current developments and prospects of the greek property ...€¦ · bank of greece eurosystem...

BANK OF GREECEEUROSYSTEM

Mitrakos T., Akantziliotou C. and Vlachostergiou V.

Real Estate Market Analysis SectionBank of Greece

6-7 October 2014

Current developments and prospects of the Greek property market


OutlineOutline

Characteristics and recent developments of the Greek real estate market

Property Prices and rents

Transactions

Developments in construction activities, employment and investment

Financing of the real estate market and financial stress

Taxation on property

Recent reforms, risks and pending issues

Prospects for stabilization and recovery


Characteristics and recent developments Characteristics and recent developments in the real estate market in Greecein the real estate market in Greece


Specific features of the Greek housing marketSpecific features of the Greek housing market

High rate of home ownership (80%)

Low mobility and trading volume over the stock

Fragmented construction industry (particularly in the residential market)

Difficulties in monitoring the real transaction prices

Non-homogeneous product (residential and commercial property)

Significant impact of fiscal measures


Residential Property PricesResidential Property Prices and Growth Rateand Growth Rate

Cumulated adjustment of -41.6% in real terms and -36.4% in nominal terms since the current financial crisis (2008 Q3 - 2014 Q2)

Source: BoG, data collected from credit institutions

65.1

102.2

57.2

-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

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Res

iden

tial P

rope

rty P

rice

Inde

x (2

007=

100)

-15

-10

-5

0

5

10

15

20

Ann

ual %

Cha

nge

of h

ouse

pric

es

Annual % change of house prices - rhs

House Price Index (nominal) - lhsHouse Price Index (real) - lhs


Indices of apartments prices by age and geographical areaIndices of apartments prices by age and geographical area(Annual average percentage changes)

Gradual decline in price resilience during the current crisisStronger decline in the two major urban centers (Athens and Thessaloniki) and olderAn even greater price reductions based on real estate agents

Source: BoG, data collected from credit institutions1Data collected from real estate agencies

2008 2009 2010 2011 2012 2013 2014-Q1 2014-Q2 2008 Q3 up to 2014 Q2

All apartments (Greece) 1.7 -3.7 -4.7 -5.5 -11.7 -10.8 -8.5 -7.3 -36.4 a1. New (up to 5 years old) 2.3 -2.0 -4.2 -5.0 -12.1 -10.7 -7.8 -6.1 -34.6 a2. Old (5 years old and above) 1.3 -4.8 -5.0 -5.8 -11.4 -10.8 -8.9 -8.0 -37.5 b1. Athens 0.9 -4.6 -3.2 -6.4 -11.8 -12.4 -10.7 -9.6 -38.8 b2. Thessaloniki 1.5 -6.0 -7.4 -6.8 -13.6 -8.9 -7.6 -5.4 -38.5 b3. Other cities 1.8 -2.7 -5.3 -4.1 -10.7 -10.5 -7.8 -6.5 -34.0 b4. Other areas 3.3 -1.9 -5.8 -4.4 -11.6 -8.5 -5.1 -4.4 -33.0 c1. Urban areas 1.5 -4.3 -4.4 -5.5 -11.8 -10.9 -9.4 -7.8 -36.9

Annual average percentage changesIndices of apartments prices by age

and geographical area


HouseHouse priceprice--toto--rentrent ratioratio

In some extent a correction of overvaluation has already taken place

House price-to-rent ratio: -31.9% lower from its peak (2006-Q4)

Sources: House Price Index (BoG), Price Index of Rents (ELSTAT)

-15

-10

-5

0

5

10

15

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*

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

60

65

70

75

80

85

90

95

100

105

110

115

Average annual change in the house price index (lhs)Average annual change in the price index of rents (lhs)Price-to-rent ratio (2007=100, rhs)


CConstructiononstruction cost indices of (new) residential buildingscost indices of (new) residential buildings(Annual average percentage changes)

Source: ELSTAT

-4

-2

0

2

4

6

8

10

12

I III I III I III I III I III I III I III I III I III I II III I I II

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Total CostMaterials CostLabour Cost

Categories weights Overall cost index 100.00 Material cost index 56.71 Labour cost index 43.29

Despite the recession, construction costs and particularly constructionmaterials remained positive up to 2012 The high cost of replacement of old residential buildings with new impedes a further decline in prices.


Number of transactions in the real estate market (in Number of transactions in the real estate market (in thousthous.).)

Source: ELSTAT (2004-12), BoG estimates (2013)

*Turnover: Ratio of transactions to stock of housing units (%)

166.0

215.1

172.9 167.7158.0

136.0117.9

83.7

57.747.6

21.632.0

13.3 11.6

38.544.749.253.668.8

46.0

0

50

100

150

200

250

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Num

ber o

f tra

nsac

tions

(in

thou

s.)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Perc

enta

ge

Total Greece (lhs)Athens (lhs)Turnover* (rhs)


Real Estate Agencies SurveyReal Estate Agencies Survey: 20: 2009 09 –– 2014 Q1 results2014 Q1 results

Annual percentage changes of residential and commercial Annual percentage changes of residential and commercial property pricesproperty prices

2008-2013: Decline in residential property prices on average (y-o-y) by 50% and in commercial properties by approx. 54% (Offices:-53.0%, Retail:-55.1% and Warehouses – Industrial:-53.8%).

