Property prices rose by 11.8% in the fourth quarter of 2023, while for the whole year prices rose by 13.4%, according to recent data from the Bank of Greece.
Based on the age of the property, the annual rate of change in prices for new apartments was 11.0% and for old apartments at 12.4%. Based on geographic location, the annual rate of change in apartment prices was 10.8% in Athens, 14.6% in Thessaloniki, 13.9% in the other major cities and 11.2% in the rest of the country. For 2023, apartment prices increased at an average annual rate of 13.4%, compared to an increase of 11.9% in 2022.
Price rally in the fourth quarter
The price increase in the fourth quarter of 2023 compared to the corresponding quarter of 2022 was 11.0% for new apartments, i.e. up to 5 years old, and 12.4% for old ones, i.e. over 5 years old. For 2023 the average annual price growth rate for new apartments was 12.4%, compared to a growth rate of 12.5% in 2022, while the average annual growth rate for old apartments was 14.2% in 2023, compared to an increase of 11.6% in 2022.
From the analysis of the data by geographical region, it follows that the increase in apartment prices in the fourth quarter of 2023 compared to the corresponding quarter of 2022 was 10.8% in Athens, 14.6% in Thessaloniki, 13.9% in other large cities and 11.2% in the rest of the country. For the whole of 2023 the price increase in the same areas compared to 2022 was 13.7%, 16.2%, 14.5% and 10.8%, respectively. Finally, for all urban areas of the country, in the fourth quarter of 2023, apartment prices were on average increased by 12.1% compared to the fourth quarter of 2022, while for 2023 the average annual increase was to 13.9%.
212,000 homes are missing from the market
The sharp increase in prices is also due to the significant housing deficit recorded in our country. According to the financial analysis of Piraeus Bank entitled “Greek real estate market: Deep and structural imbalances between supply and demand”, 212,000 homes are missing from the market, with the result that the most important challenge in the real estate market is balancing supply and demand , when at the same time everyone is “looking” for the point in time when the prices will stabilize and possibly a small correction will follow.
According to the bank’s economic analysis, cumulatively from 2016 to 2022 the growth rate of residential real estate prices has increased by 14% more than the growth rate that would be justified based on the evolution of the fundamental macroeconomic parameters of the Greek economy. The search for the factors that have led to this significant discrepancy leads us to the conclusion that the developments in the Greek economy during the years of crisis and recession have created a significant imbalance between the supply and demand of residential real estate, which unfortunately will be difficult to bridge in short term horizon.
Taking the data from the beginning, we see that the steep fall in property prices fully reflects both the reduction in disposable income and consumption of Greek households and the sharp and countercyclical increase in property taxation (i.e. the increase in taxation in a period of decline of prices and sales). The result of this is that the real estate sector, from a driving force of the Greek economy, will change into a factor inhibiting economic activity and then pass into complete obscurity and insignificance. However, market forces remain at work and the recovery in prices, alongside the improvement in demand conditions and the lifting of financing restrictions, has led to both an increase in building permits and an increase in new investment as such.
But how is the imbalance between supply and demand quantified? According to the study’s calculations, construction activity peaked in 2005 with the issuance of 66,000 building permits, which corresponded to 195,000 residences. Since then the decline has been continuous, leading to historically low levels of construction activity in 2012 and beyond, with annual permits being issued corresponding to 16,000 homes per year. Consequently, between the 2001 and 2011 census the number of dwellings increased by 917,000, while in the next decade, 2012-2022, we estimate that only 155,000 were added. At the same time, on the demand side, in the period 2001-2011 there is an increase in the number of households by 582,000, while from 2012 to 2022 we estimate the creation of only 197,000 households. In addition, however, a new feature that has emerged in recent years is the increase in housing demand due to shortages