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The real estate markets in Greece, Romania and Bulgaria

2012-02-21   |  www.setimes.com, 20.02.2012

Central Athens homeowner Mary Parisi's tale is all too familiar these days. "I've been trying to sell my house for the past year," Parisi, owner of a five-year-old 90 square metre flat, told SETimes.

No one, it seems, is ready to take the plunge. "I've placed ads in all major papers and have had only a handful of calls. Once they see the house, they love it, but when it comes to the price they're reluctant," Parisi says. "And I've even lowered the price by 20,000 euros."

The ongoing economic slump, rising unemployment rates, diminishing purchasing power, newly imposed property taxes and banks' conservative or no-loan policies have taken a massive bite out of the Southern Europe property market, which has screeched to a virtual standstill.

"It is a take it or leave it game,” said Emil Biclea, who has been trying to sell his flat in Bucharest for two years. He started out asking about 50,000 euros and never got an offer over 40,000. “The buyers take advantage of the unfavourable economic situation and ask for a much lower price. I, in return, don't want to sell it for nothing because I invested in it. Therefore, all I can do is wait for better times to get the most of this sale", he told SETimes.

Throughout Southeast Europe, property owners are playing a similar game – hoping that prices begin to return this year to their pre-2008 levels, when the global housing bubble began to pop and sent economies crashing around the world.

Polina Stoykova, chief operations manager of the Sofia-based real estate agency Bulgarian Properties Ltd, says the prices of apartments in the Bulgarian capital have fallen by 40% since the crisis began in late 2008. "The year 2009 was the most stressful," she told SETimes in a telephone interview. "In 2010, it looked as if things were somehow returning to normal. But 2011 was controversial."

The expectations for economic recovery and a revival of the real estate market that prevailed at the beginning of last year proved short-lived. The upsurge observed in the first half of 2011, when the volume of deals rose, was followed by a slowdown as a result of the deepening debt crisis across Europe, Stoykova explained.

But perhaps no one has suffered more than the Greeks, whose housing crunch is compounded by deep austerity measures that have increased taxes, slashed wages and forced many into unemployment as Athens desperately tries to avoid default.

For Greeks, 84% of whom own their homes -- the second highest rate in the EU --property has and will continue to be a safety net of sorts. That mindset has helped stabilise prices somewhat.

Values for new construction [five years or less] dropped a mere 10.4%, according to a recent Eurobank report, indicating that most builders refuse to cut prices and facilitate market mobility. Older properties saw a larger 15.8% drop.

"The market is frozen, and there's definitely been a drop in prices, but builders can only go so low, especially if one takes into consideration how much they paid for the property in the first place and then to build," Thanasis Koukas, a building constructor who sells apartments in Athens and in the seaside resort town of Rafina, southeast Attica, told SETimes.

"It's always better to buy than to rent," Dritan J., a worker from Albania living in Athens, tells SETimes. "In the end you own a house. And if you're a handyman like I am, you can always find a decent deal." Dritan bought his house in the Kato Patissia area for a "good" price, and is doing all the renovations himself. "That way we save money," he adds.

Prices in Greece have sunk 14%, back to the levels of 2005, when an 18% increase in VAT for building licenses in 2006 sent prices soaring. Koukas agrees that the market boomed after the 2004 Athens Olympic Games. "In 2003 there were six contractors working in the Rafina area, in 2005 there were 50."

The result? Approximately 180,000 unsold new houses, according to Theodoros Mitrakos, head of the Bank of Greece's real estate market analysis department. He painted a bleak picture during a recent Bank of Greece conference, adding that buyers are few and far between, investments for further development had come to halt and both were exacerbated by over taxation.

The property market, a backbone of the local economy, has been the target of the government's last-ditch efforts to fill its coffers. Taxes on property, transactions, emergency taxes as well as "fines" for illegal home modifications have left homeowners, especially those who have taken out loans, on the brink.

"I took out a loan based on my income to buy this house," says Zoi S., a 42-year-old high school teacher. "Now they've cut my salary by a third and I have to borrow money from my parents to pay the loan and get by…at this age."

The Central Bank of Greece predicts that the construction sector will suffer further, while 60% of real estate agents say prices will eventually drop.

Yet, the crisis has not hindered foreigners, who are eyeing idyllically situated Greek villas as semi-permanent residences.

"Foreign interest in Greek property is as strong as ever," Ioanna Plakokefalou, general manager of Hellenic Realty, tells SETimes. "There are those who continue to buy and who are very selective in their choices and those who are waiting for the market to stabilise," she explains. As for prices, "They have not dropped as was expected." This, she points out, is due to the Greeks' "special" bond with their properties.

Plakokefalou points out that there are sellers who have lowered their prices, some as much as 30%, given an urgent need for cash. She also notes that the pool of potential buyers seems to be changing.

"In previous decades, it was Germans and Britons who had the buying power, but in the past five months, I've been contacted by interested parties from Russia, the Czech Republic, Bulgaria and Israel." "Greece," she adds, is after all "one of the few places in Europe where a dream house by the sea is still affordable."

Back in Central Athens, an anxious Mary Parisi points out that two other larger apartments in her building sold for much less a month ago. "Some people are apparently buying; … The people who came to me said they wanted to invest their money in property because they feel it isn't safe in the bank."

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