Greece’s red-hot housing market

Aspasia Athinaiou
December 8, 2023

Table of Contents

Greek house prices continue to rise strongly, amidst increasing demand from foreign buyers and continued economic growth in the country.

In Greece’s urban areas, house prices soared by 14.14% during the year to Q2 2023, following year-on-year increases of 15.32% in Q1 2023, 14.75% in Q4 2022, 12.77% in Q3 2022, 11% in Q2 2022 and 10.6% in Q1 2022, according to figures released by the Bank of Greece. When adjusted for inflation, urban house prices rose by 11.33% y-o-y in Q2 2023.

The first half of this year has been the Greek housing market’s best performance in two decades.

Greece’s house price annual change

On a quarterly basis, house prices in urban areas increased by 2.45% (0.38% in real terms) in Q2 2023.

The strong growth was mainly seen in the major cities:

  • In Athens, Greece’s capital city, house prices rose strongly by 14.05% (11.25% in real terms) in Q2 2023 from a year earlier, its eighth consecutive quarter of double-digit growth. During the latest quarter, house prices were up 1.45% (-0.59% in real terms).
  • Thessaloniki, the country’s second-largest city, led the house price growth of 16.37% (13.51% in real terms), up from the previous year’s 11.45% increase. Quarter-on-quarter, prices increased by 3.27% (1.19% in real terms) in Q2 2023.
  • In other cities (excluding Athens and Thessaloniki), house prices rose by 14.63% (11.8% in real terms) in Q2 2023 from a year earlier, the highest y-o-y increase since Q4 2006. During the latest quarter, prices increased 4.46% (2.35% in real terms) in Q2 2023.

Demand from foreign homebuyers is rising strongly. In the first half of 2023, the total value of real estate purchases by foreign buyers, which accounts for 80% to 85% of all real estate purchases in Greece, soared by a huge 39.9% y-o-y to €1.1 billion, following annual increases of 68% for the full year of 2022 and 34.4% in 2021.

Foreign investors have been attracted to Greece, mainly due to the Golden Visa Program, which offers residency to non-EU investors purchasing or renting property worth over €250,000. However, in August 2023, the cost of a Greek Golden Visa was doubled to €500,000 in the most popular areas of the country. The plan is valid for five years and is open to renewal.

The housing market is also buoyed by the country’s strong economic performance. After expanding by a robust 8.4% during 2021, the Greek economy grew by another 5.9% last year, as the government’s National Recovery and Resilience Plan provided significant support to the economy.

The overall economy will continue growing this year, albeit at a slower pace. The International Monetary Fund (IMF) expects the Greek economy to expand by a modest 2.5% this year while the European Commission. released a slightly lower forecast of 2.4% growth.

Foreign interest in Greek tourism real estate surging

The property market accounts for about 20% to 35% share of total FDI in Greece annually. During 2022, net foreign direct investment (FDI) for the purchase of properties rose sharply by 68% y-o-y to nearly €2 billion, following an increase of 34.4% in 2021 and a decrease of 40% in 2020. It is now the highest recorded in two decades.

In the first half of 2023, net FDI in real estate reached €1.1 billion, up by a whopping 39.9% compared to the same period last year, according to the Bank of Greece.

But even before the Covid-19 pandemic, foreign investment in real estate in Greece had been rising strongly. Net FDI for real estate surged by 45.3% in 2016, 86.5% in 2017, 172.1% in 2018, and another 28.5% in 2019.

According to a 2022 Ernst & Young investment report, Greece remains resilient and attractive to foreign investors, despite the uncertainty of the international environment. Based on data released by the European Investment Monitor (EIM), Greece attracted 30 FDI projects last year, fewer than in 2020 but remains the country’s second-best showing since 2000. The total investment projects in 2020-21 accounted for about 24% of total FDIs over the last 22 years, according to the EY report. During 2022, the Greek real estate market accounted for nearly 22% of the total net FDI of €9.06 billion, based on data from the central bank.

Part of this is due to the Golden Visa Program. The Golden Visa program was launched in 2013 to revive the housing market from a prolonged slump. It offers residency to non-EU investors purchasing or renting property worth over €250,000, similar to Hungary, Spain, and Portugal. However, in August 2023, the cost of a Greek Golden Visa was doubled to €500,000 in the most popular areas of the country. The plan is valid for five years and is open to renewal.

