Hypostat 2015

EU 28 Country Reports
was stronger in the two major urban centres (Athens: -42.9% and Thessaloniki:
-44.6%), compared with other cities (-38.0%) and other areas (-35.0%), as well
as larger properties in relatively higher cost areas in Greece. During the crisis,
household demand shifted towards smaller, older and more affordable properties
in medium-cost areas which became more marked in 2014, according to the
surveys of real estate agencies conducted in 2014. These kinds of properties are
considered as a safe alternative to households’ savings and have been developed
into an investment option. This is also attributable to the substantial decline in
property transfers tax (to 3% since 2014), while recent legislation on real estate
taxation has curbed the uncertainty of the tax regime on real estate property.
With the continuous fall in house prices in the past few years, the Greek real estate
market does not currently show signs of significant overpricing. This takes into
account the fact that a strong decline was observed in the past five years in the
price-to-rent ratio. House prices then stabilised for two years before continuing
to decline further in the second quarter of 2015. House prices are now (Q2 2015)
33.6 percentage points lower from its peak in the 4 th quarter of 2006.
As a result of financing constraints, rising uncertainty and deterioration of the
economic climate, all activity in the real estate market has come to a halt since
the first months of 2015. The downward trend of house prices is likely to persist
in the following quarters, but at relatively more moderate rates. The reduced risk
of abrupt change in house prices is, inter alia, attributed to the prohibition (until
the end of 2015) of auctioning households’ main residences (with an objective
value of up to €200,000) and the reluctance of commercial banks to auction off
properties that secure bad loans at this stage of severe recession. The recovery
prospects in the real estate market depend, inter alia, on improving businesses’
and households’ expectations, improving bank financing conditions, reducing
uncertainty and boosting the recovery prospects of the Greek economy.
The volume of credit to the private sector has contracted at relatively stable rates
in the last four years. This decrease can be partly attributed to reduced demand
for credit as a result of the weakness of economic activity, commercial banks’
shortage of liquidity, the loss of confidence and the significant losses experienced
by banks as a result of sovereign debt restructuring measures. Credit expansion
remains negative and both supply and demand side developments point to a
further negative path, in view of deteriorating conditions in all funding markets.
The outstanding balances of loans from domestic MFIs to households (end of
period amounts, including loans and securitised loans) declined at an annual rate
of 1.2% in 2010, 3.9% in 2011, 3.8% in 2012, 3.5% in 2013 and 2.9% in 2014.
The respective annual rates of decline for housing loans were 0.3%, 2.9%, 3.4%,
3.3% and 3.0%. The annual growth rate for both corporate and households lending
bottomed-out by mid-2012 and has been gradually improving since, although
it remains negative. The rate of contraction of bank credit to households has
stabilised in the last few months, after decelerating gradually since end-2012;
the rate of contraction of bank credit to non-financial corporations has been
decelerating since the beginning of 2014. The bank lending rate for mortgages
and non-financial corporations has been declining, in contrast to the consumer
credit rate which has been rising. Despite this, as credit risks are increasing, bank
lending rates are expected to rise.
Mortgage Funding
Housing loans continue to record negative y-o-y growth rates, with the latest
figure (June 2015) standing at -3.4%, virtually unchanged compared to previous
months (May 2015: -3.5%, April 2015: -3.4%. Developments in credit to the
domestic private sector are expected to remain negative for the rest of 2015,
driven by uncertainty related to economic activity, as well as the lack of internal
funds and generally the liquidity squeeze experienced by commercial banks. Note
that between October 2014 and June 2015, private sector deposits reduced by
EUR 42 billion. Since the eruption of the Greek crisis in October 2009, deposits
are down by EUR 113 billion in total. Credit standards, terms and conditions
remained unchanged for loans to households and this development is expected
to continue in Q3 2015. The proportion of rejected loan applications to housing
loans shifted slightly, although the proportion of rejected applications for consumer
loans remained unchanged. As far as demand is concerned, it remains unchanged
for housing loans, in contrast to demand for consumer loans and non-financial
corporations that declined due to the effect of consumer confidence, shrinking
production and declining investment expenditures.
Greece
2013
Greece
2014
EU 28
2014
Real GDP growth (%) (1) -3.9 0.8 1.3
Unemployment Rate (LSF),
annual average (%) (1)
27.5 26.5 10.2
HICP inflation (%) (1) -0.9 -1.4 0.6
Outstanding Residential Loans
(mn EUR) (2)
71,055 69,408 6,909,057
Outstanding Residential Loans
per capita over 18 (EUR) (2)
7,794 7,727 16,787
Outstanding Residential Loans to
disposable income ratio (%) (2)
58.2 58.7 n/a
Gross residential lending,
annual growth (%) (2)
n/a n/a n/a
Typical interest rate on new residential
loans, annual average (%) (2)
2.8 2.9 3.4*
Owner occupation rate (%) (2) 75.8 74.0 n/a
Nominal house price growth (%) (1) -10.8 -7.5 2.2
* Please note that this value is the simple average of the typical interest rate of the
EU 28 countries.
Sources:
(1) Eurostat
(2) European Mortgage Federation – Hypostat 2015, Statistical Tables.
The strong economic recession has affected borrowers’ ability to service their
outstanding mortgage debt. As a consequence, the share of non-performing housing
loans has increased substantially since 2008 (i.e. 14.9% in 2011, 21.4% in
2012, 26.1% in 2013, 28.6% in 2014 and 29.7% in Q1 2015), despite the effort
by commercial banks to restructure loans in order to minimise capital losses. NPLs
(on a solo basis) rose to 34.4% in Q1 2015 from 33.8% at end-2013.
2015 EMF HYPOSTAT | 47