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Greece’s Housing Crisis: Key Drivers And Solutions

by THEFUTURE.TEAM

February 13, 2025

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.

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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.

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ECB Launches Geopolitical Stress Tests For 110 Eurozone Banks

The European Central Bank is preparing a new round of geopolitical stress tests aimed at assessing potential risks to major financial institutions across the euro area. Up to 110 systemic banks, including institutions in Greece and the Bank of Cyprus, will take part in the exercise, which examines how geopolitical events could affect financial stability.

Timeline And Testing Process

Banks are expected to submit initial data on March 16, 2026. Supervisors will review the information in April, while the final results are scheduled to be published in July 2026. The process forms part of the ECB’s broader supervisory work to evaluate financial system resilience under different risk scenarios.

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Geopolitical Shock As The Primary Concern

The stress tests place particular emphasis on geopolitical risks. These may include armed conflicts, economic sanctions, cyberattacks and energy supply disruptions. Such events can affect banks through changes in market conditions, borrower solvency and sector exposure. Lending portfolios linked to regions or industries affected by geopolitical developments may face higher risk levels.

Reverse Stress Testing: A Tailored Approach

Unlike traditional stress tests that apply the same scenario to all institutions, the reverse stress test requires each bank to define a scenario that could significantly affect its capital position. Banks must identify a geopolitical shock that could reduce their Common Equity Tier 1 (CET1) ratio by at least 300 basis points. Institutions are also expected to assess potential effects on liquidity, funding conditions and broader economic indicators such as GDP and unemployment.

Customized Risk Assessments And Supervisor Collaboration

This methodology allows banks to submit risk assessments based on their own exposures and operational structures. The approach is intended to help supervisors understand how geopolitical events could affect institutions differently and to support discussions between banks and regulators on risk management and contingency planning.

Differentiated Vulnerabilities Across Countries

A joint report by the ECB and the European Systemic Risk Board indicates that countries respond differently to geopolitical shocks. The Russian invasion of Ukraine led to higher energy prices and inflation across Europe, prompting central banks to raise interest rates. Belgium, Italy, the Netherlands, Greece and Austria experienced increases in borrowing costs and lower investor confidence. Germany, France and Portugal recorded more moderate changes, while Spain, Malta, Latvia and Finland showed intermediate levels of exposure.

Conclusion

The geopolitical stress tests will not immediately lead to additional capital requirements for banks. Their results will feed into the Supervisory Review and Evaluation Process (SREP). ECB supervisors may use the findings when assessing capital adequacy, risk management practices and operational resilience at individual institutions.