The Bank of Greece says that the housing market in Greece is suffering from an artificial scarcity. Credit: Greek Reporter

A key question is dominating Greece’s real estate market: Where did all the homes go? Despite a persistent rally in both purchase prices and rents, the available housing stock for sale or lease is shrinking month after month. The answer, according to the Bank of Greece (BoG) Financial Stability Report, is that the market is internally drained, suffering from an artificial scarcity.

The BoG attributes this dramatic reduction in housing supply to three primary factors:

1. The Bottleneck of ‘Parked’ Properties

Thousands of properties tied up in non-performing loans (NPLs) are currently “parked” in the portfolios of banks and loan servicers. While many of these are destined for auction, a significant portion remains inactive for years as legal and technical procedures are completed. This vast, unavailable inventory exacerbates the supply shortage.

2. The Investment Drain (Airbnb Effect)

The increasing investment exploitation of residential properties is rapidly absorbing available stock. Homes that were rented to families just a few years ago are now operating as short-term tourist rentals (such as Airbnb) or being acquired by foreign investment schemes, creating a severe shortage in the long-term housing market.

3. Crippled New Construction

Low production of new housing is compounding the problem. Construction activity plummeted in the first half of 2025, with a 14% drop in permits, a 24% decrease in total surface area, and a 17% decline in volume. The combined effects of a recent Supreme Court decision regarding the New Building Code, alongside high material and energy costs, have kept construction starts at historically low levels.

Real estate market imbalance in Greece drives prices

The result is a market characterized by an artificial shortage: prices are soaring not due to greater demand, but because of insufficient supply.

The BoG data confirms the intense price pressure:

• Apartment prices surged by 7.3% year-on-year in the second quarter of 2025, officially surpassing the previous historical peak set in 2008.
• New apartments rose by 6.8%, while older apartments climbed 7.6%.
• Athens saw a 5.9% increase, while Thessaloniki and other regions experienced an 8.8% spike.
• Rents show a similar trend, with the price index hitting 114.7 points—ten points higher than the previous year and approaching 2011 levels.

The Bank of Greece concludes that the market shows no signs of fatigue, as robust domestic and international demand continues to collide with severely constrained supply.

Warning of systemic risk and household burden

While the BoG notes that direct risk to banks remains low due to limited new mortgage lending, it warns that the sustained price increase and low supply are creating conditions for the accumulation of “cyclical systemic risks” for the overall market.

Market executives are sounding an alarm, warning that if the properties stuck in the portfolios of funds and servicers are not released, the imbalance will worsen.

The report also highlights the devastating financial toll on households:

• Greek households face the highest housing burden in Europe.
• 35.5% of Greek household income is now directed towards housing costs.
• Nearly one in three citizens (29%) pays over 40% of their income for housing, placing Greece first in the European Union for this metric, seven points higher than the second-ranked country, Denmark (Eurostat data cited by the BoG).

The data clearly indicates that escalating housing costs—driven by record-high prices and rapidly dwindling supply—have become the single greatest financial strain on Greek households.

Related: Greece Tightens Rules on Short-Term Rentals Amid Housing Crisis