the greek real estate market : recent developments and prospects
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BANK OF GREECEEUROSYSTEM
The Greek real estate market: recent developments and prospects
Theo MitrakosHead of Real Estate Analysis Section
Bank of Greece
February 2012
BANK OF GREECEEUROSYSTEM
Outline
Available short-term indicators for the monitoring and analysis of the real estate market in Greece
Specific features of the Greek housing market
Residential property prices in EU and Greece
Number of transactions in the Greek real estate market
Private building activity and residential investment
Business expectations in construction
Financing of the real estate market and financial stress
Real property taxation and “objective” values
Real estate developments and prospects in Greece: final conclusions
BANK OF GREECEEUROSYSTEM
Initiatives in the Bank of Greece
Data collection from credit institutions
Quarterly Residential Property Price Indices (Press Releases)
Short-term Indicators for the Greek real state market (revised every two weeks)
Quarterly survey among the real estate agencies
Data on transactions in the real estate market from various sources
Regular monitoring and reporting of short-term developments and prospects in the housing market in the publications of the BoG
BANK OF GREECEEUROSYSTEM
Available short-term indicators
Price indices on residential property and rents
Indices of residential property transactions
Construction cost Indices for new residential buildings
Construction activity
Business expectations in construction
Investment in construction and capital inflows
Financing of the real estate market (outstanding
amount of housing loans, interest rates)
Indicators of financial stress
ELSTAT: Hellenic Statistical Authority, BoG: Bank of Greece, DSA: Athens Bar Association, Ktimatologio: Hellenic National Cadastre
BANK OF GREECEEUROSYSTEM
Residential Property Prices across euro area countries(average annual percentage change)
Source: BIS and ECB Monthly Bulletin, November 2011 (http://www.ecb.int/pub/pdf/mobu/mb201111en.pdf )
Residential property prices (nominal) in the euro area
Weight 1999-2008 2009 2010 2011 H1 Q1 Q2
Belgium 3.8 8.9 -0.4 5.4 3.1 3.2 3.0 Germany 26.7 -0.3 0.6 2.3 - - - Estonia 0.2 - -35.9 0.1 6.4 2.2 10.7 Ireland 1.8 9.3 -13.7 -15.5 -11.8 -11.1 -12.4 Greece 2.6 9.7 -3.7 -4.7 -4.9 -5.2 -4.5 Spain 11.7 12.2 -6.7 -2.0 -5.5 -4.1 -6.8 France 21.3 10.9 -7.1 6.4 8.3 8.9 7.7 Italy 17.0 6.9 -0.4 0.1 0.9 - - Cyprus 0.2 - -4.1 -2.5 - - - Luxembourg 0.4 10.9 -2.1 4.5 4.0 2.4 5.7 Malta 0.1 8.3 -5.0 1.1 -1.3 -2.6 0.0 Netherlands 6.4 7.3 -3.3 -2.0 -1.6 -1.2 -1.9 Austria 3.1 1.7 3.6 5.7 - 3.9 - Portugal 1.9 3.1 0.4 1.8 0.4 0.6 0.2 Slovenia 0.4 - -8.2 2.8 - 1.1 - Slovakia 0.7 - -11.1 -3.9 -2.7 -2.5 -2.8 Finland 1.9 5.8 -0.3 8.7 3.7 4.2 3.2 Euro area 100.0 6.4 -2.9 1.9 1.7 2.3 1.1
(annual percentage changes) 2011
BANK OF GREECEEUROSYSTEM
Residential Property Prices across euro area countries(average annual percentage change)
Source: ECB Monthly Bulletin, November 2011 (http://www.ecb.int/pub/pdf/mobu/mb201111en.pdf )
The annual growth of Euro Area house prices decelerated in the first half of 2011, from 2,8% in 2010 H1
1999-2008: +5.6%, 2009: -2.9%, 2010: +1.9%1999-2008: +5.6%, 2009: -2.9%, 2010: +1.9%
2011 H1: +1.7% 2011 H1: +1.7% (2011 Q1: +2.3%, Q2: +1.1%)
Only in few countries house price growth continued to recover (Estonia, Luxembourg, France)
Divergent developments across euro area countries, with highest price growth in Estonia and France and lowest in Greece, Ireland and Spain.
