According to the official forecast, Greece is facing a contraction of the economy in the range of 3.5 to 5 percent by 2013, while the unemployment rate will rise even higher and lead to an even greater reduction in loans next year. In addition, the increase in property taxes will weaken the demand for housing.
Taking all this into account, prices in the residential real estate market will fall further in the next few years. The decline in prices may accelerate if banks are allowed to sell mortgaged real estate and a new equilibrium in the real estate market is likely to occur at a lower level.
In order for the price drop to come to an end and the economy to stabilize, the growth of unemployment must be stopped, mortgage loans must become available and provided at reasonable interest rates, and the country's future in the eurozone must be secured. Based on current trends, it's hard to believe that this could happen before the second half of 2014.
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