Price growth in Greece’s housing market is expected to slow significantly in 2023 after racing ahead for five years amidst a broader slowdown in the economy, economists and market watchers say. Rising interest rates and shrinking household incomes are seen putting pressure on home prices as forecasts for the Greek - and European economies - are being constantly revised lower.
According to Theodoros Mitrakos, former Deputy Governor of the Bank of Greece, disposable income in Greece is seen dropping by 20 percent through 2024. Out of this total, only a portion will be recovered through wage hikes, he added. "(Housing) prices will continue to rise but at a slower pace in the coming quarters," he said.
Bank of Greece data shows apartment prices have been rising steadily since 2018, however, the market appears to be pausing under severe inflationary pressure. From 2019 to 2021, while there was little inflation (or even deflation) price increases ranged from 4.5% to 7.4%. Since 2022, however, price hikes exceeded 9 percent in the first and second quarters, versus inflation of 12 percent, indicating that the real gains are considerably less.
Last week, we saw the latest rate hike when the European Central Bank announced a 0.75% increase in key interest rates, the third increase in the cost of money this year. “This is a game-changer for the cost of borrowing for both companies and households. A fact that will limit demand and make it difficult to buy in the coming years", added Mitrakos.
Although the course of the Greek economy is strong, the dark clouds of recession gathering over Europe have spread to the region’s south. In 2023, the Greek economy is expected to expand at a rate of 1-2 percent, versus a pace of some 6 percent this year.
Economists note that house price increases are typically in line with the rate of GDP growth. Some experts, however, say that housing prices generally trail GDP growth by 1-2%. This was not the case in Greece between 2018 and 2021 due to the accumulated demand from the country’s economic crisis years, but if this is the case in 2023, then the price hikes in Greek residential real estate will be minimal.
