Greek banks have seen a four billion euro boost to their balance sheets in the last two years due to the recovering housing market that has exceeded expectations, sector officials say.
Higher property prices mean that the value of real estate tied to loans improves and this strengthens the asset side of the balance sheet for lenders.
Commercial property prices have risen by 14 percent since lows seen in 2017, while apartment prices are up by 11 percent. Bank officials estimate that for every 1 percentage point rise in property prices, banks benefit by nearly 400 million euros.
Lenders have started to add these book gains to their balance sheets amidst expectations that property prices will keep rising in 2020 and the next couple of years, possibly at a faster rate.
Another benefit for banks is that the higher property prices are helping boost the value of secured loans being sold off as part of their push to sharply reduce bad debt.
Real estate has turned into the only factor that is going much better than expected for the country's lenders.
In a recent presentation to analysts, Piraeus Bank forecast a 2.6 percent rise in housing prices for 2019, along with a 4 percent jump in commercial property prices. Data from the Bank of Greece, the country's central bank, however, shows that the market is performing considerably better than that.
Housing prices in the third quarter of the year jumped 9.1 percent - a 13 year high - and 7.4 percent for the first nine months of the year. Prices in Athens advanced 11.9 for the third-quarter period.
Meanwhile, office prices moved 7.2 percent higher in 2018 and then added 2.2 percent in the first half of the year. In retail property, prices moved ahead 4.2 percent in the first half of the year, whereas gains for prime assets in this segment were higher (4.6 percent for Athens and 5.6 percent for Thessaloniki).
Yiannis Papadogiannis
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