The government plans a new “My House” program, utilisation of the stock of public properties through social rent and measures to reduce the steep rents, with an eye on boosting the supply of houses in order to alleviate the housing problem that plagues young people and vulnerable families in particular.

The multi-level intervention in the property market will be presented by prime minister Kyriakos Mitsotakis at the TIF, marking the start of negotiations to secure new EU funds.

The so-called “property bubble” shows no sign of shrinking. Spending on housing in recent years has exceeded 40% of disposable income for 3 out of 10 wage earners, one of the highest in the EU.
According to a study published in the Bank of Greece’s financial bulletin, almost a third of households in urban areas spend more than 40% of their disposable income on housing, while many low-income households spend more than 60% on rent alone.

The problem is more acute in Athens and Thessaloniki, while the greatest burden is recorded in the southern Aegean, where spending on housing reaches 45.5% of income. The hardship is most significant, especially among young people up to 30 years of age and decreases as the age increases, but still the percentage remains very high.

At the same time, the “My House” program -I and II- yes, it gave thousands of young households the opportunity to acquire their first home with a discount of up to 75% on the loan rate with the financing of theRecovery and Resilience Fund (RDF), but on the other hand it increased demand by pushing up the prices of properties, many of which were on top of that old and unrenovated. In short, the prices of eligible homes have “inflated” to the extent that it often becomes unaffordable or even impossible to obtain financing from bank loans. Of course, there is no mention of buying newly built ones, which are out of reach for middle-income earners. According to the finance ministry, the solution for affordable housing will be found by boosting the supply of real estate.

The Minister of National Economy and Finance Kyriakos Pierrakakis spoke of a “supply shock” through measures to be announced to open up closed homes and expand the long-term rental market. ELSTAT and POMIDA estimate 2 million properties remain closed or unmarketable. So as demand outstrips supply, prices are rising.

For example, a property that a year ago cost 150,000 euros, today the price has increased by 20% and 25% and can reach 190,000 euros.

How will the closed properties be opened? There are many reasons why a property remains empty, such as high renovation costs in relation to its yield and/or legal, tax, planning and inheritance issues. The measures being considered by the finance staff to make empty homes available for rent are rent tax reliefs. Public sector properties in the portfolio of the EBRD are also expected to be included in the frame. In this context, apart from the rent rebate that will come into effect from November with a maximum of 800 euros, tax relief, extension of restrictions on short-term leases and an increase in the ENFIA on the properties of banks and companies that remain closed are being considered.

Profile

But how is the profile of a borrower in the process of buying a home through the “My House II” program outlined?

According to the most recent data:

1/ 34-37 years old by 13.24%

2/ 31-34 years old by 13.13%

3/ Married or cohabiting by 58.37%, unmarried by 3.42%, while 7.23% are single parent families.

4/ Annual declared income is 12,000 to 24,000 euros by 58.14% and 24,000-36,000 euros by 29.53%.

5/ The bank loan approved is 150,0000 to 190,000 euros for 27.98% of the borrowers and 90,000 to 120,000 euros for 26.51%. Interestingly, within a few months of the previous data recording, the amounts of loans applied for by borrowers have increased, which means that prices continue their upward trend unabated.

6/ The average commercial value of the property purchased is 164,731 euros, while the year of construction of most of them is between 1980 and 1985.

7/ Hellenic Development Bank has approved 9,341 loans worth 1.1 billion euros, i.e. the absorption rate is 58.34%. However, while interest remains high, loan disbursement is proceeding at a turtle’s pace (about 2,561 loans have been disbursed). This is due to the small number of apartments available for sale and high prices, as demand remains higher than supply. The lending bank’s estimate of the price of a property is usually lower than the actual price, forcing borrowers to use equity which they find difficult to secure.

8/ Most loans, as is reasonable, are for the purchase of property in Athens and Thessaloniki. In Attica in particular, the areas that the beneficiaries prefer or, better, can approach financially are the western suburbs, Zografou and Byron. Apart from Attica and Central Macedonia , the percentage of interest in buying property in Thessaly (due to “Daniel”) and Thrace is remarkable…

The package of measures

But let’s see in more detail what the government intervention provides for the mitigation of the housing problem.

– “My House III”:The new program, tentatively named “My House III”, is being considered to provide for looser conditions regarding the age of houses, as well as income criteria which in any case will still apply to new low- and middle-income households. According to circles in the relevant ministries, “the aim of the government’s interventions is to alleviate the housing problem for young and vulnerable families by expanding the funding from community resources, which may no longer come from the Recovery Fund, but from the revised NSRF.”

– Social consideration: social consideration will be added to the government’s affordable housing arsenal in order to increase the housing stock particularly for those on low incomes. The government’s actions on social consideration are included in the Ministry of Social Cohesion and Families’ draft bill that has been posted for public consultation and is expected to be passed in September.

According to the draft law, the ministry’s new General Directorate for Housing and Demographic Policy will automatically transfer dozens of state properties to the new General Directorate for Housing and Demographic Policy in order to be used through the social rent-for-hire programme to create 5,000 homes – in the first phase – with social, affordable rent through the development of partnerships with the private sector. The project is not easy to implement overnight, as international tenders are foreseen to select the contractors, the first of which will be launched at the end of the year. The plots will be made available to individuals for the constructioń of housing, with 30% of these being provided to vulnerable groups. The social housing will be made available at an affordable rent, the upper limit of which will be set by the relevant ministry, and there is also an option to buy out after ten years of consistent tenancy (rent to own model). Beneficiaries are expected to be young people aged up to 39 or young couples.

Therefore, 10 plots of land (75 ha) with building permits are ripe for development, located in Kifissia, Peania, Larissa, Xanthi and Volos. Of particular importance are also two plots of land owned by EFKA in Argyroupoli, the former “Anatolia” factory in Nea Ionia and the historic YFANET building in Toumba, Thessaloniki.

At the same time, 98 suitable plots have been identified within the city plan, with a total surface area of 627 acres, of which 1/3 is located in Attica.

Reduction of taxes for landlords who rent them out

Addressing the housing crisis is a key priority of the DETH package, with measures aimed mainly at young couples and families with children. In addition to permanent rent rebates, social compensation for cheap rents and the “My House III” programme, the introduction of relief and incentives for landlords are being considered.

The economic staff is considering alternative scenarios for new tax incentives for landlords who make closed properties available for rent. The most important is a reduction of the first rental tax rate (from 15% to 5% for incomes up to 5,000 euros) or, perhaps most likely, the creation of a new intermediate bracket with a 25% rate that would mitigate the steep jump in the tax burden from 15% to 35%. But frozen, as it seems, are the proposals for disincentives with a tax “increase” for those who keep closed apartments (as an idle tax imposed in other countries) in order to give them for rent and to increase the supply of housing to bring down rental prices that have risen excessively in recent years.