The increased real estate investment requirement would be applied to the northern part of the Hellenic Republic, the central and southern sectors of Athens in the Attica region, and the islands of Mykonos, Santorini, and the Municipality of Thessaloniki.

“In order to increase the affordability of real estate for Greeks, we are now increasing the minimum amount of investment required for the issuance of a golden visa from €250,000 to €500,000 (£434,000, $500,000),” said Greek Prime Minister Kyriakos Mitsotakis.

From 2014 to 2021, 9,610 main applicants received their Golden Visa in Greece. From its inception to December 2021, a total of 28,767 Greek Golden Visa permits were granted to the main applicants and their dependents, which yielded a total investment of more than €2.6 billion into Greece. Then in 2022, the Ministry of Migration and Asylum announced that 2,767 new Golden Visas were issued, up by a whopping 81% from a year earlier and one of the highest ever recorded.

From 2014 to 2022, the highest number of applicants came from China, with a total of 6,159 visas approved which is equivalent to about 62.8% share, followed by Turkey (6.4%), Lebanon (4.5%), Egypt (2.9%), and the U.K. (2.0%).

In the first half of 2023, the number of Golden Visa applications reached 20,103. Of these, 5,822 represent the main applicants and 955 are renewals. The remaining 13,326 applications are related to family members of the main applicants.

Measures to boost the housing market

Aside from the Golden Visa program, several other measures introduced by Prime Minister Kyriakos Mitsotakis have buoyed the housing market recently:

  • Suspension of VAT payments on new building permits: Mitsotakis announced in October 2019 a suspension of VAT payments on any new building permits and unsold properties built after January 1, 2006. The suspension originally runs from December 12, 2019, to December 31, 2023. But in September 2022, Mitsotakis announced an extension of the tax relief for another year – until the end of 2024.
  • Tax relief for real estate: the government ended real estate tax in 26 islands in 2020.
  • Reduction of the single property tax (ENFIA): The ENFIA for individuals was reduced in 2019 – 30% reduction for properties valued up to €60,000; 27% for those valued up to €70,000; 25% for those valued up to €80,000; 20% for those valued up to €1 million; and 10% for properties valued more than €1 million. A further 10% reduction, on average, was applied to all property owners from the year 2020. Then in February 2022, Mitsotakis announced a new 13% reduction in the ENFIA.

Starting from 2022, the main rates of the new ENFIA are as follows:

Property zone ratesOld ENFIANew ENFIA
€751 to €1,500€3.70 per sq. m.€2.80 per sq. m.
€1,501 to €2,500€4.50 to €6 per sq. m.€3.70 per sq. m.
€2,501 to €3,000€7.60 per sq. m.€4.50 per sq. m.

Moreover, the new system expands the 30% ENFIA discount for properties up to €100,000 euros each and the 25% discount expands to properties of €100,001 to €150,000. The new law also provides for the payment of the single property tax in up to 10 interest-free monthly installments, up from six tranches in 2021.

“Under the new rules eight out of ten property owners will pay an even lower rate,” PM Mitsotakis said. “A fair share will pay the same contribution, while a small minority, around 6 percent, will see a reasonable increase.”

High property taxes had discouraged many potential buyers because property taxes had increased seven times since the global financial crisis.

Reducing taxes has been one of the priorities of the Mitsotakis government.

Housing boom and bust

Greece had a great house price boom during the early-2000s. Real estate agents reported 30% to 40% annual price rises for properties near the sea in 2004. In Athens, house prices rose 11.2% in 2006, before slowing to 6.2% in 2007.

When Greece’s dramatic economic crisis hit, residential property prices began falling dramatically. Between 2007 and 2017, Greece’s GDP per capita fell by a quarter, and house prices in Athens fell by 44.5% (-49.5% in real terms). 

Here are the house prices in Athens in the past 15 years:

Sources: Bank of Greece, Global Property Guide

Greece finally emerged from the recession in 2017 – growing by 1.1% in 2017, 1.7% in 2018, and by 1.8% in 2019. 

