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Real Estate

Provisions concerning the revival of mortgage loans in 2015

The Greek banks focus on new mortgage loans for the upcoming year. The intentions of banks have already been recorded by tentative movements which are proportional to the present weak demand, but it is expected that 2015 will be a turning point for granting mortgage loans of around 1 billion euro and also according to the estimates of the bankers, there are expectations of recovery of real estate market.

It is estimated that this year the amount of new mortgage loans will vary between 500-600 million euro and  will double in 2015. From the disbursements of 15 billion euro in 2007, the market gave less than 250 million euro within the year 2013.

In the beginning of 2000, the annual increase of mortgage loans raised up to 82% due to the low interest rates and the easy access to bank financing. The highest volume was recorded in September 2012 for the amount of 81.5 billion euro and has fallen to 70.2 billion euro in June.

The crucial aspect is the demand, which remains limited, but “of good quality”, as it is recorded in bank branches. It is indicative of the “better climate” the fact that recently seven out of ten applications submitted get approved, while during the period of crisis, only four out of ten requests were accepted. It is about law value loans, which are to a great extent repairing and are addressed to borrowers with an appropriate credit profile.

The ratio of the loan to the value of the property, which ranges near 75% and is much lower than the one during the “golden age” of mortgage loans, reflects a new model, such as for instance the exploitation of even the repairing loans is carefully checked by the submission of the relevant documents. Before the crisis, was taking frequent repair loans for consumption purposes. Before the crisis, the repairing loans for consumption purposes were very frequent.

Banks anticipate the financing of the private sector in September will be totally accelarated, and therefore they estimate that the increase of the offer, which began after Easter, will be greatly enhanced in the coming time. The budgets include new loans of about 5 billion euro this year compared to the amount of 1 billion euro in 2013.

Furthermore, the interest of financing of the private sector focuses mainly on business loans, secondarily on mortgage loans and to a much less extent on consumer ones, whereas there is already a growing interest in car loans. The credit growth is expected to enter in a “positive field” in 2015, when the new loans will begin to exceed the full payments. Based on official data of the Bank of Greece, the annual rate of change in mortgage loans in June reached the rate of -3.2% and was stable in the last few months with negative flow of financing at about 129 million euro.

Four reasons
Meanwhile, they are four reasons which are expected to contribute to a better development in the areas of trade and investments in real estate during the next few quarters:
a. the improvement of the “economic climate”, including the expectations of the consumers who have already led to the stabilization of the private consumption and the significant increase in car sales,
b. the rationalization of the tax burdens on property,
c. the very low prices offered for real estate sales and
d. the possibility of combining the return of deposits in the country with the recovery of real estate market.

Savings
The Bank Financiers expect the recovery of the real estate market, indicating that there are accumulated significant savings in many households, arranged in banks, while the possibility of real estate investing in Greece by foreign residents becomes more affordable. As it is pointed out by the Economic Research Division of Alpha Bank, the market activation will mark the start of several other important sectors of the Greek economy, including the banking sector.