Katerina Giousi had given up on buying a place to call home. “It was just unthinkable,” the 29-year-old hairdresser, recently married and with a 10-month-old son, said from the central Athens beauty salon where she has worked for the past six years.
Greece’s seven-year housing boom has left many young people in the same position, priced out of the property market and forced to cover the cost of soaring rents despite little rise in their real incomes. A surge in borrowing costs after the European Central Bank raised interest rates by two percentage points over three meetings has only added to the problem.
That may soon change, however, after the Greek government unveiled a €1.75bn affordable housing package that will put home ownership within the grasp of Giousi and thousands like her by offering ultra-cheap loans to fund property purchases.
As borrowing costs soar across Europe, Greece is the latest country to offer relief to people struggling to get — or stay — on the property ladder. Madrid has unveiled a package of measures to ease the burden on vulnerable homeowners, many of whom are tied to floating-rate mortgages, which move closely in line with interest rate increases. Warsaw stepped in to protect borrowers whose mortgages were made in Swiss francs, following the depreciation of the zloty. Ireland, meanwhile, has loosened the requirements for loans for first-time buyers.
The scale of the crisis facing young Greeks is so great — a poll in June by the Athens-based Eteron think-tank showed 47.9 per cent of people aged between 18 and 44 struggled or were unable to pay rent — that managing it has become a priority for the centre-right government of Kyriakos Mitsotakis, which faces elections next year.
Starting early in 2023, banks will provide €500mn worth of mortgages at a quarter of the market rate to about 10,000 low-income people aged 25 to 39 by using €375mn in interest-free loans from the government. That will mean this group can borrow, initially, at least, at around 1 per cent.
“Without the cheap mortgage, it would be impossible for us,” said Giousi, who has started a property search close to where she lives in Haidari, a densely populated suburb west of Athens.
“The reality is that housing costs gnaw off your income. It wasn’t that way in the past, and we needed to create different tools to cover different needs,” said Akis Skertsos, minister of state and designer of the programme.
The proportion of Greeks spending more than 40 per cent of their disposable income on housing is far in excess of the EU average.
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However, the OECD warned recently that the package will merely lead to higher housing costs in the longer term. “Cross-country experience suggests that the new fiscal subsidy for home loan interest costs may raise house prices when new supply is constrained, with the effect of reducing access to home ownership,” the Paris-based organisation said last month.
Bankers played down the concerns. “Real estate prices will hardly be distorted as the scheme is expected to apply to about 10,000 people,” said Eurobank’s chief executive, Fokion Karavias.
However, Nikos Vettas, general director at IOBE, an Athens-based economic think-tank, said that while the measures were a step in “the right direction”, housing would remain unaffordable as long as salaries stayed low.
The government package also aims to address a shortage in the supply of accommodation, using much of the remaining €1,375bn in funds to renovate old flats for students and low earners. The government is also planning to move civil servants from 177 of its offices from the centre of Athens to the suburbs over the next five years, increasing the availability of space in the city centre.
“[The package] will not only give the opportunity to young people to become homeowners but also provide an incentive to upgrade an ageing real estate market,” said Karavias.
Skertsos said the government will double the funding if demand exceeds supply. The legislation enabling the assistance should be passed by the end of the month, while banks are expected to open applications almost immediately.
Since Greece emerged from its debt crisis, residential property prices have soared. “House prices have increased 30 per cent while rents are up 50 per cent in the past seven years,” said Dimitris Melachrinos, chief executive of Spitogatos, the largest online real estate platform, which has more than 500,000 listings.
The rapid increase has been blamed in part on the growth of Airbnb and similar short-term rental platforms. Greek cities have far more Airbnb rentals that are listed as entire homes than cities such as Amsterdam and Dublin, indicating that the business is having a more drastic impact on curtailing the availability of housing to local people than elsewhere.
In Koukaki and Plaka, two areas close to the Acropolis, old buildings have been renovated and turned into boutique hotels, while former residents, among them students and young couples, have been replaced by tourists. Taxis and minivans circle the streets, waiting for visitors, while keys have been replaced by codes on the exterior doors, and luggage wheels roaming the pavements are part of the soundtrack.
“It has turned my neighbourhood into a tourist block,” said Constantinos Sofikitis, a lifetime resident of Plaka. “We have become the dirty backyard of the Parthenon.”
Another factor pushing up prices has been the golden visa programme, which granted a five-year residence permit to third-country nationals on the condition that they bought real estate worth at least €250,000. Many properties were purchased at double or even triple their market value, according to a study by Eteron. A doubling of the qualifying threshold to €500,000 from next year will add to the bubble, according to Alkis Kafetzis, a researcher at Eteron.
Germans are the leading foreign buyers, followed by Americans and British, said Melachrinos. “With high global inflation, people turn to real estate as a safe investment, and Greece is still relatively a cheap market compared to other European countries. Just not to Greeks.”
Charts by Federica Cocco
