IMF: The Greek housing paradox, why affordable housing remains out of reach

The above findings are highlighted in the IMF’s recent report on Greece, which provides an extensive analysis of the country’s affordable housing crisis.

In recent years, property prices in Greece have risen at a much faster pace than citizens’ incomes. Following the sharp decline during the financial crisis, when housing prices collapsed by more than 40%, the real estate market began to recover from 2017 onwards. This upward trend accelerated significantly after the pandemic, resulting in housing prices increasing by approximately 85%, while incomes grew at a considerably slower rate.

This situation has rendered the housing market inaccessible for a large portion of the population. For the average worker or a young couple, purchasing a home through a mortgage has become extremely difficult. High interest rates, strict lending conditions, and the requirement for substantial down payments act as major deterrents. According to the study’s findings, a household may need up to 20 years of savings to accumulate the funds required for a housing down payment.

At the same time, rents have also increased sharply, particularly in major urban centres such as Athens and Thessaloniki. Although rent increases were initially slower than the rise in housing sale prices, the situation changed after the pandemic. The cost of new rental agreements continues to rise steadily, placing significant pressure on tenants.

According to the study, approximately two out of every five Greek households spend more than 40% of their disposable income on housing-related expenses, including rent, mortgage payments, energy bills, and property maintenance. This means that a large share of the population is considered financially “overburdened” by housing costs.

The housing pressure has substantial social consequences. Many young people are forced to remain in their parental homes for longer periods, delaying their independence and family formation. The issue is even linked to the country’s low birth rate. At the same time, many households live in smaller homes than they actually need, while cases of energy poverty — the inability to adequately heat or cool one’s home — are also increasing.

One of the most striking findings of the report is that Greece has a very large housing stock relative to its population. Nevertheless, a significant portion of these properties is not used as primary housing. Approximately 35% of housing units remain outside the core housing market, while a considerable number are completely vacant.

Many of these properties are old, energy inefficient, or abandoned, requiring substantial investment for renovation. In addition, bureaucratic obstacles, fragmented ownership structures resulting from inheritance, and legal disputes hinder their utilisation. As a result, although there appears to be an adequate number of homes in theory, in practice a large proportion cannot be readily used.

Increased demand from foreign investors has also played a significant role in driving prices higher. Following the crisis, Greek real estate was viewed as an attractive opportunity due to its low prices. The Golden Visa programme, which grants residence permits to foreign property investors, attracted considerable capital inflows. At the same time, members of the Greek diaspora as well as foreign investors purchased large numbers of properties, particularly in tourist areas and central Athens.

Meanwhile, short-term rentals through platforms such as Airbnb expanded dramatically. Short-term rentals in Greece increased by approximately 240% within just a few years. In many areas, property owners prefer to rent their properties to tourists rather than offer long-term leases, as short-term rentals generate higher profits and provide greater flexibility.

As a result, the supply of housing available to permanent residents has declined, particularly in tourist destinations and central neighbourhoods of Athens and Thessaloniki. The study notes that the expansion of short-term rentals contributed to increases in both property sale prices and rents.

At the same time, although construction activity in Greece has recovered compared to the years of the financial crisis, it continues to face serious challenges. The construction sector struggles to meet demand due to labour shortages, low productivity, and high construction costs.

Most construction companies are very small and have limited access to financing. Furthermore, there is a shortage of new workers entering the sector, as many left the profession during the crisis years. As a result, the supply of new housing is growing slowly, while construction costs remain high.

Another major issue concerns the energy condition of housing in Greece. Most of the country’s building stock is old and energy inefficient. Only a small percentage of homes belong to high energy-efficiency categories.

This means that even homeowners who do not pay rent or mortgage instalments still face very high electricity and heating costs. The energy upgrading of residential properties is progressing slowly, despite existing subsidy programmes.

The Greek government has already introduced a series of measures aimed at addressing the housing crisis. The total package exceeds €6.5 billion and includes more than 40 interventions.

These measures include subsidised mortgage programmes for young people, rent refunds, housing allowances, and tax relief measures. At the same time, housing renovation programmes such as “Renovate–Rent” and “Exoikonomo” have been introduced, aiming to utilise vacant properties and improve their energy efficiency.

The government is also attempting to limit the uncontrolled expansion of short-term rentals in certain areas and encourage long-term leasing. In parallel, efforts are being made to expand social housing and student accommodation.

However, the study emphasises that more coordinated and deeper interventions are required. One of its main conclusions is that Greece is facing less of a housing shortage and more of a problem related to the poor utilisation and allocation of its existing housing stock.

Experts propose the introduction of both incentives and disincentives to return vacant properties to the market. For example, additional subsidies for renovations could be provided, while taxes could be imposed on properties that remain vacant for long periods in high-demand areas.

Particular emphasis is also placed on resolving issues related to fragmented ownership and inheritance disputes that keep thousands of properties inactive. At the same time, improving the judicial and administrative framework is considered essential in order to accelerate property transfer and development procedures.

Interventions in the construction sector are also regarded as crucial. Increasing productivity, supporting small businesses, training new workers, and facilitating access to financing could contribute to higher construction activity and lower building costs.

The study further stresses that demand-support measures must be implemented carefully. If they are not accompanied by an increase in housing supply, there is a risk that they will simply lead to further increases in property prices and rents, benefiting property owners and investors more than citizens who genuinely need assistance.

Finally, the report underlines that housing policy cannot operate independently from other public policies. Income growth, labour market improvements, lower energy costs, and regional development are all directly linked to addressing the housing crisis.