The housing market started to recover in 2018, having fallen 42.5% (-47.7% in real terms) from 2007 to 2017. House prices in urban areas rose by 3.51% in 2018 and by another 7.46% in 2019. Athens had even stronger house price growth of 4.67% and 11.86% over the said two years.

And, despite the fact that the pandemic dragged the economy back to recession, with real GDP shrinking by a huge 9% during 2020, the housing market remains resilient. House prices in Athens rose by 6.23% (8.45% in real terms) y-o-y in 2020.

Fortunately, the overall economic conditions have since improved, with the economy growing strongly by 8.4% in 2021 and another 5.9% in 2022, mainly driven by the easing of pandemic-related restrictions and the low-base effect from the prior year.

As such, house prices in Athens soared by 11.61% (6.86% in real terms) in 2021 while prices in urban areas increased by 10.81% (6.09% in real terms) over the same period. In 2022, house price growth in Athens accelerated to 16.57% (7.67% in real terms) and to 14.75% (5.98% in real terms) in urban areas.

Rapid urbanization has led to a sharp dichotomy between urban and rural areas. Accordingly, more than 35% of the housing stock is vacant, mostly in rural areas. These units are typically dilapidated, or in need of total rehabilitation.

On the other hand, dwelling units in urban areas are amongst the most crowded in Europe. Most children continue to live with their parents after they enter adulthood. The reduction of notary fees from 1.2% to 1% of real estate’s value was clearly insufficient in reducing the high transaction cost, which adds to the burdens of first-time homebuyers.

Moderate rental yields; falling rents

Gross rental yields in Greece averaged 5.22% in Q3 2023, according to a Global Property Guide research conducted in August 2023. In central Athens, specifically Athens Historical Center and Kolonaki – Lykavittos, gross rental yields range from 3.45% to 7.71%.

Smaller apartments tend to have higher rental yields than larger ones.

Rents have been generally falling in the past decade. From 2010 to H1 2023, rents in Greece plunged by about 21%, the worst performance in the European Union, according to the Eurostat. Among the 27 EU member states, only Greece recorded rent declines over the period.

Currently, the monthly rents for two-bedroom apartments in Athens range from €550 to €1,550, based on the Global Property Guide research. In Thessaloniki, a similar apartment rents for about €460 to €600 per month.

Around three-fourths of Greeks live in owned homes, with a homeownership rate of 72.8% this year, down from 73.3% in 2022, 73.9% in 2021, and 75.4% in 2020, according to Eurostat. The rental market comprises about 20% of the dwelling stock.

Mortgage interest rates rising

Mortgage interest rates in Greece are now rising, following the move of the European Central Bank (ECB) to hike its key rates to rein in inflationary pressures. In September 2023, the ECB raised its repo rate further by 25 basis points to 4.50%, its tenth consecutive rate hike since July 2022, when the repo rate was at a record low of 0%.

As a result, the average interest rate for new housing loans rose to 4.29% in September 2023, up from 3.36% in the previous year and 2.87% two years ago, according to the Bank of Greece. For new housing loans with a floating rate or up to one-year initial rate fixation (IRF), which accounts for more than 77% of all new housing loans drawn this year, the average interest rate was 4.42% in September 2023, up from 3.5% in September 2022 and 2.33% in September 2021. Since the second half of 2009, 70% or more of new housing loans have had interest rates adjustable at least annually. 

For new housing loans with IRF of over 5 and up to 10 years, the average interest rate increased to 4.3%, up from 2.95% a year earlier and 3.35% two years ago.

For outstanding housing loans with a maturity of 1-5 years, the average interest rate increased to 5.2% in September 2023, from 4.12% a year ago and 4.06% two years earlier. Likewise, the interest rate for loans with maturity of over 5 years rose sharply to 4.42%, from just 2.73% in the previous year and 2.02% two years ago.

Mortgage market continues to shrink

The size of the mortgage market continues to shrink, amidst rising interest rates. During 2022, the mortgage market was estimated to have contracted to just about 14.2% of GDP, down from 16.9% of GDP in 2021 and 39.5% of GDP in 2012. 

