The Greek property paradox
While real estate transactions are increasing, the number of housing loans is dropping
The share of cash in real estate purchases is increasing, as the relevant data show. The sharp increase in lending rates has sharply reduced the demand for mortgages, but at the same time transactions continue to move upward, along with sales prices, which are breaking one record after another.
According to Bank of Greece data, the flow of financing in housing credit decreased by 646 million euros in the first half of the year compared to last year, while in June the negative flow of financing reached €38 million.
As the BoG emphasizes, “the avoidance of borrowing is attributed to the increase in house prices, which discourages initiatives to acquire a home, despite the subsidizing of the new interest rates for housing loans offered by the banks.”
In its recent monetary policy report, the BoG noted that in the first quarter of the year, the total amount of new mortgage loans fell by 7.2% year-on-year, compared to a 67.3% increase in the first quarter of 2022. At the same time, after two years of continuous growth in mortgage demand, a decline has been observed for four consecutive quarters (until the first quarter of 2023).
However, just as data from housing credit should reflect a general lag in buying and selling transactions, as well as a slowdown of the rise in prices and even their stabilization, the exact opposite is happening. According to Independent Authority for Public Revenue data, online declarations of transfer tax (which is paid on every purchase and sale of property) amounted to 56,000 during this year’s first four months. This is a figure that translates into 168,000 transactions on an annualized basis; if confirmed, that would represent an annual increase of 21% compared to 2022, when the corresponding declarations had risen to 139,239.
It is clear that more cash and equity is now being traded in the housing market compared to the previous period. A few months ago National Bank Chairman Gikas Hardouvelis noted that 80% of housing purchases are made without bank lending – i.e. exclusively with equity.
