Is there a fair price for real estate?

The cheapest house for rent is in the Pella or Fokida area. The most expensive is in the Southern Suburbs of Athens. Prices range from 5 euros per square meter to 12 euros. Obviously, there are more expensive options.

One of the accommodations, multiple streets, one or two floors, a balcony and most importantly, a nice renovation, even in an older apartment, make all the difference in the cost of renting. In any case, most people looking for new housing hear prices between 7 and 10 euros per square meter (see www.spourgiti.com).

When it comes to prices, they always talk about the average. Is that a lot? Of course it's not a lot. However, it all depends on what kind of home you are looking for. What size, how many bedrooms and so on.

But next to the problem of grocery prices and changes in fuel and energy prices, a roof, especially for young couples, adds to the stress with its costliness. A problem that is singled out in absolute priority by all citizens.

It is true that all indicators tracking the real estate market have recorded significant growth in the recent period. For example, in the middle of this year, the Bank of Greece's special index for urban areas shows an increase of 42% when compared to the middle of 2019. However, if we compare the price level (what is called "dearness") with the corresponding one in 2008, we find a decrease in prices, and even more than 10%!

Paradoxical? It seems so, but it isn't. It's been a long time of uninterrupted real estate price declines. Older homes have lost nearly half of the value they had in 2008. What happened? One reason is revenue ascesis and reduced economic activity. The second reason is the disappearance of mortgage loans as banks faced a tsunami of red loans. The third reason is that the new houses were not built. Those who once considered selling their grandfathers' home chose to keep it as collateral.

Rent rents remained stable during this long period and in many cases declined. The owners, realizing the tenants' difficulties, as well as concerns about the unreliability of the next tenant, chose to freeze the lease. The pandemic prolonged this situation for a few months, but the problem of closed houses and unemployed construction workers was already beginning to show.

Everything changed suddenly when, after Covid, the community opened up and the economy began to grow. Prices have risen nearly 30% in no more than 24 months. Young people left without "fatherly" housing really felt they could afford it. After all, it's been a few years.

But building a new apartment building takes time, even more time to complete and plenty of time to sell at a good price. Especially in a market that is constantly growing. The stock of older dwellings has been and continues to be inadequate. Their reconstruction is difficult and the cost is high.

The decline of neighborhoods that for decades have been out of sight of low-income families has been opened up to great tourist "interest", the "atmosphere" of the old city and, most importantly, the proximity to monuments, museums and bustling stores that have created new squares, already from the "era" of the lobster macaronade. "Opening up" short-term rentals takes even more properties from the "reserve" as the income already promised seems attractive.

In other words, the real estate market quickly gained momentum and immediately stalled. And here we are now. Fewer properties, more tenants. In such a situation, as economists know well, the price is determined by the last property sold or rented. Which, obviously, will be purchased by whoever has more financial wealth or who adequately reallocates their budget.

And because there are now much better paying jobs in the labor market, prices are rising and rising rapidly. Imagine if banks start offering loans like they used to. But with interest rates at their highest level since the introduction of common currency, mortgages are only available to those who ... they don't need it.

Next week I'll tell you more, especially to show you that although the houses are really expensive, they are still not much different from the expected, i.e. "fair price".