George Sitaras for Hellenic Αssociation of Realtors

GREEK MARKET REPORT 2009 / George Sitaras ,HAR Greece

The Greek economy, besides the consequences of the international crisis, has to deal with severe endogenous problems. The whole economic and political systems, have considerable shortcomings ,that have come to the surface, as well as serious institutional problems (e.g. corruption).

The industrial activity pertaining to constructions, has reduced by 25%. Everything indicates that the crisis has not influenced the surface of the market, to wit the prices, but it passed more deeply, afflicting the productive fabric of the economy.

The market reminds of the levels of the decade of the '80. The purchases realized ,were at least by 20% less , comparing to 2008. This year, the sales will move around 80.000 and 100.000 residences. It will be less by 53% to 62% comparing to 2005, when it reached the record level of about 215.000 properties.

The drop of the sale transactions ,will move around 15 to 25 %. The notaries' estimations ,show the number of last year's property transfers ,to be about 130.000.

"The real estate markets ,decreased by at least 30% and there are not even indications that this tendency will be reversed, at least by the end of the year".

According to the report of the Bank of Greece, the evaluations of residential properties that were done by the banks, were 70% less. The lending institutions modulate the funding and therefore, the market.

The shaped situation ,seems to assert originality. In reality, the selling prices of the residences are stable; there is an increase in the land prices, a decrease in the prices of building material and stability to the prices of work.

According to the research of the Economic University of Athens, the core of the building crisis is the production of redundant residences, which created the excessive supply and the relative stock.

This constitutes a burden for the owners - constructors, because it binds capital and has maintenance cost. The excessive supply is hard to be absorbed in the case of goods such as a residence.

This moment, there are 5 characteristic factors that characterize the national real estate:

• Drop in the demand of residences

• Low interest rates

• Recession

• Excessive supply of properties

• The prices not to decrease considerably

The possible "good news" is that with the continuous decrease of the building activity, the previously mentioned stock might decrease.

The refunds from 5% - 6% before the crisis, are 3-3.5% for the residences of 60-120 sqm.

Fortunately, we did not give a loan to everyone who asked for, even though the crisis is severe and seems to last until 2012.

Without the financing from the banks, the Greek real estate market cannot function, since the prospective buyers will have to improve their financial situation.

Summarizing, we observe:

• Large supply of new-build

• 100.000-200.000 unsold new-build apartments all over Greece.

• The prices of the properties remain high.

• The largest percent of residences that are bought are used and old.

• The banks are lending with difficulty.

• Decrease of demand by 50-70% in relation to the period 2005-2007.

• Increase of auctions.

• Large possibility for many enterprises of the sector to be destroyed.

• Refunds are less than the time account interest rate.

• The "good message" is - always according to the experts of the real estate market - that there is nο real estate "balloon", because if there was, then no one could estimate the depth of crisis.

• Moreover, several opportunities are created for investors, and for average buyers.

In any case, a tendency for residence acquisition is noticed. The previous years, enough buyers postponed such a move, due to the high prices and the economic recession.

The market demand is still hypotonic, but gradually a "core" of interested buyers is starting to form, who hold out for, until the conditions are improved, both from prices aspect and financing aspect.

Also, the rural residence purchases that took place this year by foreigners were by the most moderate estimations, at least 40% less comparing to the previous year.

During the previous years, most foreign buyers were financing their investments mainly through bank loans. However, this year, in total the European banks were particularly penurious in their financing.

Essential is the intervention of the government in the institutional problems that the Greek market faces, in comparison with the markets of competitors.

Fortunately, a rotation of this group of buyers was observed, to old residences, usually inside the traditional settlements of the region.

The commercial properties leasing ,presents significant decrease both in the market of Athens ,as well as Thessalonica.

Finally, the last clues indicate that after the twelve-month freeze of the market, the last weeks ,there is an increased mobility ,with a resurgence tendency.

A national policy to exit the immobility is required. The entrance of new groups of buyers, the contemporary policy for houses with protection of the environment, the opening of the Greek market abroad and the establishment of motives for reconstructions / restorations of traditional and listed properties ,will stimulates the industry and the employment in the large cities and the region.

As a consequence of the recent government change, there was a freeze of every discussion concerning the legislation that will regulate our professional rights and establish rules.

We suppose that after the required briefing of the qualified minister, we will be able to start the relative discussions.

In any case, it is optimistic that as soon as she took over, she moved quickly towards the establishment of the energy certification of buildings.

Sources: Economic University of Athens - Statistics Department

Bank of Greece

National statistics service

Newspaper "Kathimerini"