Greece’s real estate market is heading for a crunch with prices falling sharply as the country’s central bank is pushing up interest rates and its government is considering a hike in the countrys main bond rate.
House buyers are pouring into Athens in record numbers as the nations second largest economy faces a cash crunch after an IMF loan was cut to zero on Monday and a debt crisis forced its biggest banks to lay off thousands of staff.
“It’s the second wave of the debt crisis, which has left a lot of people without a job and the economy is already going through a real crunch,” said Nikolaos Proulis, a 37-year-old house seller from the southern city of Patras.
“In the past few months, we’ve seen the demand for houses rise from about 10,000 houses a day to 30,000 a day.
There are some people who are buying for as little as 20,000 euros ($23,000),” he added.”
I was surprised to see so many people selling their houses for 20,00 euros ($22,000) in the first week of February.
That was the first time I had seen such a surge,” said Proulin, who owns two properties in Athens.”
The market is booming now, and people are really looking for a home that they can live in and invest in.””
There are a lot more buyers in the market than there were two weeks ago.
Prices have come down significantly and the average price has dropped from 50,000 to 35,000, and that’s very good news,” said Mihai Kokkalis, head of Athens-based market research company EKOS.”
People are taking their money elsewhere because of the economic uncertainty.
People are also buying in bulk, buying a house, and putting their money into other investments.”
The latest sign of a sharp slowdown came on Tuesday when the central bank cut its benchmark bond rate to 5.5 percent, the lowest in six years.
“There is definitely a sense of desperation in the markets, but people are still buying,” said a 30-year old house buyer from the northern city of Skopje, who declined to give his last name.
“Some people are looking for houses that are at least 100 percent worth the money.
They are selling their first and second homes, they’re buying smaller properties,” he added, referring to people who buy homes to move into the neighborhood.”
When prices were going up, people bought homes at the peak of the boom in Greece.
Now it’s a recession,” he said.”
They are looking at buying houses that they will rent out, which they will pay back, and they’re also buying a car for their kids and a home for themselves.”
House buyers have also started to move away from Athens, which is the country, for bigger cities in Germany, the Netherlands and other European countries.
The country’s prime minister, Alexis Tsipras, has called for an easing of austerity measures and has promised to extend Greece’s second bailout by another two years, which would give it access to the EU and other loans.
However, a slowdown in the Greek economy is likely to hit other major eurozone economies in the next few months.
European Central Bank (ECB) Vice-President Mario Draghi said in an interview with the Financial Times that a second bailout for Greece could be agreed within weeks if needed, though a deal on a further extension could not be reached until after elections next year.
The Greek economy grew by 5.9 percent in the three months to March, but the country has been hit hard by a debt load of about 150 percent of gross domestic product.
The economy has shrunk by more than 6 percent this year, the fastest in more than three years, as the cost of servicing its debts has risen.
Greece has been in recession since 2014.
The government has been struggling to make money from its bonds, which it has long sold at cheap interest rates, and the country is now facing the prospect of having to declare a full default, potentially throwing it into a deepening financial crisis.
The latest data showed that house prices in Athens fell 2.4 percent in January, a sharp drop from a 5.8 percent drop in February.
In contrast, house prices were up 7.7 percent in Berlin, an annual rate that has been above 10 percent for decades, according to research firm Zillow.
The figures are based on a survey of nearly 3,000 households conducted by the Athens-Clarke Building Association, which says the average house price in Athens was 6,000 euro ($7,000).
“The situation in Athens is not bad,” said Nikos Dendias, the head of research at Zillows.
“But when you compare the average prices in cities like Berlin, Frankfurt and London, it is quite a different story.”
Dendias noted that while house prices are up in Berlin and Frankfurt, they are not