New conditions emerging in the housing market point to the first signs of systemic risks building up for the country’s financial stability, according to the Bank of Greece (BoG), which is calling for new measures to increase the housing stock.
In its Financial Stability Report published yesterday, the BoG describes the pace of replenishment of the housing stock as “sluggish”, despite an increase in construction activity.
“On the supply side, the limited availability of homes reflects both the withdrawal of part of the existing housing stock from the market and its persistently sluggish rate of replenishment.
The high number of vacant properties is due, among other things, to delays in resolving private debt and to properties being tied up as collateral for non-performing loans undergoing enforcement proceedings,” the report says.
Gross value added in the construction sector remains close to 2% of GDP, significantly below the European average (Q2 2026: 5%).
Meanwhile, private construction activity for new homes rose year on year in January-June 2026, with the number of building permits issued up 40.9%, floor area up 32.2% and volume up 33.6%, following a decline in 2025.
The risk for banks
As prices continue to rise, albeit at a slower pace, risks for banks are also emerging.
The BoG stresses that developments in residential property prices point to the start of an accumulation of cyclical systemic risks. Although they do not yet pose a concern for financial stability, they warrant close monitoring of lending standards, particularly as mortgage lending recovers.
It is worth noting that house prices are showing signs of stabilising, but continue to rise in some areas, by as much as 22%, according to new market data.
The Bank of Greece goes on to say that “in the current circumstances, it is advisable to strengthen and accelerate the implementation of measures to increase the available building stock, both by developing new homes and upgrading existing properties, and by providing incentives to bring properties that were taken off the market in the past back onto it.”