Demand side: uncertainty with regard to income and affordability has been increasing
The overvaluation of euro area house prices built up prior to financial crisis has gradually declined, from its peak of around 15% in 2007 to around 10% in 2011.
BANK OF GREECEEUROSYSTEM
Specific features of the Greek housing market
The construction industry in Greece is fragmented (particularly in the residential market, 10-15,000 firms)
High rate of home ownership (80%) and low mobility of land market
Significant impact of fiscal measures in the housing market
High transaction costs and low trading volume over the stock
Non-homogeneous product (residential property)
The supply responds slowly and with a significant lag in demand signals (lack of land, construction time, issuing building permit and financing, etc.)
BANK OF GREECEEUROSYSTEM
Residential Property Prices in Greece
Cumulated adjustment of -21,5% in real terms and -12,9% in nominal terms since the current financial crisis (2009 - 2011 Q3)
Source: BoG
Residential Property Prices
-6
14
34
54
74
94
114
Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Ind
ex: 2
007=
100
-10
-5
0
5
10
15
20
% C
han
ge
y-o
-y
Growth rate (right-hand scale)NominalReal
BANK OF GREECEEUROSYSTEM
-15
-10
-5
0
5
10
15
20
2004I
III 2005I
III 2006I
III 2007I
III 2008I
III 2009I
III 2010I
III 2011I*
III*
Urban areasAthensOther urban areasPrice Index of Rents
Indices of Prices of Dwellings and Rents(Average annual percentage change)
The rate of change in rents has declined slightly but has remained positive during the current financial crisis (2008: 3.9%, 2009: 3.6%, 2010: 2.4%, 2011 10months: 1.0%)
Source: House Price Index (BoG), Price Index of Rents (ELSTAT)
BANK OF GREECEEUROSYSTEM
Residential Property Price Indices: recent developments
Relative strong persistence of apartment prices (2008: 1.7%, 2009: -3.7%, 2010: -4.7%, 9months 2011: -4.6%)
Stronger decline in the prices of "old" apartments during the crisis and relatively stronger persistence of newly-built apartments typically available for sale by construction firms
Stronger decline in house prices according to real estate agencies
Annual percentage changes 2008 2009 2010 2011 (9M)New (up to 5 years old) 2,3 -2,0 -4,2 -3,5Old (5 years old and above) 1,3 -4,8 -5,0 -5,2
Athens 0,9 -4,6 -3,2 -5,8Thessaloniki 1,5 -6,0 -7,4 -6,3Other cities 1,8 -2,7 -5,3 -3,6Other areas 3,3 -1,9 -5,8 -2,4
Source: BoG
BANK OF GREECEEUROSYSTEM
House price-to-rent ratio (overvaluation)
Sources: House Price Index (BoG), Price Index of Rents (ELSTAT)
The house price-to-rent ratio has been declining continuously, reaching levels seen in 2001, indicating that in some extent a correction of overvaluation of house prices has already taken place.
House price-to-rent-ratio
-10
-5
0
5
10
15
20
I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I* II*III*
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
60
65
70
75
80
85
90
95
100
105
110
115Average annual change in the house price index (left-hand scale)Price-to-rent ratio (2007=100, right-hand scale)
BANK OF GREECEEUROSYSTEM
Construction Cost Indices of (new) residential buildings(average annual percentage change)
Despite the recession, construction costs and particularly construction materials remained high in 2010 (Total cost: 1.8%, Materials: 3.0%) and in the first 9 months of 2011 (Total cost: 1.2%, Materials: 2.9%).
The high cost of replacement of old residential buildings with new impedes a further decline in prices.
