The real estate market in Greece showed resilience in 2020, despite the economic shock caused by the pandemic crisis.
As DBRS comments in its analysis, after the cumulative increase of 9.2% in the period 2018-2019, the increase in house prices slowed down in 2020 due to travel restrictions and other measures for the coronavirus, but price performance remained positive, at 4.6%.
Despite the imposition of restrictive measures in the first quarter of 2021, preliminary data from the Bank of Greece show that house prices continued to rise at a rate of 3.3% per year.
The Greek real estate market is highly dependent on foreign investment, resulting in large price increases in Athens and other popular tourist destinations.
In contrast, prices and transactions in other areas of Greece that are of limited investment interest, although likely to benefit from the effects of “overflow”, are still low.
DBRS estimates in the long run that the development of the real estate market as a whole will depend on Greece’s ability to create jobs and promote policies to support real income growth, while maintaining a stable macroeconomic environment to attract foreign investment.
Specifically, prices in the housing market increased by an average of 4.6% in 2020 and by 3.3% on an annual basis in the first quarter of 2021.
The increase in prices in Athens and Thessaloniki was more intense, reaching 7.6% and 4.8% in 2020 and 5.4% and 3.7% in the first quarter of 2021, respectively, while prices in other cities remained unchanged, according to preliminary data published by the Bank of Greece.
Despite travel restrictions in 2020, increased demand from foreign buyers before the pandemic and the expectation that COVID-19 pandemic restrictions would be temporary prevented a further decline. The construction activity, as measured by the number of building permits, continued with an upward trend, increasing by 8% in 2020 and by 13.7% in the first quarter of 2021.
Prices in areas of the country with low investment interest remain in recession. Clear and strong government support is evidenced by recent legislative interventions, which include reduced taxes on renovation costs, a three-year VAT suspension on new building permits, an adjustment to fair values that could efforts to reduce bureaucracy and improve efficiency in public administration, which could improve planning and speed up sales.
Other policies include the Non-Dom scheme, which was introduced last year and provides tax incentives to those willing to move their tax residence to Greece. In addition, banks’ efforts to clear their balance sheets will boost credit expansion and, therefore, demand. However, mortgages remain low and are likely to remain so.
DBRS estimates that the long-term prospects for the market as a whole will depend on Greece’s ability to recover from the COVID-19 crisis and maintain a stable macroeconomic and political environment