Bank of Greece: Real estate values, leasing revenue imploded during crisis

Real estate values in Greece have imploded, with the value of residential apartments down 41.4 percent over 2006-2016 period, Bank of Greece (BoG) vice president Theodoros Mitrakos told participants at a relevant conference on Thursday.

Mitrakos said nominal prices for office space and high-end commercial property fell by 30 percent between 2010 until the end of 2015. Revenue from leased office space stabilized in 2015, although revenue from leased commercial property fell 6.3 percent. In total, a decline in revenue from leased office space and commercial property totaled roughly 30 percent and 35 percent, respectively, since 2010.

The central banker noted that these figures were of particular importance to the banking sector, as a slide in property prices reduced the value of loan guarantees, negatively affecting the credit behavior of borrowers and possible proceeds from the liquidation of guarantees. This trend was even more important since commercial and residential property accounted for 82 percent of guarantees held by banks for loans to businesses and households, without taking into account personal and corporate guarantees.

The Bank of Greece in 2015, aided by an independent advisor, drafted a survey to classify non-performing loans (NPLs) and to evaluate the commercial banks’ “tool kits” for dealing with the massive problem.

The findings of the survey were conveyed to credit institutions, which were encouraged to integrate the results into their strategic and business plans for managing NPLs.

Mitrakos said an obligation by Greece’s systemic banks to achieve specific operating goals on the management of NPLs will have a positive effect. These goals were agreed to in June 2016 after deliberations between the Bank of Greece, with the European Central Bank and the four systemic banks.

Recapitalized Greek banks have pledged to reduce their NPLs portfolios by around 40 percent (or around 40 billion euros) by the end of 2019.

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