Source: BoG, data collected from real estate agencies

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2009 2010 2011 2012 2013 2014

Ann

ual %

Cha

nge

in p

rices

Offices

Retail

Warehouses - Industrial

Residential


BoG commercial property data base Sources: REICs, Credit Institutions, Property Consultants, Developers, Real Estate Agents Data set comprised by prime and secondary commercial properties Coverage: entire Greece Provisional results

Commercial property market overview Commercial property market overview

Cumulative average change (beginning of crisis up to 2013 H2)*

OFFICES Market Values ~ ‐40%Rents ~ ‐35%Yields ~ 30%

RETAIL Market Values ~‐52%Rents ~‐40%Yields ~ 36%

LOGISTICS Yields ~ 35%

* Provisional data , incorporating REICs’ and Credit Institutions’ data


Developments in ConstructionDevelopments in Construction


PrivatePrivate constructionconstruction activityactivity(Annual average percentage changes)

Source: ELSTAT

Sharp decline in construction activity during the current crisis

An even greater reduction in the Athens area

-20.6

-8.8

1.4

-3.1

-50

-40

-30

-20

-10

0

10

20

30

40

50

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 -H1

Number of Building PermitsFloor Space of Buildings (in square meters)Volume of Buildings (in cubic meters)Cement Production Volume


EmploymentEmployment inin constructionconstruction(thousand people)

Source: ELSTAT, Labour Force Survey

Total employment in construction decreases dramatically

Employment inConstruction 2007 - 2013

Total employment -57.1

Self-employed personwith employees -70.0

Self-employed personwithout employees -15.6

Employees -65.0

149.6

401.8

0

50

100

150

200

250

300

350

400

450

Ι ΙΙ ΙΙΙ ΙVΙ ΙΙ ΙΙΙ ΙVΙ ΙΙ ΙΙΙ ΙVΙ ΙΙ ΙΙΙ ΙVΙ ΙΙ ΙΙΙ ΙVΙ ΙΙ ΙΙΙ ΙVΙ ΙΙ ΙΙΙ ΙVΙ ΙΙ ΙΙΙ ΙVΙ

2006 2007 2008 2009 2010 2011 2012 2013 2014

Family workersEmployeesSelf-employed person without employeesSelf-employed person with employees


Distribution of constructions, average days of employment per moDistribution of constructions, average days of employment per monthnth

Source: IKA-Social Insurance Institute

Number of constructions (in thous.)

57.9 58.7 56.660.5 58.3

51.7

43.1

36.3

24.6

15.312.2

0

10

20

30

40

50

60

70

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Average days of employment per month

13.314.5 14.4 14.7 14.6 14.2 13.6 13.1

12.3 12.112.8

0

2

4

6

8

10

12

14

16

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Number of insured individuals (in thous.)

203.7183.3 175.7

190.2 184.5

161.3

123.8

97.4

61.5

39.8 32.9

0

50

100

150

200

250

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013


Total construction and residential investment (at constant priceTotal construction and residential investment (at constant prices) as % s) as % of GDP and real house pricesof GDP 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 as % of GDP (2007: 12.4%, 2014 Q2: 1.4%)

1.42.3

5.45.9

4.03.63.4 3.3

0

2

4

6

8

10

12

14

16

18

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Q2

50

60

70

80

90

100

110Residential (lhs)Construction (lhs)Construction other than residential (lhs)Real House Price Index (2007=100, rhs)

Investment in construction as % of GDP


Financing of the real estate market and Financing of the real estate market and financial stressfinancial stress


Domestic Domestic MFIsMFIs credit to householdscredit to households

Source: BoG

Continuous deceleration of credit expansion to households

The rate of decline in the outstanding balances of housing loans slowed down after 2013

Reluctant house buyers and cautious banks to extend new mortgages

YearTotal Loans

Housing Loans

2005 31.4 33.52006 25.4 25.92007 22.2 21.52008 12.6 11.22009 3.1 3.72010 -1.2 -0.32011 -3.9 -2.92012 -3.8 -3.42013 -3.5 -3.3

2014 Aug -2.9 -3.0

-10

-5

0

5

10

15

20

25

30

35

40

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

l

2006 2007 2008 2009 2010 2011 2012 2013 2014

% C

hang

e y-

o-y

Total Loans

Housing Loans


Financial stress and high rate of nonFinancial stress and high rate of non--performing performing loansloans