Source: ELSTAT
-4
-2
0
2
4
6
8
10
2004I
III 2005I
III 2006I
III 2007I
III 2008I
III 2009I
III 2010I
III 2011I*
III*
Total CostMaterials CostLabour Cost
BANK OF GREECEEUROSYSTEM
Index of Residential Property Prices and number of transactions-appraisals
The current crisis in the real estate market reflected also in a strong decline in the number of transactions-appraisals.
Source: BoG
Index of Residential Property Prices (nominal) and transactions
80
85
90
95
100
105
Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ Ι ΙΙΙ
2006 2007 2008 2009 2010 2011
Ind
ex
: 2
00
7=
10
0
0
5
10
15
20
25
30
35
40
45
Number of transactions (inthousands, right-hand scale)
Index (left-hand scale)
BANK OF GREECEEUROSYSTEM
Residential property transactions: recent developments
On the supply side, existence of a substantial stock of new houses, which stabilized in 2010 and 2011 (150,000-180,000 housing units)
Significant drop in the number of transactions: 2008 2009 2010 2011 (9M)
Bank appraisals (residential) -21.7% -35.7% -0.2% -43.0%
Number of notarial acts on real estate -5.8% -13.9% ….. …..
Number of real estate transfers ….. -14.0% -13.0% -25.5%
Contracts in the presence of a lawyer* -10.0% -18.0% -16.3% -31.2%
Transfers in Athens Land Registry ….. ….. -15.5% -26.2%
Much stronger reductions in the volume (in square meters) and mainly the value of transactions
Buyers’ preference shifted towards smaller and more affordable properties
Greater fall in the number of transactions in Athens
Increase in the number of cash transactions* Transactions in Athens area only
BANK OF GREECEEUROSYSTEM
Number of transactions in the real estate market
Source: ELSTAT (2004-09), *BoG estimates (2010-11)
*Turnover: Ratio of transactions to stock of housing units (%)
Number of transactions in the real estate market
166.0
215.1
172.9 167.7158.0
136.0
110.0
82.0
23.0
0
50
100
150
200
250
2004 2005 2006 2007 2008 2009 2010* 2011*
Nu
mb
er
of
tran
sacti
on
s (
in t
ho
us.)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Perc
en
tag
e
Total GreeceAthensTurnover* (right-hand scale)
BANK OF GREECEEUROSYSTEM
Private building activity(average annual percentage change)
Source: ELSTAT, * provisional data
Large decrease in building activity during the current crisis and even sharper reduction in the first 7 months of 2011
-31.9
-10.9
-44.0
-19.8-23.7
-39.4
-14.3
-35.4
-60
-40
-20
0
20
40
2005 2006 2007 2008 2009 2010 2011-7months*
% C
hang
e y-
o-y
Number of Building PermitsFloor Space of Buildings (in square meters)Volume of Buildings (in cubic meters)Cement Production Volume
BANK OF GREECEEUROSYSTEM
Residential investment and real house prices
Sources: House Price Index (BoG, Real house prices deflated with HICP), Residential and Construction Investment, HICP and GDP (ELSTAT)
Strong decline in residential investment (peaking at 11,7% of GDP in 2006, it declined rapidly to 5,0% in 2010 and 3,1% in 2011 H1).
3.1
6.0
79.8
0
2
4
6
8
10
12
14
16
18
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011H1
50
60
70
80
90
100
110Residential Investment in % of GDPConstruction Investment in % of GDPReal House Price Index (2007=100, right-hand scale)
BANK OF GREECEEUROSYSTEM
Business expectations in Construction
Significant and sustained decline in all indices of business expectations in construction during the period of the current crisis
An equivalent reduction of business expectations in public works (2010:-1.0%, 2011 10-months: -40.8%) and an even more significant reduction in residential construction (2010: -32.4%, 2011 10-months: -45.1%)
The months of assured production in residential property construction fell to 3.1 in October 2011, from 8.3 in 2010 and 11.0 in 2009
Total Construction 2009 2010 2011-Oct.
