A significant drop in housing costs, which is approximated by the relevant subcategory of the harmonized index of consumer prices (HICP) and includes, among other things, the cost of heating and maintenance and the rent is recorded in our country, from the beginning of 2023, as the first five months of the year fell by 8.8% year-on-year, compared to a rise of 30.6%, in the first five months of 2022, says an economic analysis by Alpha Bank included in the bank’s weekly financial report.

At the same time, in a reversal of the picture of last year, when the rapid increase in energy costs was the main cause of the rise in housing costs, the de-escalation of energy prices was the main factor in its reduction, in the first months of 2023. This happened despite existence of countervailing forces exerting an upward effect on housing costs, such as the rise recorded in rental prices and interest rates, Alpha Bank analysts note, with chief economist Panagiotis Kapopoulos.

In particular, rent prices, measured by the HICP-Rent, increased by 4%, on average, in the first five months of the year. The increase, albeit at a moderate rate, in rental prices, i.e. property yields, is consistent with the rise in property values. In particular, the nominal prices of houses maintained, in the first quarter of the year, a strong upward trend, with the residential real estate price index registering a significant increase of 14.5% on an annual basis, which came from the rise in the prices of both new houses (up to 5 years) by 12.8%, as well as old houses (over 5 years) by 15.6%.

Although the house price index has recovered since the first quarter of 2018, with a temporary slowdown in the rate of increase during the pandemic, the index has not fully recovered the losses suffered during the past decade. However, the increase in real estate prices implies a rise in the non-financial wealth of households.

The evolution of housing costs

The economic analysts of Alpha Bank record the evolution of the individual elements of housing costs in our country, based on the HICP-Housing index. This index includes the categories of rent, home repair and maintenance and related services, such as water supply and, finally, energy products related to heating (electricity, natural gas, heating oil, etc.).

After the large increase of 25% in 2022 overall, there was a decrease in the cost of housing in our country, in the first five months of 2023. Specifically, as mentioned above, in the period January-May the cost of housing decreased by an average of 8.8% and even at an accelerated rate (with the exception of May). Conversely, over the same period, in the Eurozone, housing costs continued to rise, albeit at a declining rate. Specifically, housing costs increased by 7% in the first five months of 2023, compared to a milder increase overall in 2022 (17.5%), compared to Greece. The analysis of the annual changes of the individual subgroups that make up the HICP-Housing identifies the factors behind the recent drop in housing costs in our country. In particular, the changes in the subgroups of the HICP-Housing, which includes energy products, are presented. This index increased by 50.8% in 2022, while all its sub-groups recorded a significant increase, with natural gas having recorded the largest increase of approximately 105%, followed by heating oil with an increase of 45.1% and electricity with an increase of 43.1%. In contrast, the prices of non-energy sub-groups recorded a significantly milder increase, with home repair and maintenance and rents increasing by 2.7% and 1.3% respectively, while a marginal increase (0.2%) was also recorded by various services related to home.

This picture was reversed, in the first five months of 2023, as the drop in energy prices led to a significant decrease in the HICP-Housing due to the evolution of energy prices (-16.3%) and mainly its sub-groups, such as electricity ( -23.8%) and heating oil (-13.6%). In contrast, the natural gas price subgroup remained in positive territory albeit at a significantly softer pace compared to the same period last year (2.1% y-o-y, from 80% in the first five months of 2022).

On the other hand, the large increase in energy prices, within 2022, is estimated to have passed on to the remaining subgroups of the HICP-Housing, with the result that the prices of home repair and maintenance and rents have increased by 4.7% and 4%, the first five months of this year.

In conclusion, as far as the cost of housing is concerned, the decrease in the indices of the subgroups related to energy has a greater impact on its evolution, compared to the increase in the indices of the subgroups not related to it, and for this reason it registers a decline .

Finally, according to Eurostat data, the cost of housing as a percentage of disposable income was maintained at 34.2% in our country in 2022, which is the highest percentage among the member states of the European Union.