Chrysostomos Tsoufis

The era of cheap money has been over since last July.

Since then, the ECB has proceeded with 7 interest rate increases and as everything shows it is preparing for 1 more before the summer holidays, specifically in mid-June, when of course the bloc of “hawks” is pushing to continue the increases from September.

Despite this, property prices in Greece continue to rise for the 5th consecutive year according to data from the Bank of Greece.

Apartment prices rose 11.1% year-on-year in 2022, following increases of 7.6% in 2021 and 4.5% in 2020.

The increases, as is normal, are a little higher if we focus on the newest apartments, 5 years old, and even higher, namely 13%, if we look at what is happening in Attica.

However, the situation in many regions of Europe is different and, according to some analysts, resembles a bursting bubble.

Bloomberg’s City Tracker index showed that Vienna’s once-strong real estate market has turned into its weakest link.

The fall in the price of real estate reached 12.2% on an annual basis as the market of the Austrian capital was simultaneously hit by the increase in borrowing costs, the tightening of lending criteria by Austrian banks and also by an oversupply of real estate, interest the era of cheap money.

This drop came despite the fact that the Austrian government gave tax breaks to first home buyers as well as incentives to builders to reduce the cost of construction.

Stockholm saw a 6.4% decrease in property prices, Dublin 2.4%, Paris 2.3%, Berlin 1%, while prices in London remained unchanged. 10% is the increase in Copenhagen with Danish central banker Christian Ketel Thomsen “obliged” to tell Bloomberg that the Danish property market remains robust.

The IMF, in its latest report on Europe at the end of April, warns of the “end of innocence”.

There will be “disorderly” price corrections in the real estate market even if the economic disruption is avoided, he emphasizes, citing the Czech Republic, Denmark and Sweden as the first examples. According to IMF models, there is an overvaluation in most European countries of the order of 15-20%, with Alfred Kammer, head of the Fund’s European department, warning that problems are concentrated in the markets of all countries, not just the over-indebted ones.

The correction has started to be supported in Washington seeing that property prices pan-European fell 1.5% in the 4th quarter of 2022 compared to the previous quarter.

Despite global uncertainties both inside and outside the country, the Bank of Greece maintains that the outlook for the Greek real estate market remains positive.

In the short term, as it states in its report, the market will be supported by the strong investment interest from foreign investors mainly for privileged positions in the Attica basin but also tourist areas.

In the medium term, measures such as facilitating the acquisition of a home by young people or the renovation of old homes, which are already being implemented and are expected to contribute to the improvement of the building stock and of course to the improvement of the financial situation of supported households, will work positively.