Housing affordability in Greece: More supply needed – Apr 24

Greece, like much of the rest of Europe and the broader developed world, is facing housing affordability issues. There are many potential solutions to this complex issue, but one thing is certain; a housing supply increase is needed.

Hello everyone.

House prices in Athens have increased by 80% since the market trough in Q1 2017, according to Bank of Greece data. Additionally, provisional Q4 2023 data suggest that prices are now almost back to the previous market peak (after 16 years!).


The story is the same for rents in the capital, although data availability is more limited, with anecdotal evidence and several limited-sample research reports suggesting that rents have also increased by a similar order of magnitude.

If we combine house price and rent increases with cost increases in virtually all other aspects of life, affordability has worsened significantly and is getting more worrying.

In our view, housing affordability and its solutions have largely to do with real estate economics and ultimately demand and supply.

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Source: Bank of Greece

Income side of affordability

Greece missed the low/zero interest rates wave of the 2010’s due to the Greek crisis. As a result, house prices did not see the same explosive growth seen in other international markets which saw prices overshoot previous peaks by a significant margin years ago.

Between 2017, when the Greek housing market troughed, and 2022, Greece’s real disposable income grew by a total of 12%, outpacing the real income growth of the European Union which was at 6%, according to Eurostat data. However, Greek house prices grew by 36% over the same period, and other housing-related costs also shot up creating the affordability issue that people are facing today. If we look at Europe as a whole, this house price growth looks to be in line with the rest of the EU27, where prices grew by 36% over the same period.

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Source: Eurostat, Bank of Greece

However, the aforementioned Greek house price growth of 36% was the full trough-to-peak increase for Greece, while the trough-to-peak increase in the EU27 has been 71% and in several countries it has been >100%, according to Hypostat. The reality is that Greek house prices have increased more moderately than the rest of Europe.

If we compare the relativity between house prices and real income growth in longer term time periods, the relative story in Greece still does not seem worse than the European Union. For example, between 2009, when Greek incomes peaked, and 2022 real disposable income decreased by 21% in Greece, while house prices decreased by 17%, while European Union real income grew by 10% and house prices increased by 60%. As a result, fellow European citizens have on average been squeezed more by home price growth.

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Source: Eurostat, Bank of Greece

So why do statistics suggest that Greece is in one of, if not the worst position in Europe in terms of home affordability?

Eurostat shows that Greece has the highest % of disposable income that goes into housing costs in Europe at 34% in 2022, while the EU27 average was at 20%.

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Source: Eurostat

If we pay a closer look at the data history, it looks like there is a structural issue in the Greek market and it is less related to the more recent increase in prices and rents. In 2014, when this series begins, Greeks were paying 43% of their disposable income into housing costs, while in the EU 23%, so the ratio has declined by 11% in Greece, vs a 3% decrease in the EU.

In our view, low incomes in Greece is the key issue that needs to be addressed urgently. In 2022 the adjusted gross disposable income per capita in Greece was €17,482 per annum (provisional figure), just ahead of Slovakia and behind Latvia, Croatia, Estonia and Hungary, placing Greece at the last position in the EU27 (no data for Bulgaria, Romania and Malta).


A caveat on the validity of the facts above is the uncomfortable truth of undeclared incomes in Greece and how much this impacts and underestimates the “real” disposable income figure and as a result the actual % of income that goes into housing costs in the country. We have not attempted to estimate this in this article, and we are using directly the figure produced by Eurostat which is used widely.

Concluding on the income side, Greek house prices and rents have grown strongly, but that is after a decade of Greek crisis and aggressively declining prices and rents. At the same time, if compared with the EU, house prices have increased the least and have been considered attractive, which explains partly the increased interest of local and foreign buyers over the past few years. However, houses are expensive to buy and rent for the majority of the Greek population given low income levels, and this is something that should be addressed urgently.

Supply side of affordability

The other side of the story is how prices can normalize without necessarily having to reduce demand and this is through increased housing supply. There are various attempted solutions to this issue, and we have seen examples across Europe, including rent caps, social housing, housing subsidies and others, which all intend to limit house price growth. While all of them have merit, the only change that can organically normalize house prices is an increase in housing supply.

There is common belief on the street in Athens that cranes are everywhere, and that companies and people are building too much and that this is creating a bubble situation. Although we won’t argue if there are any downside risks to house prices in this article (you can see our previous note on this here), we will attempt to provide an overview of the current housing supply in Greece.

During the Greek crisis, private construction permits on a square meters basis dropped by 89% from the peak on a 12-month rolling basis, according to the Greek Statistics Agency, ELSTAT. Since the trough, permits have increased significantly and the latest figure of 6.1 million square meters means permits have increased threefold. However, this figure is still 70% or 14 million square meters lower than the previous peak. What is more, Greece’s investments in private dwellings as a share of total investments was at 14% in Q3 2023 versus an average of 40% between 2000-2010, while the gross value add of the construction sector as a % of total in Greece was the lowest in the EU27 at 2.1% at the end of 2023, versus a European average of 5.7%.


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Source: Eurostat, ELSTAT

There are several studies across Europe that point to a desperate need of more housing needed to be built to meet demand across Europe and most countries fail to achieve the necessary levels. Similarly in Greece, Piraeus Bank used data on the number of new households that have been created over the past years and the number of houses that have been built over the same period and how many houses have been removed from the supply due to short-term renting and came up with a housing deficit of 212,000 homes in the country. Countries, including Greece, don’t build enough houses and that is a major determinant of high prices.


Without the necessary incentives, planning alignment, a functioning debt market and land/building availability for developers to build more and housing owners to direct their additional ownerships towards renting , this supply deficit relative to demand will continue pushing prices and rents higher.


House prices, rents and housing costs in Greece have grown at a stronger pace than incomes have, which have already been starting off the very bottoms of the EU27, and that has created an affordability issue. Demand from wealthy Greeks and foreign capital boosted by the market’s relative value, attractive characteristics, Golden Visa scheme, the rise of short-term renting combined by the lack of supply of modern new and renovated homes have all created a distorted market where homes are not accessible to most Greeks.

As a result, we need to build and renovate more houses in Greece. Both for sale and for rent. And to do that, several factors need to exist: economic backdrop support; planning regime alignment; bureaucracy limitation; streamlined transaction process; functioning rental market that protects both renters and landlords; financial incentives to build; loan market functionality. From the developer side, we need to have the skill and will to address and price the market’s structural and cyclical issues and work towards the goal of more quality housing in Greece.

On the financial incentives front, clear funding of local or European government programs, as an example, similar to the very successful touristic development programs, where part of a touristic project is granted provided that the property gets rented out for touristic purposes for a number of years after completion, are required. A similar program funding part of a new residential development or renovation with the requirement to rent the completed homes in the market for a specific time period or sell at a specific price point could go a long way in incentivizing stakeholders to build more and increase the housing supply that can then moderate house prices and rents in the country.

The above is just a suggestion to a problem that is complicated and where potential solutions are likely numerous. A clear and concise strategy for tackling an issue that affects most developed countries is needed urgently and requires the will and collaboration of both the government and private sector towards a common goal, which is a financially and environmentally sustainable housing market for all.