Panic Home Buying

Estate agents and notaries have a frantic week trying to wrap up as many property sales before a series of tax and other changes is introduced on New" Year's Day

By Maria Kagkelidou

Athens News

Several estate agents expect the market will
adjust in the new year as properties are
slightly overpriced

On December 27 the government announced the updated "objective" values for property transactions - its estimates of propert'y prices upon which real-estate taxes are based. As the Athens News was going to press, notaries, buyers and sellers were preparing to spend the last hours of 2005 signing property exchanges. The new higher values along with a host of tax measures that come into force on January 1 are expected to make property for sale more expensive.

"A minor panic is currently taking hold of notary offices throughout the country as buyers and sellers are trying to complete property transactions and finalise parental property donations" says John Revithis, president of Athens' realtors. The panic, ensued sometime in July when the government announced that it would impose a 19 percent VAT on transactions involving newly built properties and that it would review so-called objective values.

At the time, the government said the measures were part of its general effort to eliminate or reduce tax evasion. Typically, both parties to a Greek property exchange officially declare that the value of the contract is much smaller than the amount of money that has really changed hands.

As a result the state collects far less money from property, transactions and other property-related taxes than it should.

Objective values paradox

In order to address the situation in the early '80s, the government introduced so-called objective values of properties. The government sets estimated property values and taxes are based on those figures, regardless of the real price of purchase. Typically they are much lower than the real sale price of properties.

Architect and developer Babis Kotsailidis explains that real property prices are around 40-100 percent
higher than objective values. "For example, you can expect to pay around 200,000 euros to buy a three bedroom apartment that has a size of around 100 square metres in Kallithea, or 2,000 euros per square metre. But the tax office has set objective values in the area at around 1,000 euros per metre, so a typical buyer will pay tax on 100,000 euros minus tax allowances for first home etc instead of 200,OOO euros," he tells the Athens News.

To raise money for state coffers -Greece's deficit ran at 6.1 percent of gross domestic product (GDP) in 2004 - in June 2005 the then deputy finance minister Adam Regouzas announced, that objective values would be increased but did not say by how much. At the same time, the government also decided to impose a 19 percent VAT on all transactions concerning newly built properties.

To counterbalance the changes, the government also announced it would raise the amounts for which buyers are exempt from taxation when purchasing, or being given, their first home by their parents. The values announced on December 27 were on average around 30 percent higher than previous figures throughout the country.

Between June and last week Greeks chose to assume the worst. There has been panicked property buying and prices have risen in some cases dramatically. "In late May I visited an apartment in Exarheia on the market for 120,000 euros. Three months later, when I went to view it again, the price had risen to 190,000 euros," says house-hunter Elias Doleas, who has yet to decide on a property.

Properties slightly overpriced

Revithis estimates that the June e announcement.compounded market trends and, as a result, property prices rose by around 10 percent in the capital during the past year. He believes the government should postpone imposing the changes to give the market time to adjust. "I think it would be cleverer and fairer if Finance Minister George Alogoskoufis postponed applying the new objective values for around three months after December 27. Otherwise the market will go through a period of inactivity that will last for around half a year with not much coming on or off it," he explains.

Within the last couple of weeks the market has been cooling. People realized they might not have enough time to complete transactions before the January 1 deadline and in some cases sellers have been lowering their asking price. Doleas says the third time he saw an announcement for the same apartment, the price had fallen to 150,000 euros. Other prospective buyers report that in a matter of minutes on one December day, the estate agent dropped the price of the property they were viewing from. 400,000 euros to 310,000 euros.

Revythis says many properties remain unsold because their owners have simply set prices too high. "I expect the market will adjust in the new year as properties are slightly overpriced. My estimate is that property prices in Athens will fall by around 5-7 percent," the realtors' president says.

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