General Index of Business Expectations -31.4 -27.4 -30.8 Activity relative to previous quarter -16.1 -39.0 -36.1 Planned future activity -42.8 -63.2 -85.0 Prospects of employment, 3-4 months ahead -32.1 -46.4 -37.5
Particularly important the role of business expectations in the recovery of the real estate market
Expectations of further decline in prices in the next quarter (according to survey among the real estate agencies)
Source: ΙΟΒΕ
BANK OF GREECEEUROSYSTEM
Domestic MFIs credit to households
Source: BoG
Continuous deceleration of the rate of change in outstanding loans to households and a significant tightening in the financing of residential property market.
Cautious attitude of households to house purchase and selective attitude of banks to finance new mortgages
-3.1-2.1
-10
-5
0
5
10
15
20
25
30
35
Ja
nM
ar
Ma
yJ
ul
Se
pN
ov
Ja
nM
ar
Ma
yJ
ul
Se
pN
ov
Ja
nM
ar
Ma
yJ
ul
Se
pN
ov
Ja
nM
ar
Ma
yJ
ul
Se
pN
ov
Ja
nM
ar
Ma
yJ
ul
Se
pN
ov
Ja
nM
ar
Ma
yJ
ul
Se
pN
ov
Ja
nM
ar
Ma
yJ
ul
Se
p
2005 2006 2007 2008 2009 2010 2011
(%)
12
-mo
nth
ch
an
ge
Total Loans (stock)
Housing Loans (stock)
Stock of housing loans:
December 2005: 33.5% -//- 2006: 25.9% -//- 2007: 21.5% -//- 2008: 11.2% -//- 2009: 3.7% -//- 2010: -0.3% September 2011: -2.1%
BANK OF GREECEEUROSYSTEM
Housing loans interest rates
Continuous decline in mortgage rates from November 2008 to mid-2010. Recovery since March 2010 for the rates of new mortgages.
Source: BoG - Including charges other than interest (handling fees, mortgage registration fees, etc.).
4.8
5.8
3.6
5.3
3.9
5.2
3.63.5
4.0
4.5
5.0
5.5
6.0
Jan
Mar
May Ju
lS
epN
ov Jan
Mar
May Ju
lS
epN
ov Jan
Mar
May Ju
lS
epN
ov Jan
Mar
May Ju
lS
epN
ov Jan
Mar
May Ju
lS
epN
ov Jan
Mar
May Ju
lS
epN
ov Jan
Mar
May Ju
lS
ep
2005 2006 2007 2008 2009 2010 2011
(%) p
er a
nnum
Interest rates on all new housing loans including charges
Interest rates on outstanding housing loans with initialmaturity of over 5 years
BANK OF GREECEEUROSYSTEM
Indicators of financial stress: Non-Performing loan ratio
Continuous increase in households financial stress during the current crisis
Source: BoG
3.6 3.4 3.6
5.3
7.4
6.3
5.44.5
5.0
7.7
12.8
10.4
11.9
10.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2005 2006 2007 2008 2009 2010 2011 Q2
Non
-per
form
ing
loan
rat
io (%
) Total loans
Housing loans
BANK OF GREECEEUROSYSTEM
Real property taxation: recent reforms
Increased tax burden and higher in taxation on real estate property
3.7 billion additional public revenues in 2012 through the taxation on real estate property, according to the new government budget
The “objective” values in residential property are lower than the market values (ratio of about 0.63, but increasing)
Higher ratio (“objective” to market value) in commercial real estate (0.66 in June 2011). However for approximately 10% of the commercial property units of REITS, the administrative value is higher than the market value (REITs Analysis: Eurobank Properties, Trastor, MIG Real Estate)
The expected increase in administrative values as from 2012 will put additional burden on property owners and make the recovery of the market more difficult.
