The first warning signal for the property market came on Friday from the Bank of Greece, in the midst of the coronavirus epidemic. BoG analysts say that the uncertainty regarding the broader consequences on the domestic and global economy are creating new conditions, with possibly significant effects on the real estate market, at least in the short term.
“Given the high dependence of the property market on tourism and other sectors of the economy, it is expected that property prices will remain stagnant in the first few months of 2020 or in some cases suffer pressure, the extent of which will mainly depend on how long the current extraordinary conditions last. Domestic and foreign demand will rebound as fast as normality is restored.”
In the last few years the local realty market has relied heavily on foreign buyers as most demand has come from abroad. In 2019 the net inflow of capital from foreign investors, as recorded in the BoG data, came close to 1.5 billion euros, up 28.5 percent from 2018. A large share of that investment went toward residential property, either at popular summer destinations or in central Athens and the city’s southern suburbs.
In this context there has been a significant rise in sale prices. Across Greece prices climbed 7.2 percent last year from 2018, while in Athens the increase reached 10.4 percent. However, as the BoG report noted, the growth in prices and demand has not spread to the entire market, precisely due to the preference of foreigners for specific locations. It is therefore clear that one condition for the definitive and complete rebound of the property market is the strengthening of domestic demand, which is expected to take place gradually, combined with the further improvement of the economy.
Besides prices, the gradual improvement of the housing market is also confirmed by the increase in investment in residential property in the context of construction activity, which climbed 12.1 percent in 2019 year-on-year after a 17.2 percent advance in 2018. Even so, it has remained at a low level compared to gross domestic product, at just 0.8 percent.
There has also been a marked improvement in commercial properties, with prices in the first half of 2019 (which the latest available data concern) growing 6.7 percent for offices and 9.7 percent for stores in Athens.