The Organisation for Economic Co-operation and Development (OECD) has flagged a significant rise in Greek real estate prices, with an increase of 69% recorded from 2017 to the present day.
This steep climb in housing costs is exacerbating the affordability crisis for Greek households, as the ratio of income to house prices continues to worsen.
Urban Housing Pressures and Foreign Investment
The surge in property prices has been most pronounced in Greece’s major cities, particularly Athens and other areas in the Attica region, as well as tourist hotspots. A growing share of non-resident buyers is contributing to this trend, driving up demand and intensifying pressure on local markets.
Housing Costs Strain Household Budgets
The OECD report reveals that housing costs represent a severe financial burden for Greek families. In 2022, 27% of Greeks spent over 40% of their disposable income on housing expenses—a stark contrast to the eurozone average of 9.4%, according to data from the Bank of Greece.
Eurostat figures from 2023 further highlight the disparity: Greeks allocate 35.2% of their disposable income to rent, utilities, mortgages, and other household costs. This is nearly double the European average of 19.7% and significantly higher than Denmark, the next EU country after Greece, at 27.6%. Cyprus, by comparison, has the lowest housing expense ratio, at 11.6%.
Economic Consequences for Greek Families
The financial burden extends beyond housing costs. Nearly half of Greek households (47.3%) struggle with outstanding financial obligations, the highest rate in Europe, well above Bulgaria’s 18.8%, the next highest. Additionally, Greece leads the EU in excessive housing costs, with many families unable to afford basic needs like heating. A significant proportion of the population also resides in smaller homes, reflecting limited housing options.
Impact on Mortgages and Financial Stability
The OECD report notes that while there is limited risk of a sharp drop in house prices in the short term, the housing market demands vigilant oversight. Rising house prices may impact banks’ mortgage loan portfolios, although risks are somewhat mitigated by improved household economic conditions, declining unemployment, and a reduction in gross household debt—now at 76% of disposable income, down from 114% in 2012.
Banks have largely offloaded non-performing loans (NPLs) to specialized funds, ensuring their portfolios remain healthier, with 88% of residential real estate loans maintaining loan-to-value (LTV) ratios at or below 80%.
Government Measures to Ease Housing Pressures
In response, the Greek government has tightened its “golden visa” program as of April 2024, reducing property demand from foreign investors. It has also launched the “Renovate-Rent” initiative, offering subsidies of up to €50 million to increase housing availability through renovations.
The OECD recommends that Greek banks remain proactive in supporting households by offering solutions to prevent credit defaults. Measures such as renegotiating loan terms could help align mortgage repayment obligations with borrowers’ financial capacities.
(Source: In.gr)