The mortgage market is poised to contract further to just about 12% of GDP this year.

Since the global financial crisis, cash-basis property transactions have accounted for about 80% of all transactions with only 20% relying on bank loans, according to the Bank of Greece, resulting in a continuous decline in the size of the mortgage market.

In the first three quarters of 2023, new housing loans fell by 13.3% y-o-y to €442.7 million, according to the Bank of Greece. This is far from the average of €14.17 billion new housing loans recorded annually in 2005-08 and €5.4 billion annually in 2009-13.

In Q3 2023, total housing loans outstanding fell by 5% to € 28.37 billion from a year earlier, following declines of 3.7% in 2022, 33.3% in 2021, 12.6% in 2020 and 7.2% in 2019.

Construction activity continues to increase

Residential construction in Greece has risen continuously in the past six years, after almost a decade of declining activity. During 2022, building permits rose by 4.6% y-o-y to 24,913 units, following annual growth of 26.8% in 2021, 8.9% in 2020, 13.5% in 2019, 10.1% in 2018, and 9% in 2017.

Despite this, it remains far lower than the 70,000 to 80,000 permits issued annually from 2004 to 2007.

The rise in construction activity in recent years has been buoyed by Mitsotakis’ suspension of VAT on new properties and on unsold properties built after January 1, 2006. The suspension originally ran for four years, between December 12, 2019 and December 31, 2023. However, recently Mitsotakis announced an extension of the tax relief for another year – until the end of 2024.

The VAT exemption is also applicable to situations known as “antiparochi”, where owners provide land to builders in exchange for a number of future apartments.

Construction activity continues to increase this year, despite surging inflation, rising interest rates, and heightened global economic uncertainty. During the first seven months of 2023 (based on figures from Hellenic Statistical Authority):

  • Number of permits: 15,393 units, up by 11% from a year earlier
  • Floor space: 3.38 million sq. m., up by 15.2% from a year earlier
  • Volume: 15.61 million cu. m., up by 16.4% from a year ago

Why Greece had eight years of economic crisis

When the euro was first introduced in 1999, Greece was left out because of its high budget deficit and inflation. Embarrassed by the isolation, Greece appeared to clean up its act and fix its finances and macroeconomic fundamentals. By January 2001, it was able to adopt the euro as its official currency, bringing access to cheap funds and allowing the Greek government to pump-prime the economy.

In November 2004, however, Greece admitted that it had fudged its figures to gain entry into the Eurozone. Since 1999 its budget deficit had never been within the EU limit of 3% of GDP. It was also revealed in early 2010 that Greece had paid Goldman Sachs and other banks to hide the true amount of its debt and borrowing.

When it became clear that the spending spree was unsustainable, creditors and the EU together with other international institutions such as the IMF demanded that Greece cut its spending, including wages and pensions. This was met with severe resistance, manifested in public protests and rioting.

After assuming office in October 2009, Prime Minister George Papandreou revealed that the deficit was much higher than the previous government had claimed. He vowed to downsize the public sector and fight rampant tax evasion.

In May 2010, European leaders and the International Monetary Fund (IMF) agreed to a three-year, €110 billion bailout for Greece which was tied to additional austerity measures. These moves led to a 5.5% economic contraction in 2010, following a decline of 4.3% in 2009. Violent protests, rallies, and strikes followed.

The economy continued to contract in the following years, with real GDP declines of 10.1% in 2011, 7.1% in 2012, and 2.5% in 2013.

The continued demand for cuts and more cuts in the face of already high levels of public misery led to the rise of the radical leftist party Syriza, a coalition of diverse elements. Its leader, Alexis Tsipras, led Syriza to victory and Syriza assumed office on January 26, 2015.

Despite Tsipras having earlier pledged “No more bailouts, no more submission, no more blackmailing,” Greece and its creditors agreed to a third bailout worth €86 billion in August 2015, imposing further spending cuts. As part of the deal, the government passed a pension and tax reform bill in May 2016, which aimed to raise taxes and increase social security and pension contributions for most Greeks to bring about €5.4 billion in budget savings.

Greece exited the bailout program, finally!

