Fitch: House prices still dropping

By Nikos Roussanoglou

House prices in Greece will drop an additional 15 percent in the medium term, Fitch estimated on Thursday, which would take the total decline since the peak of 2008 to 45 percent, according to the international ratings firm.

Fitch has already upwardly revised its total decline estimate from an original 42 percent in a previous report. According to central bank data, the average house price in Greece has dropped by 34 percent since 2008.

Fitch appears to be aligning itself with a recent assessment by the International Monetary Fund, which anticipated the crisis in the local housing market lasting for six-and-a-half years with a total price slide of 45 percent.

Fitch attributes its negative estimate regarding the course of the country’s property market to the Greek economy’s continuing deep recession and the uncertainty in the real estate market stemming from the tax framework. In the first four months of the year just a handful of house transactions were completed owing to uncertainty about the application of the capital gains tax.

Although that issue has largely been settled now, transactions have not reverted to their usual level, even though one would have expected them to rise due to agreements made during the period of the transaction freeze. The problem is that in many cases buyers have to justify incomes they do not have which would need to appear on the paperwork due to the objective property prices, used for tax purposes, which are much higher than the actual market rates.