by admin The right to housing in Greece tends to become a joke as housing prices soar at rates out of proportion to wages.
While the problem of access to housing is intensifying on a pan-European level, it is now also on the agenda of politicians, who until recently underestimated it. As part of the housing policy, the government will announce at the Thessaloniki International Forum “My House 2”, which will expand the age and income limits for acquiring a home with a low-interest loan. At the moment, negotiations with the European Commission continue in order to “lock in” the specifications of the program for accessible housing, which will be half financed by the Recovery and Resilience Fund. However, since June, when the initial announcements about My Home 2 were made, there have been concerns that the new program may lead to a new race on the already inflated prices of residential properties. In order to avoid the risk of distortions in the market, proposals have been submitted, such as not including eligibility criteria that would disproportionately increase the prices of properties that fall under the program’s specifications (eg value, square footage, age).
Housing with cheap loans … and for (almost) fifty-year-olds
Although no official announcements have yet been made about what “My House 2” will include, from what has been known so far the following will apply: It will also include the 40-49 age groups, which were excluded from the first cycle of the program – My Home 1. The program is expected to be financed with a total of 2 billion euros, of which 1 billion euros will come from the European Union’s Recovery and Resilience Fund, while the other 1 billion euros will be provided by Greek banks. The interest rate for the loans to be granted under “My House 2” will be approximately 50% lower than the current mortgage interest rates. The income criteria to be applied will be more flexible and expanded compared to the first program, enabling a greater number of citizens to participate. In “My House 1” the annual income limit was set at 24,000 euros for a couple, increased by 3,000 euros per child, and at 27,000 for the single-parent family, with 3,000 per child. There will be provision for three or more children, as well as a zero interest rate. The age of the properties will not be less than 15 years. This limit is intended to ensure that properties acquired through the scheme are relatively modern and in good condition. After all, the European Commission reportedly links the financing of the program to the pillar of the Green Transition, setting as a condition the obligation to upgrade the energy of the properties that will be purchased through “My Home 2”.
Unaffordable housing for employees
While waiting for the official announcements of “My House 2”, it is worth recalling some of the aspects of the complex problem that everyone now recognizes as the housing crisis. We refer to two recent surveys, which come from the area of the real estate market – so they are beyond suspicion of “populism” or “anti-government”. The first belongs to the consulting company Cerved Property Services (CPS) and analyses the issue of access to housing for Greeks. It comes to the disheartening conclusion that current housing prices, especially in newly built apartments, are beyond the reach of 90% of households, who do not even meet the special criteria for bank lending. The second is the Real Estate Market Barometer 2024, a public opinion survey on the opinions and attitudes of the public on the real estate market. It was conducted by the Public Opinion and Market Research Unit of the University of Macedonia, in collaboration with consultant Ilias Papageorgiadis. A representative sample of the population from Athens and Thessaloniki (over 1700 people) participated in the survey, of which more than half characterize the irrational increases in real estate prices as a “bubble” product.
11.5 years’ wages for an old two-bedroom
In order for a worker, with a salary from Greece and not Switzerland, to find housing in a 60 square meter apartment, 20 to 30 years old in Athens, he will have to save 11.5 years’ wages. In 2021, 8.5 years of wages would be required to buy the same apartment, according to a UBS analysis cited by Cerved. Based on this research, housing in Athens is the fifth most expensive on the planet for local residents. It is ahead of London, New York, Geneva and Amsterdam, while leaving opulent Dubai far behind. The only cities that are more expensive than Athens are Tel Aviv, Paris, Tokyo and Hong Kong. According to Cerved research, there is a gap of at least 40 percentage points between the growth rate of house prices over the past five years and the growth rate of nominal wages (because real wages have fallen in terms of purchasing power).
57% price increase in five years
Within five years, the prices of a house that can cover the needs of a family of four (about 110 square meters), have increased by 57%. From 175,000 in 2018, to nearly 275,000 in 2023. Over the same period the average wage has risen nominally by around 17% – with inflation wiping out any nominal increases. The conclusion of the research is that real estate prices in Greece are incompatible with the average income, instead they are attractive to foreign buyers from richer countries. Accordingly, there is limited “real” access to bank lending for Greek households. Current conditions are “targeted” at the top quartile of Greek households based on disposable income while in the new build market current price levels are “targeted” at the top 3-10% It is also noted that the maintenance of low transaction volumes and the current mix of foreign and domestic investors in the market creates conditions for upward pressure on real estate prices. Finally, it concludes that there is a need to formulate appropriate “Social Housing” policies that will also stimulate the possibility of housing supply.
Property Barometer 2024: One in four sees a bubble
The conclusions of the public opinion survey by the Institute of the University of Macedonia are enlightening as to what the Greeks themselves believe about the real estate market. Among the questions posed by the research is the following: “In recent years, in our country, real estate prices have had an upward trend. How would you describe this trend?…” Of the sample of respondents, consisting of men and women over the age of 17, with a representative weighting according to gender and age, only 16% consider the rise in prices to be expected. 17% consider it reasonable. The majority of those who are even slightly interested in buying a home (66%) consider the increase in prices unjustified. In fact, one in four considers it a bubble (24.5%) and even more consider it illogical (26.5%) and 15% characterise it as incomprehensible. The highest percentages of those calling price rises irrational and a bubble are found in the 17-34 age group, reflecting the impact of the housing crisis on young people.
Prices will continue to rise
Also more than half (55%) believe that property prices will continue to rise until mid-2025, of which 6.5% believe they will skyrocket. 65% believe that prices will rise in the city they live in (Athens and Thessaloniki) in the next period, until autumn. In fact, one in four believes that the rise in real estate prices will exceed 10%. Accordingly, 57% believe that rent prices will increase further next year, while less than one in three (30%) expect them to stabilize. 7 out of 10 think that accessing bank loans to buy a home is difficult and 8 out of 10 think that mortgage interest rates are high. As for how much money Greeks can allocate for renting or buying a property, based on their disposable income, 7 out of 10 (72.5%) think they can allocate less than in 2023.
Source: Afroditi Tziantzi, 26/8/2024