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Greece’s Housing Crisis: Key Drivers And Solutions

Greece is grappling with a severe housing crisis caused by a sharp decline in construction activity and reduced household purchasing power. What was once a typical housing market is now facing a significant shortage of new properties, exacerbating the affordability gap for many Greeks.

The Decline In New Construction

From 2001 to 2011, Greece built an average of 52,000 new homes per year, with 31,000 of them in Attica. But from 2011 to 2021, this dropped to just 26,000 homes annually, with a mere 4,500 in Attica. The housing supply has fallen by as much as 85%-90% compared to the pre-crisis period. Though construction activity has revived in recent years, it is still far from meeting demand.

The Paradox Of Vacant Homes

One of the most perplexing aspects of Greece’s housing issue is the 700,000 vacant homes across the country, according to the latest census. While this large number suggests there should be enough supply, the crisis is fueled by other factors such as rising divorces and a growing number of single-member households, driving up demand.

Mortgage Decline And Shrinking Purchasing Power

Another critical indicator of the housing crisis is the dramatic drop in mortgages. In 2023, only 14,000 new mortgages were issued, compared to 115,000 in 2007. Meanwhile, disposable income in Greece is now at just 68% of the 2010 level, making it harder for people to afford homes. This has further increased pressure on the housing market as real estate prices continue to rise.

Urban Planning And Unused Land

Urban planning policies have also played a role in limiting housing supply. Expansive areas like Mesogeia and Eleonas in Attica remain largely unexploited, while restrictions on existing properties prevent efficient use of available land. These factors prevent the market from responding to growing demand.

Limited Real Estate Availability

Banks and servicers currently hold around 15,000 residential properties, but many of these are occupied, making it difficult to release them to the market. Though efforts to speed up their availability are underway, the overall supply remains limited.

Short-Term Rentals And Their Impact

While short-term rentals contribute to the housing shortage, they are not the primary cause. The real issue is that no new homes have been built in the past 15 years, and renovation costs have risen sharply. Additionally, high taxes and unpaid rents discourage owners from offering long-term leases.

Economic Disparity: Rising Prices vs. Stagnant Incomes

From 2015 to 2024, property prices increased by 5% annually, while average per capita income grew by just 3%. This disparity, coupled with the 20% annual growth in short-term rentals, has made homeownership increasingly out of reach for many Greeks.

Conclusion: A Call For Action

The housing crisis in Greece is multifaceted: insufficient new construction, limited availability of real estate, economic stagnation, and restrictive urban planning all contribute to the problem. Urgent policy changes, including incentives for new construction and better management of vacant properties, are needed to address the growing housing demand and restore affordability.

AI Spending Is Complicating The Fed’s Fight Against Inflation

Silicon Valley leaders have long argued that artificial intelligence will make technology and services dramatically cheaper. OpenAI CEO Sam Altman has described a future where intelligence becomes extremely inexpensive, while Tesla and SpaceX CEO Elon Musk has predicted that AI and robotics will create greater abundance and drive down costs.

So far, those benefits have yet to materialise at scale. AI adoption remains relatively slow, while the enormous investment needed for data centres and AI infrastructure is putting pressure on electricity prices, supply chains and other costs. For the Federal Reserve, this creates a difficult balancing act: AI could eventually boost productivity and reduce inflation, but its current buildout is contributing to higher prices.

OpenAI chief economist Ronnie Chatterji said AI needs to be adopted by organisations and generate measurable value before its broader economic impact becomes visible in productivity statistics.

AI Adoption Remains Uneven

Capital spending on AI infrastructure in the U.S. is expected to reach $581 billion this year, according to Goldman Sachs Research, with global investment potentially reaching $1 trillion.

Despite the scale of spending, adoption remains far from universal. A May survey by the U.S. Census Bureau found that 17% to 20% of U.S. businesses reported using AI, with adoption significantly higher among large companies.

Companies that have implemented AI at scale also highlight the challenges. Julie Averill, former CIO of Lululemon, said successful deployment requires changes in employee behaviour and trust in the technology. OpenAI has observed a similar divide: its most advanced business users deploy AI at around eight times the rate of average companies.

Why Productivity Gains May Take Time

Economists point to the limits of automation. AI can perform individual tasks effectively, but many jobs combine tasks that are difficult to automate.

Stanford professor Charles Jones refers to these as “weak links”. Radiology, for example, involves interpreting scans but also communicating with patients and working with colleagues. AI can automate part of the job without eliminating the profession itself.

As a result, the full economic impact of AI may not become clear until businesses adopt the technology more broadly and reorganise their operations around it.

AI Adds To The Fed’s Policy Challenge

AI’s economic impact has become part of the Federal Reserve’s policy debate. Fed Chairman Kevin Warsh has argued that AI could eventually become a significant disinflationary force by increasing productivity and strengthening U.S. competitiveness.

Other officials are more cautious. In July, the Fed kept interest rates at 3.5% to 3.75%, while some officials expressed concern that AI infrastructure spending could add to inflationary pressures.

Minneapolis Fed President Neel Kashkari pointed to massive data-centre investment as a new source of demand. Household electricity prices rose 10% in the two years through July, compared with a 6.2% increase in overall consumer prices. Meanwhile, shortages of chips and other AI components are pushing up costs. JPMorgan Chase estimates that DRAM prices could rise 400% by the end of 2026 compared with 2024.

Warsh has consequently adopted a more cautious tone, saying that while AI investment is laying the groundwork for future growth, the timing and scale of its economic effects remain difficult to predict.

For the Fed, the challenge is clear: AI could eventually deliver major productivity gains, but the cost of building that future is already showing up in the economy.

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