Source: BoG

Continuous increase in households financial stress during the current crisis

6.3 5.4 4.5

7.7

16.0

24.5

31.934.1

5.0

10.4

3.43.6 3.6

27.426.1

21.4

14.9

7.45.3

10.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014H1

Total loansHousing loans


Taxation on immovable propertyTaxation on immovable property


Tax revenues on immovable property Tax revenues on immovable property ((inin milllionsmilllions of of euroeuro))

Source: Ministry of Finance – General Accounting Office (MoF-GLK), * 2014 forecast, BoG estimates (excl. 2 instalments of ENFIA )

0

500

1000

1500

2000

2500

3000

3500

2006 2007 2008 2009 2010 2011 2012 2013 2014*

(in m

illio

ns o

f eur

o)

Tax revenues on property transactions

Total tax revenues on property


Taxes on immovable property Taxes on immovable property as a % of GDP as a % of GDP ((Year: 201Year: 20122))

Source: OECD (data for 2012 and * indicates data for 2011)

4.2

3.9

3.43.3

3.0 2.9 2.82.7 2.7 2.7

2.52.3

2.1 2.0 2.01.8 1.8

1.3 1.3 1.2 1.2 1.2 1.21.0

0.9 0.9 0.90.7 0.6 0.5 0.4 0.3 0.3

1.82.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

United King

domFranceBelgiumCan

ada

United States

Israel

Korea Italy

Luxembou

rgJa

pan

Icelan

dAustr

alia*

New Zea

land

SpainSwitz

erland

GreeceIre

land

Denmark

OECD-Total*

Netherla

nds*Portu

gal

Norway

FinlandPoland*

Turkey

Sweden

Germany

HungaryChil

eSlov

eniaAustr

ia

Czech

Repu

blic

Slovak R

epublic

Estonia

Mexico*


Taxes on immovable property Taxes on immovable property as a % of GDP as a % of GDP in the European Unionin the European Union(Year: 2012)(Year: 2012)

Source: DG Taxation and Customs Union and Eurostat

2.1

1.4

Other


Greece, EUGreece, EU--28 a28 annd Ed EAA--1818: Recurrent taxes of properties as % of Total : Recurrent taxes of properties as % of Total TaxationTaxation

Source: DG Taxation and Customs Union and EurostatEU28 and EA-18: weighted average

3.8

1.30.8

4.2

3.2

3.8

2.6

1.9

3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Greece EU-28 EA-18


In a few words In a few words ……....

BoG: Residential Property Prices (2008Q3 - 2014Q2) -36.4%

BoG - Real Estate Agencies: Residential Property Prices (2008-2013) -50.0%

BoG: House price-to-rent ratio: (2006Q4 - 2014Q2) -31.9%

ELSTAT: Number of transactions in real estate market (2005 -2012) -78.4%

ELSTAT: Private construction activity – Volume of Buildings (m3) (2005 -2013) -89.0%

ELSTAT: Employment in construction – Self-employed person with employees (2007-2013) -70.0%

IKA: Employment in construction – Number of insured individuals (2006-2013) -83.0%

ELSTAT: Production Index in Construction (2008-2013) -70.2%

ELSTAT: Residential investment (2007-2013) -72.2%


Recent reforms, risks and pending issuesRecent reforms, risks and pending issues (1/2)(1/2)

Negative short-term expectations remain (economic, employment, taxation, etc.) despite the recent improvement in business expectations

Low number of property transactions and heavy taxation on property ownership

From transfer to recurrent taxes on properties

Red tape in the Greek real estate market is an additional factor that discourage demand

Notable efforts for the development of public real estate assets but revenues remained low.

Rent prices decline and renegotiations of lease contracts

Cautiousness in developing new investment projects and general shift to more affordable commercial properties

Expectations of further adjustment in prices


Important pending issues:

prohibition of auctions for primary residence?

requirement to disclose the origin of the funds to purchase/build real estate property?

urban planning regulations? land uses? etc

adjustment of objective values?

Stress test and nPLs

Recent reforms, risks and pending issuesRecent reforms, risks and pending issues ((22/2)/2)


Prospects for stabilization and recoveryProspects for stabilization and recovery

The recovery of the property market is linked directly to:

improving the expectationsreducing the prevailing uncertaintyreducing the tax burden and establishing a constant real estate taxation systemfinancing the market by the banking systemthe overall prospects for dealing with the problems of the Greek economy (fiscal, structural, etc.)


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Bank of GreeceBank of Greece

Thanks for your attention!Thanks for your attention!

Bank of Greece: 21, E.Venizelos Avenue, GR-102 50 Athens, Greece

Contact DetailsFor any queries, please contact:

Bank of GreeceEconomic Analysis and Research DepartmentReal Estate Market Analysis Section21, E.Venizelos Avenue,GR-102 50 Athens, GreeceTelephone: + 30 210 320 2376, 3837, 2436, 2373 Fax: + 30 210 320 2660, 2423 Email: [email protected]

http://www.bankofgreece.gr/Pages/en/Statistics/realestate/default.aspx

current developments and prospects of the greek property ...€¦ · bank of greece eurosystem...

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