The economy started to recover in 2017, registering real GDP growth of 1.1%. In August 2018, Greece finally exited its eight-year bailout program. But it remains subject to scrutiny from its European creditors. The economy grew by 1.7% in 2018 and by another 1.8% in 2019.

“We have had eight very difficult years, often very painful years, where we have had three successive programs. But now Greece can finally turn the page in a crisis that has lasted too long,” said Pierre Moscovici, the European commissioner for economic and financial affairs. “The worst is over.”

In the July 2019 elections, the centre-right New Democracy party won a landslide victory receiving 39.7% of all votes, defeating Tsipras’ incumbent leftwing Syriza party. Ironically the defeated leftists had improved government finances with surpluses of 0.2% of GDP in 2016, 0.8% in 2017, 0.9% in 2018, and another 0.9% in 2019. Public debt also dropped to 180.6% of GDP in 2019, from 186.4% in 2018.

New Democracy’s leader, Kyriakos Mitsotakis, became the new prime minister in 2019. The New Democracy’s victory was mainly attributed to Mitsotakis’ ability to charm centrists, to the conservatives’ ability to obtain votes from Golden Dawn by taking a tough stance on immigration, and on an accord struck by Tsipras resolving a long-running name row over Macedonia, Greece’s neighbor to the north.

Then in June 2023, Mitsotakis beat his center-left rival in the country’s second election in a month. His New Democracy party won 40.5% of the national vote, almost 23 points ahead of Tsipras’ Syriza party, which got just under 18%. Mitsotakis, who has been credited with successfully returning the Greek economy to growth and stability after a severe debt crisis, beat Syriza in May 2023 but called new elections in a bid to win a majority. Mitsotakis’ campaign promises included lower taxes and improved public health.

Improving public finances, continued economic growth

After four years of surpluses, Greece recorded a huge budget deficit in 2020, equivalent to about 9.7% of GDP, due to massive stimulus packages to mitigate the impact of the pandemic. The shortfall fell to 7% of GDP in 2021 and further to just 2.4% of GDP in 2022. The deficit is expected to narrow further to 1.3% of GDP this year and to only 0.6% of GDP in 2024, according to the European Commission.

The country’s debt stood at 172.6% of GDP in 2022, down from 195% of GDP in 2021 and from a recent record high of 207% of GDP in 2020. In fact, it is now below the 180.6% of GDP seen in 2019 before the Covid-19 pandemic.

Public debt is projected to fall to about 160.2% of GDP this year and to 154.4% in 2024, based on EC estimates.

After expanding by a robust 8.4% during 2021, the Greek economy grew by another 5.9% last year, as the government’s National Recovery and Resilience Plan provided significant support to the economy. The economy contracted by a huge 9% in 2020 due to the adverse impact of the pandemic.

“Despite the energy crisis and associated inflationary pressures throughout the year, the Greek economy grew by 5.9% in 2022. Buoyant private consumption, significant investment activity, and the impetus provided by the rebound of tourism during the summer season contributed to the strong growth performance,” said the European Commission.

The overall economy will continue growing this year, albeit at a slower pace. The International Monetary Fund (IMF) expects the Greek economy to expand by a modest 2.5% this year while the European Commission released a slightly lower forecast of 2.4% growth.

“The ongoing implementation of the RRP is shifting from reforms towards investments and is thus set to sustain capital spending, notably in construction and to a lesser extent in equipment, partly offsetting the impact from tighter funding conditions. The full recovery of international tourism to pre-pandemic levels is set to bolster Greek exports,” the European Commission noted.

Overall inflation stood at 3.4% in October 2023, up from just 1.6% in the previous month but far lower than the 9.1% seen in the same period last year, according to the Hellenic Statistical Authority. It also remained above the ECB’s target of 2%. From an annual average of just 0.2% from 2011 to 2021, inflation surged to 9.6% in 2022.

The seasonally-adjusted unemployment rate was 10% in September 2023, down from 10.6% in the previous month and 12.1% a year earlier, according to figures from the Hellenic Statistical Authority. It is Greece’s lowest jobless rate in almost 14 years but still one of the EU’s highest.

There were about 467,800 unemployed people in Greece in September 2023, down from 572,000 unemployed in the same period last year.

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