Piraeus: Reasons for the Rise in Real Estate Prices - Economic Courier - ot.gr

real estateinGreeceThis is the result of a huge gap between supply and demand. As a result, between 2016 and 2022, the growth rate of residential real estate prices increased by 14% more than the growth rate that would be expected based on the main macroeconomic indicators of the Greek economy.

Supply deficit compared to demand for approximately 212,000 dwellingshousescaused an accumulative revaluation. According to the bank, the reasons for this significant gap lead us to conclude that developments in the Greek economy during the years of crisis and recession have created a significant imbalance between supply and demand for residential real estate, which unfortunately will be difficult to correct in the short term. Meanwhile, market forces remain active and the recovery in prices, in parallel with improved demand conditions and the removal of financial constraints, has led to an increase in construction licenses and investment.

Construction activity and housing demand

The Bank has made calculations showing that construction activity peaked in 2005 with the issuance of 66 thousand building licenses, corresponding to 195 thousand homes. Since then there has been a steady decline, resulting in historically low levels of construction activity from 2012 onwards, with annual license issuance corresponding to 16 thousand homes per year.

The 2001-2011 Census results recorded an increase of 917 thousand dwellings, while in the subsequent decade 2012-2022 it is assumed that only 155 thousand were built. In parallel, the demand for housing increased by 582 thousand homes between 2001 and 2011, while only 197 thousand new households are assumed to be created between 2012 and 2022.

Increased demand for housing

In addition, a new feature that has emerged in recent years is the increased demand for housing due to short-term rentals. This demand, which acts in addition to domestic housing demand, now amounts to 170 thousand dwellings. The shortfall in supply relative to demand of some 212 thousand dwellings is thus responsible for an accumulative revaluation of house prices 14% higher than the level of income growth. Due to the magnitude of the gap between supply and demand, the rate of real estate price growth is expected to soften but not turn negative.

As a result of all this, the marketreal estateis in a phase of the economic cycle where potential buyers are still willing to accept ever higher demands from sellers, but with clear signs of fatigue, preparing to enter the next phase of the cycle where high prices will be accompanied by lower transactions.