Demand key to construction in 2023
An unpredictable year has begun for the real estate market, as countervailing forces from the supply and demand side collide.
Will the interest rate hike and the steep rise in the prices of building materials slow down construction? Or will the upward trend continue due to demand for property from abroad or from Greek depositors who will see the value of their savings gnawed away by high inflation?
Construction costs, which remained essentially stable from 2015 to 2020, have already increased by more than 20%, while the price rally has not stopped. Interest rates were also fixed until mid-2022. However, within the first quarter of 2023 there are two new hikes expected that will bring the cost of mortgages even above the 5% level, for both fixed or floating rates.
If building a square meter of housing now requires more than 1,500 euros – which means that together with the value of the land and the contract profit the cost of that newly built square meter may exceed €3,000 – the purchase of a 100-sq.m. flat may require equity of €100,000 and monthly tranches of €1,000-1,100 for 30 years.
The question is whether there is demand enough to absorb the supply at these prices. The answer will determine the course of construction in the coming period.