The increase in administrative values should be combined with abolition of other taxes or reduction in tax rates (taxes on transactions, etc)
BANK OF GREECEEUROSYSTEM
Administrative to Market Value of Residential Properties
Continuous increase in the ratio of “objective” to market value since 2006
Source: BoG
0,47
0,63
100
110
120
130
140
150
160
170
180
190
200
I III I III I III I III I III I III
2006 2007 2008 2009 2010 2011
(In
th
ou
san
d e
uro
s)
0,40
0,45
0,50
0,55
0,60
0,65
0,70
Market value per housing unit
Ratio of "objective" to market value (right-hand scale)
BANK OF GREECEEUROSYSTEM
Administrative to Market Value of Residential Properties
The “objective” values in residential property are lower (about 2/3) than the market values
Source: BoG
Ratio of Administrative to Market Value of Residential Properties (2011)
0.64
0.61
0.65
0.56
0.63
0.50
0.52
0.54
0.56
0.58
0.60
0.62
0.64
0.66
0.68
0.70
Athens Thessaloniki Other cities Other areas Total Greece
BANK OF GREECEEUROSYSTEM
Ratio of Administrative to Market Value of Residential Properties in Athens: 2011
Source: BoG
0.77
0.76
0.68
0.65
0.63
0.63
0.61
0.56
0.55
0.50 0.55 0.60 0.65 0.70 0.75 0.80
Center (Omonia, Vathis, Kypseli etc)
Center (Kolonaki, Filopappou, Acropoli etc)
South (Argyroupoli, Alimos, Paleo Faliro etc)
Piraeus (center)
East (Agia Paraskevi, Papagou, Cholargos etc)
South (Voula, Glyfada etc)
West (Peristeri, Petroupoli, Chaidari etc)
North (Kifisia, Dionysos, Penteli etc)
West (Ilion, Acharnes etc)
BANK OF GREECEEUROSYSTEM
Real Estate Agents and Consultants Survey
BANK OF GREECEEUROSYSTEM
Assessment of the current situation in the housing market (1/2)
Deterioration of the housing market conditions
Over-supply of houses
Continuing rationalisation of the house prices
Source: BoG
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Much worse 7% - - - - 6% - -Worse 34% 21% 67% 8% 24% 29% 73% -Unchanged 59% 59% 33% 92% 76% 66% 20% -Better - 21% - - - - 7% -Much Better - - - - - - - -
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Much higher Supply 86% 97% 90% 75% 74% 89% 93% -Higher Supply 7% 0% 7% 25% 19% 6% 7% -Balanced - 3% - - 3% - - -Low Demand 7% - - - 3% 3% - -Much LowerDemand - - 3% - - 3% - -
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Very under-priced - - - - 3% 11% - -Under-priced 21% - - - 3% - 7% -Rational 17% 21% 7% 17% 18% 49% 60% -Over-priced 59% 72% 90% 79% 74% 31% 20% -Much over-priced 3% 7% 3% 4% 3% 9% 13% -
A1: What is your assesment of the current situation compared to 3 months ago
2011
A2: In your view, what is the balance between Supply & Demand
2011
2010
2010
A3: What is your assesment of the current house price level
20112010
BANK OF GREECEEUROSYSTEM
Strong reduction in house purchase transactions (also confirmed by the data of the Hellenic Cadastre)
Prices showed a continuous decrease during 2011
Assessment of the current situation in the housing market (2/2)
Source: BoG
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Much Lower 17% 14% 23% 12% 15% 8% 40% -Lower 21% 17% 40% 17% 41% 34% 40% -Unchanged 41% 48% 33% 67% 38% 57% 13% -Higher 21% 21% - 4% 6% - 7% -Much Higher - - 3% - - - - -
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Much Lower 21% - - 25% 3% - 7% -Lower 55% 90% 53% 21% 73% 71% 80% -Unchanged 24% 7% 43% 54% 21% 26% 13% -Higher - 3% 3% - 3% 3% - -Much Higher - - - - - - - -
A4: What is your assesment of the current volume of house transactions compared to 3 months ago
20112010
A5: What is your assesment of the current house prices compared to 3 months ago
20112010
BANK OF GREECEEUROSYSTEM
Expectations in the housing market
Worsening expectations in the housing marketLower number of transactionsFurther weakening of house prices
Source: BoG
