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A market collapse, in numbers

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By Kosmas Theodorides*

Greece has been through a lot in the 20th century but the Civil War in the 1930s is within the two or three most traumatic events. “The Communists will take our homes” was a famous motto of the united opposition to the left-leaning guerillas. Such is the association of Greeks with their property that it worked wonders. I was still hearing this motto in my childhood of the late 1970s and you can still hear it in jokes. The real issue is of course now whether anyone really wants to take our homes. It seems that fewer and fewer people are interested if they have to pay for them. Or so the data shows.

The Athens  Lawyers Association released some data the other day for the first half of the year. Lawyers have still to be present during Real Estate transactions, although as from the end of last year their compulsory presence was limited to contracts over 80.000 Eu. Still, their data was disappointing. Lawyer representations in Real Estate contracts have been reported as follows:

2005     112.231
2006     89.282
2007     90.910
2008     83.515
2009     70.361
2010     61.437
2011     40.103
2012     22.410

for the first six months of 2013 the respective number is 1.744 ( with the caveat that they likely represent mostly transactions over 80.000Eu).

As I follow the Association’s numbers year on year, I have found that they correlate strongly with the final results on transactions published nationwide by the Bank of Greece. If this turns out to be correct again this year, we will be talking about a genuine (further) collapse not only in transaction numbers but also in volume as the most interesting sales of over 80.000 Eu have really been decimated.

Given the enormous supply of newly-built and used housing units, when these results filter through, I expect this collapse to be reflected in prices, with only local pockets resisting. I do not want to be the “bearish analyst” once more but unless serious measures are taken to prevent further collapse, especially in housing, 2014 will be a very interesting year pricewise. The main issue is of course liquidity. I have written time and again that Real Estate crises are for the most part banking and credit crises. This proves especially true in a country where most (over 80%) of the household wealth is invested in property. Something needs to be done and it needs to be done quickly.

To come back to the Civil War jokes, it looks like our Capitalist creditors imposed measures that have achieved what the Communist idealists were always dreaming of: the near extinction of the market. But if the EU and the troika want the country to remain in any form of reasonable shape, economic or social, they better start thinking of ways for the market to function again.

Otherwise, they too may come to the conclusion that the Greek middle classes are ready to fight tooth and nail in order to feel that they protect their homes and property.

*Kosmas Theodorides is a Broker / Owner Polis Real Estate

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