Greek economic turmoil leaves quarter million houses unsold

Greece’s property market is in the grips of stagnation amid talks of Grexit, the country’s possible EU exit. There are 250,000 houses unsold at the moment, says Greek real estate agency E-Real Estates in its new report, and last year’s sharp price slide shows no sign of recovery from its 17% drop in 2014.

It is not only the drastic cuts in mortgage approval rates since the 2008 crisis at play in the demise of real estate demand. “Greek households suffer from low incomes, permanently high unemployment rates, and tough taxation”, explains Themistoklis Bakas, managing director of E-Real Estate.

According to the agency’s report, only 750 mortgages were approved in the first quarter of 2015, a far cry from the 2,500 approvals during the same period last year. Austerity politics in light of the Greek and European crises coupled with the bank’s ravaging fear of unfulfilled credit have forced the country into a shocking downward spiral which has left the real estate sector in dire straits. In 2006, pre-crisis Greece had approved 120,000 mortgage requests but by 2009, this number had already fallen to 75,000.

“Young couples, who once constituted the largest percentage of buyers, as well as pensioners who used to acquire properties as an investment, appear cautious”, says Bakas.

The real estate sector continues to pay the price for Greece’s economic fallibility and there is little hope that its new Syriza government, led by Alexis Tsipras, can plug that hole. Talks of Grexit, nationwide discontent, inflammatory speeches against bailout terms and the failing patience of EU-IMF creditors are worsening the situation. A dismal 1,800 houses were sold in Q1 2015 against 15,000 in Q1 2014; both of which are dwarfed by the average quarterly pre-crisis peak in sales of 41,000 in 2004.

Tsipras shocked the world on Saturday by announcing a referendum on the bailout following his return from miscarried negotiations in Brussels and terms he condemned as “clearly violating European rules.” The Syriza government is leaving the nation to decide whether or not its debt should be honoured as citizens queue in front of empty and closed cash machines across the nation.

German banking giant, Deutsche Bank, has moved swiftly to warn of the pending danger, declaring: “we would consider the recent turn of events as a particularly negative market outcome.” So while investors may reap higher gains from heightened risk, foreign property buyers should not rush to snatch up unwanted Greek real estate.

Dark clouds shroud the Acropolis as the country edges closer to the brink of bankruptcy and EU exit. Should this happen, experts warn that the property market will follow and likely collapse by 50% or more, leaving investors to decide whether the benefits outweigh the risks in these times of turmoil.

Ivan Chepizhko, Tranio