago office space in Kolonaki cost about 7,300 euros (2.5 million drachmas) per square meter; now it can be had for about 5,800 euros (2 million drachmas) per square meter. Home rents in the same area have dropped from 53 euros (18,000 drachmas) to 38 euros (13,000 drachmas) per square meter. Shop rents will not change in the more expensive areas, but the value of the intangible assets of businesses has dropped considerably, even as much as 50 percent in Kolonaki and by 30 percent in Ermou Street in comparison to February 2001. In Kifissia, Halandri, Maroussi and Glyfada, it is almost non-existent. Market analysts say that aggressive buying is a thing of the past. For example, a year ago a bank had to pay up to 3,000 euros (1 million drachmas) per square meter to get a tenant to leave. Now all they need to pay is the rent. There are 10 vacant stores between Pedion tou Areos, at the bottom of Alexandras Avenue, and Aghiou Meletiou Street, and four between Kaningos Square and the Athens Academy. Once upon a time, stores in these areas would be snapped up before they became vacant. Experts say that the doubling of real estate prices over the past three years was only to be expected because of the dramatic drop in interest rates on housing loans from 16 percent to 5.5 percent, and the rise and subsequent fall of the stock market. Massive gains during the boom period were handed out freely for property, but after the crash and the fall in interest rates on deposits and repos, demand for real estate rose even further as there were no other investment options giving substantial returns. Major public works such as the Athens Metro and Attiki Odos improved the value of new areas, raising prices near those works accordingly and taking other areas with them. Property prices have also risen because of the belief that the 2004 Olympic Games will increase property values. These factors, however, have already been incorporated into existing property prices. Meanwhile additional negative factors are beginning to make their presence felt. According to Nikos Gianoulelis, managing director of N. Gianoulelis and Associates, the most obvious change has been in investors’ mentality, that is, in the belief that prices will fall after the Olympics. But as of 2003, the «Olympics card» will already have been played out. Movement toward the Mesogeia Plain, as well as to the Thriassio Plain and Megara, although to a lesser extent, will free property in the overcrowded Attica basin and send considerable business to these other areas, followed by a spread of investments in property over a broader area and increasing supply, bringing prices further down, even of business properties in Attica. Furthermore, following the Olympics funds will be available for public works outside Attica, developing the property market in other towns at Attica’s expense. These factors all point to a period of further, gradual reductions in the capital’s property prices until 2007, with other factors entering the picture as of 2005 that will change the property market completely.
