Low housing supply squeezes home prices up
Low housing supply squeezes home prices up
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Low housing supply squeezes home prices up

Nominal prices of apartments in the first quarter of 2023 were increased compared to the corresponding quarter of 2022 by 14.5%.
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RE+D magazine
03.07.2023

The slowdown in the growth rate of construction activity, that for more than a decade has been affected by successive crises, has led to a further increase in property prices, and especially housing, in the first months of 2023, according to the recent Bank of Greece's Report for Monetary Policy.

Apartment prices in the first quarter of 2023 were up 14.5% compared to the corresponding quarter of 2022 with office and high-end retail prices increasing by 2.2% and 2.4% respectively over the same period .

The low supply of modern properties gradually leads to the diffusion of price increases to properties of lower technical specifications. At the same time, yields are kept at low levels for the market, but attractive for investors, as a result of which investment activity remains active both from abroad and from within the country.

In the first quarter of 2023, net foreign direct investment in Greece for the purchase of real estate recorded a significant positive annual growth rate (32.9%) and reached €0.5 billion, continuing the dynamic course of the previous year.

Residential property market

According to the indices for apartment prices unveiled by the Bank of Greece from data-estimates collected from credit institutions, the nominal prices of apartments in the first quarter of 2023 were increased compared to the corresponding quarter of 2022 by 14.5% (provisional data ), while for the whole of 2022, based on the revised data, apartment prices increased at an average annual rate of 11.7%.The growth rate in the first quarter of 2023 in old apartments (over 5 years old) was higher (15.6%) compared to that of new apartments (12.8%), while on the contrary in 2022 the growth rate of new apartments was slightly higher.

By geographical area, the two major urban centers of the country record stronger annual growth rates than the average annual rate for the whole of Greece, mainly due to the continued investment interest. In particular, for the first quarter of 2023, the Athens region recorded an average annual growth rate of 16.5% and Thessaloniki 16.1%, while for the whole of 2022, the corresponding growth rates were 13.7% and 12.5 % (revised figures).

Residential construction activity (ELSTAT data) appears to be recovering in the first two months of 2023 at national level, recording in terms of building volume (in cubic meters) an annual increase of 6.8%, while in the region of Attica the corresponding increase was higher ( 19.3%).

Residential investments (seasonally adjusted ELSTAT figures at constant prices) increased in the first quarter of 2023, on an annual basis, by 48.4%, although they remained at a low level as a percentage of GDP (2.0%).

The total construction cost of new residential buildings (ELSTAT data) increased in the first quarter of 2023 on an annual basis by 8.1%, while for the whole of 2022 the average annual increase was 8.8%.

The total amount of new mortgages, which remains at low levels, decreased during the period January-April 2023 on an annual basis by 7.2%, against a significant increase in the corresponding period of 2022 (67.3%). At the same time, the increase in mortgage interest rates contributed to the decline in mortgage demand for the fourth quarter in a row, after two years of continuous demand growth (Bank Lending Survey data, Q1 2023).

Stable total return in commercial properties market

With regards to commercial real estate sector, based on the data collected by the Bank of Greece, in the second half of 2022 the prices of high-end offices increased by 2.2% compared to the immediately preceding half-year, while the prices of high-end shops increased by 2.4%.

In Athens, the growth rates for offices and high-end shops were higher, reaching 3.7% and 3.2% respectively. Increases were also recorded in the rents of offices and shops of all categories, which amounted to 1.1% and 1.8% respectively at country level, compared to the previous semester.

Minimum yields on high-end offices in the most commercial parts of the capital's center ranged between 5.6% and 6.4%, flat on the previous half-year. High-end store yields in the most commercial locations of central Athens (Ermou Street), during the second half of 2022, are estimated to have fluctuated between 5.3% and 6.2%, also at the levels of the first half of 2022.

During 2022 the construction activity for commercial real estate (ELSTAT data) recorded a negative rate of change (-8.1%) and, despite the fact that in the first two months of 2023 the corresponding rate of change became marginally positive (0.8%) ), in the individual categories the picture remains mixed. Specifically, the first two months of 2023 saw a very significant increase in the number of new licenses for offices (342.9%), while the corresponding total volume (in cubic meters) was reduced by 52.0% compared to the same period in 2022. New store licenses are down 33.3%, but volume is up 51.2%. Finally, a drop was recorded during the first two months both in the number of new licenses (-10.4%) and in the volume (-9.4%) of hotels.