ARiadni Real Estate Blog

How much and where will real estate prices fall?

27 April, 2020

Mr Themistoklis Bakas, the President of the E-Real Estates Pan-Hellenic Network of Real Estate Agents, spoke to Newsbomb.gr regarding current real estate property price ranges.

The E-Real Estates Pan-Hellenic Network of Real Estate Agents researched the initial downward trends in the cost of renting 90-110 sq.m. homes that are located higher than the first floor in blocks of flats, suitable for families, and constructed after 2000.According to Mr Bakas, “the listed prices are those asked for by owners in February 2020, and the decreases recorded in April 2020 were made following their own recommendations to lower the asking price — namely, they are not the rent prices following negotiations, which will probably be even lower”.He also pointed out that “This sample is not representative of the entire real estate market, it is just a trend — initial reactions by approximately 25% of owners who voluntarily reached out to lower rent asking prices”.

Rental price trajectory prior to the Coronavirus

“The immediate need for shelter, short-term leasing and the ‘Golden visa’, combined with the increase of tourism in Greece, have overturned the real estate market map, with property rent prices sky-rocketing in comparison to 2016, especially in areas of central Athens”, stated Mr Bakas.In 2018 the average rent in the region of Attica increased by 7%, while in 2019 the market is estimated to have recorded an annual growth rate of 10%. In fact, as regards central Athens, where the highest increases are recorded, rent prices have increased by 20-30% on average over the last 2 years, while outside the city centre the corresponding increase was about 10-15%. In the pre-coronavirus period, renting a flat that was suitable for a family, covering about 90-110 square metres in the eastern, northern, and southern suburbs, ranged from €650 to €850, about as much as the average salary.It is worth mentioning that the rent prices during the 2007-2019 period increased by up to 6.4%, while during the same period of time sales prices dropped by up to -24%.

As Mr Bakas said, “currently, tenants very often spend an entire month’s salary on housing. There were many cases of property owners whose lease with lessors ended within 2018 and who silently extended it for 12 months, and property owners accepted further lease renewals on the condition that the lessor accept rent price increases of up to 35%-40% in comparison to the rent price 3-4 years earlier.”“The only way for someone to find a property suitable for a family at pre-crisis prices, was renting 25–40-year-old properties in “degraded areas” in central Athens and the Suburbs of Athens and Piraeus. That was also the case in most rural cities, where there were very few properties available to rent at normal prices”, he pointed out.

“The major spike in rent prices is mainly due to the accumulation of both many years of residential property underperfomance, which led many owners to sudden rent price increases in order to limit the losses sustained during the years of the financial crisis, and the inability of interested parties to invest in purchasing a home to cover their housing needs”, mentioned the President of the E-Real Estates Pan-Hellenic Network of Real Estate Agents.
At the same time, during the recent pre-coronavirus period “there was an increase in rent payment delays by tenants, mainly concerning rent from late 2018 to September 2019, where there were high rates of unpaid rent”, said Mr Bakas.

Where things stand during the coronavirus pandemic and in the immediate future

“Historically speaking, the first sector to feel the impact of financial crises is the real estate sector, whether it be sales prices or rent prices”, stressed Mr Bakas. The real estate sector is interconnected with Greece’s economy, its tourism, which is the most important aid to real estate investment, consumer psychology, the general sense of security and the investment goals of the global community at any given time in a country that provides and/or creates investment opportunities.Rent prices have already started to drop, especially in areas in which asking rent prices had reached their highest levels recently. This decrease is a reaction by owners who require immediate income, because in many cases income from rent covers other obligations and/or loan payments.

At the same time, there are many real estate owners who reduced rent asking prices (asking prices are prices before negotiations, which means that they may be greatly reduced) because they wanted to immediately rent out their property and avoid dealing with major reductions due to potential financial crashes.

“The highest reductions will be recorded after the summer season and gradually until early in the new year”, estimated the President of the E-Real Estates Pan-Hellenic Network of Real Estate Agents.

Initially, the first generous reductions will be recorded in properties that are not located in top destinations and were the last to enter the short-term rental sector. Properties where the vast majority of owners will return immediately to long-term or conventional leases and/or will sell their properties after the major losses making their appearance in 2019 and peaking in 2020.
Areas that previously, before short-term leasing, were characterised as “degraded”. Areas in which, due to short-term leasing, properties available for long-term leasing were limited, which resulted in many owners rapidly increasing rent asking prices.
Reductions will be rapid, especially in these areas, while the higher the number of properties to quickly return to long-term leasing, the more intense the reduction in rent asking prices will be, especially after the increase in lost rents from non-paying tenants, a trend that has been observed since the summer of 2019.

At the same time, we believe that many funds that have been invested in purchasing homes and/or foreign investors, mainly Chinese (golden visa), who aren’t planning to visit Greece, will rent out their properties in order to have some form of return on their investment and to be able to pay for the cost of maintaining property in Greece.
“Certainly in the immediate future, especially after September 2020 and until early in the new year, the real estate market, as regards property leasing, will self-regulate and will be nothing like the second half of 2018 and 2019. Many areas in Attica will suffer reductions in rent prices, especially in areas that have already reached their price ceiling (e.g. the Southern Suburbs, P. Faliro, N. Smyrni, Glyfada, Alimos, Voula), some immediately and others depending on the amount of time afforded by each area’s standard of living”, noted the President of the E-Real Estates Pan-Hellenic Network of Real Estate Agents.

“We cannot safely identify the amount of overall reductions in long-term rent prices for flats suitable for families, because it is still too early, but we believe that reductions will be in the double digits and determined by the initial leasing cost before the coronavirus, the general economic climate, the rate of increase of unpaid rents, the state of entrepreneurship after the coronavirus, labour standards, the number of properties available for long-term leasing, as well as the government’s economic measure exit strategy regarding the crisis caused by the coronavirus”, concluded Mr Bakas.

Source newsbomb.gr