Ahmet Gencturk
24 July 2024•Update: 25 July 2024
- Financialization of the housing sector is one of the primary causes for the skyrocketing prices, urban studies professor Thomas Maloutas tells Anadolu
- 'When the decade-long economic crisis ended in 2019, it was only natural the prices started to increase,' says Athens real estate agency partner Loukas Karabelas, pointing also to role of booming tourism
ATHENS
Greece's housing market is experiencing a dramatic surge in prices, bucking the trend in much of Europe and exacerbating economic challenges for many still recovering from the 2009 debt crisis.
With housing costs up 10.4% in the first quarter of 2023 — the third-highest increase in the EU — the government is scrambling for solutions to a crisis that threatens social stability and political consequences.
Meanwhile, the Europe-wide rise in housing costs amounted only to 1.3% in the same period, while falling 0.4% in the eurozone, which includes Greece. To compare, housing prices declined by a substantial 5.7% in Germany, with France not far behind with 4.8%.
Going back to 2017, Greece's housing sales price index has seen a total increase of some 66% since the third quarter of that year, according to a recent survey by the Bank of Greece.
Seeking to stem this trend as many Greeks are already overburdened by soaring food and energy costs, the government has developed a range of possible solutions, including schemes to turn unused state property into apartments and provide cheaper housing loans for younger people, who have taken the brunt of the housing crisis.
Further taxes and curbs on short-term rentals are also being worked on in a bid to increase housing supply and hence decrease the balance the real estate market.
Moreover, the government in April introduced a major hike in the investment threshold to obtain a Greek residence permit under its "golden visa" scheme, which has been subject to heavy criticism for contributing to the housing crisis.
Thomas Maloutas, emeritus professor of urban studies at Harokopio University in Athens, traces the roots of the problem to the 1990s, when housing began to be treated as a financial instrument.
Speaking to Anadolu, he points to Greece's growing reliance on tourism as a major factor fueling the crisis, noting: "Swift expansion of the short-term rentals, in parallel to growth in tourism, in many places, not only in islands but also in Athens, where significant portion of the Greek population live, has become a serious problem in this regard."
In the capital, the impact is clearly visible. "Skyrocketing housing costs in the central districts of Athens is pushing the middle-class, working-class people and migrants to seek more affordable solutions in the peripheries of the Athens metropolitan area," Maloutas added.
He also highlighted Greece's lack of a strong social welfare tradition and the pursuit of neoliberal policies, even under left-wing governments, as contributing factors.
“The housing market would have been more balanced if enough social housing were produced and offered to the people,” he said.
Maloutas suggested that comprehensive and innovative solutions are needed, given the structural nature of the problem. He proposed that the government should seek cooperation with small-scale landlords, who typically own one or two properties.
“The state should give them an incentive to renovate their house and put it on the social housing market, where prices would be a little bit below the market price," he says, arguing that this could be a long-term, sustainable solution benefiting all parties.
Speaking to Anadolu, Loukas Karabelas, from one of Athens' largest real estate agencies, offered additional context.
He noted that recent price increases were partly a correction from the rock-bottom levels seen between 2016-2019, when costs in some neighborhoods fell to one-third of their pre-crisis levels.
"When the decade-long economic crisis ended in 2019, it was only natural the prices started to increase. On top of that came the booming of tourism and the introduction of the golden visa, which caused to booming demand particularly for the flats ... in the city center," Karabelas said.
