Real estate development in the city of Athens during the financial crisis

Abstract

PurposeThis study aims to determine how the prices of residential properties in the Greek real estate sector are affected by their structural characteristics and by the prevailing economic factors during recession.Design/methodology/approachBased on 13,835 valuation reports for the city of Athens, covering a period of 11 years (2006–2016), this study develops a series of econometric models, taking into account both structural characteristics of the property market and the macroeconomic relevant variables. Finally, the city of Athens is divided into sub-regions and the different effects of the structural factors in each area are investigated via spatial analysis confirming the validity of the baseline model.FindingsFindings show that the size, age, level, parking and storage space can explain the property price movements. Moreover, the authors find evidence that it is primarily house demand variables (e.g. the annual average wage, the unemployment rate, the user cost of capital, financing constraints and expectations about the future course of the house market) that affect house prices in a statistically significant manner and with the correct sign. Finally, using a difference-in-differences approach, this study finds that an increase in house demand (on account of net migration) led to higher house prices in smaller and older than in larger and younger apartments in areas with high concentration of immigrants.Originality/valueThis study uses a novel data set to help entities, individuals and policy-makers to understand how the recent economic and financial crisis has affected the real estate market in Athens.