Are an overheated economy and high inflation setting the scene for another property price bubble? Photo: Luciavonu / Shutterstock
Greece’s housing market has survived two house price crashes since 2008. In the last five years, house prices have boomed, owing to strong economic growth and low interest rates. The most recent data showing prices increased by 11.2% in the third quarter of 2022.
However, with rising energy costs and rising interest rates increasing borrowing costs, is Greece’s property bubble about to burst?
In this article, we look into historical and recent data as well as factors that shape house prices to predict if a Greece house price crash is underway.
What is a housing crash?
Property, like many other assets, experiences a boom and bust cycle. A housing market bubble occurs when house prices rise rapidly and exceed their underlying value.
House prices typically rise as a result of low mortgage rates and improved living conditions, which drive demand higher than supply in the market. When house prices continue to rise to unsustainable levels and demand falls, the bubble could burst, causing the property’s value to fall.
The condition where the house prices drop after skyrocketing is often referred to as a housing market crash.
Several factors contribute to the housing market crash. Mortgage rates can rise as a result of a central bank raising interest rates. If homeowners are unable to meet the new, higher mortgage payments, they may face foreclosure. This will increase the number of homes on the market for sale.
Falling household incomes as a result of inflationary pressures or job losses during recessions can also reduce housing demand.
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