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Much worse 17% 14% 37% - 6% 3% 7% -Worse 55% 34% 23% 21% 18% 18% 80% -Unchanged 24% 48% 30% 46% 44% 68% 7% -Better 3% 3% 10% 33% 32% 12% 7% -Much Better - - - - - - - -
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Much Lower 14% 14% 20% - 6% 3% 7% -Lower 59% 34% 40% 21% 18% 32% 80% -Unchanged 24% 45% 27% 29% 47% 62% 7% -Higher 3% 7% 13% 50% 29% 3% 7% -Much Higher - - - - - - - -
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Much Lower - - - - 3% 3% 7% -Lower 66% 83% 83% 79% 68% 54% 87% -Unchanged 34% 17% 17% 21% 29% 43% - -Higher - - - - - - 7% -Much Higher - - - - - - - -
B1: What are your expectations about the housing market sitution in the next quarter
20112010
B2: What are your expectations about the volume of house transactions in the next quarter
2011
B3: What are your expectations about the house prices in the next quarter
2011
2010
2010
BANK OF GREECEEUROSYSTEM
Assessment of the current situation in the commercial real estate market
C1: What is your assessment of the current situation in the commercial real estate market compared to 3 months ago
Source: BoG
Economic Sentiment Index in the Commercial Real Estate Market
-60
-50
-40
-30
-20
-10
0
10
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2009 2010 2011
Offices
Stores
Industrial
BANK OF GREECEEUROSYSTEM
Expectations in the commercial real estate market
C9: What are your expectations about the commercial real estate market situation in the next quarter
Source: BoG
Expectation Index in the Commercial Real Estate Market
-70
-60
-50
-40
-30
-20
-10
0
10
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2009 2010 2011
Offices
Stores
Industrial
BANK OF GREECEEUROSYSTEM
Conclusions: Recent developments and prospects in the housing market (1/2)
Relative reluctance on the demand side and tightness on the financing side
On the supply side, the existence of a substantial property stock (available for sale)
Relative strong persistence of house prices with a slight downward tendency in the next few months
The overvaluation in house prices has been corrected gradually and its adjustment is probably not finished yet.
Buyers’ preference shifted towards smaller (average area from about 97m2 in 2006 to 91m2 in 2011), existing (older) and more affordable apartments
Cautiousness in developing new investment projects and general shift to more affordable commercial properties
BANK OF GREECEEUROSYSTEM
Overall increase of empty commercial premises, rent decline, elimination of goodwill factor, renegotiation of lease contracts
Negative short-term expectations (economic, employment, taxation, etc.) with a significant effect on the real estate market
Expectations of a further small adjustment in prices in the housing market, with being rather low the risk of an abrupt change
Increased tax burden and higher taxation on real estate property
The recovery of the property market is linked directly to improving the expectations of households and businesses, reducing the prevailing uncertainty, financing the market by the banking system, but also the overall prospects for dealing with the problems of the Greek economy (fiscal, structural, etc.).
Conclusions: Recent developments and prospects in the housing market (2/2)
BANK OF GREECEEUROSYSTEM
BANK OF GREECEEUROSYSTEM
Bank of Greece: Real Estate Market Analysis Section
Thank you!
For any queries, please contact:
Bank of Greece Economic Research Department Real Estate Market Analysis Section 21, E.Venizelos Avenue, GR-102 50 Athens, Greece Telephone: + 30 210 320 2376, 3837Fax: + 30 210 320 2660, 2423
Email: sec.realestate@bankofgreece.gr
URL address: http://www.bankofgreece.gr/Pages/en/Statistics/realestate/default.aspx
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