By Chrysostomos Tsoufis

A breath away from their all-time high – set in the third quarter of 2008 at 102.2 units – are real estate prices in Greece according to the Bank of Greece (in Athens the record has already been broken). According to the Financial Stability Report, the real estate price index, which has been continuously increasing since October 2017, reached 99.2 points in June this year.

And there are all the conditions for the record to be broken since, as the central bank points out, “In the short term, prices are estimated to continue their upward trend as long as foreign demand remains strong.” To this should be added the sluggish activity of the construction sector which does not allow the real estate stock to be replenished

With such high property prices and high interest rates at the same time (the three successive ECB interest rate cuts have passed on very little to the cost of borrowing as they are very recent). Demand for mortgages decreased in the third quarter of this year, with the rate of change in August at -2.7%. In theory, a recovery is imminent as borrowing costs fall due to lower interest rates.

In the first half of this year overall, the loans granted against residential property (including consumer or repair loans as well as loans to freelancers and sole proprietorships) have increased, but the disbursed amounts are much lower than last year. €593m were disbursed, +17% compared to last year, but the average loan as it appears from the examination of the data is only €57,900 compared to €77,200 last year. This year’s loans are 25% lower on average than last year’s.

94.7% of the loans were given as expected by the big 4 systemic banks. 4.3% is the share of the smallest commercial banks and only 1% of cooperatives.

Based on the above, the average disbursement is only at 61.2% of the value of the mortgaged property from 61.7% last year. 9 out of 10 loans are less than 80% of the value of the mortgaged residential property. Almost 1/3 (29%) reaches a maximum of 50%.

The loan-to-income ratio at issuance stood at 3.8, meaning the loan amount is almost 4 times higher than the borrower’s disposable annual income.
However, based on the classification of the Central Bank, 72.9% of the loans disbursed belong to the category of low default risk as the borrowers are deemed to have sufficient income and satisfactory ability to service the loan. 26.9% belongs to the middle class and only 0.2% is given to borrowers who do not have sufficient income and therefore a satisfactory ability to service the loan.

Almost all borrowers who take out a loan have the goal of purchasing a property for their own residence. Only 3 out of 100 loans concern the purchase of property to be rented.

Almost all loans are fully delinquent

45% of loans have an initial fixed rate period of more than 10 years
15% of loans have an initial fixed interest rate for the first 5-10 years.
16% of loans have an initial fixed rate of up to 12 months with the BoE noting that the majority of borrowers are protected from further increases in prime rates.

The average loan lasts 24.3 years

16% of loan agreements have a duration of up to 15 years
35% has a duration of 15-25 years
44% with a duration of 25-30 years
5% are over 30 years old