Sunday, 10 May 2009Fitch Ratings says today that mortgage support measures announced earlier this week by the Greek government may have a positive impact on the revival of the domestic housing market. However, the agency notes that their effectiveness ultimately lies on the Greek banks' discretion to extend credit amid the current financial conditions, while regulatory supervision is required to oversee prudent new loan underwriting.
The new government measures are intended to stimulate mortgage credit demand by reducing transaction costs (i.e notary fees) as well as expanding the tax deductibility scope for residential mortgage loans originated in 2009 and 2010.
"Mortgage debt penetration in Greece stands below Eurozone average, and is significantly lower than countries like the Netherlands, where a full tax deductibility regime has promoted market growth over time," says Lara Patrignani, Senior Director, in Fitch's European Structured Finance team in London. "Given also that transaction costs in Greece have traditionally been high by international standards, both of these measures have the potential to stimulate the country's mortgage and property market".
Moreover, in an apparent effort to support mortgage credit supply, the Greek government announced that it separately guarantees loan amounts granted in excess of 75% loan-to-value (LTV) ratio, and up to 100% LTV, for loans disbursed by the end of 2010.
Fitch is cautious with regards to the latter measure; a guarantee for high-LTV loans means that the state itself would be liable for up to the first 25% of credit losses under the new scheme. This could lead to more aggressive loan underwriting from Greek lenders who have recently been reducing mortgage origination volumes in light of ongoing funding challenges and elevated credit concerns.
Crucially, LTV is the single most important criterion in Greek mortgage underwriting. Apart from an indicative 75% LTV limit recommended by Bank of Greece (BoG), existing regulatory guidelines also impose a 40% limit on a borrower's debt-to-income (DTI) ratio. In Fitch's view however, both LTV and DTI regulatory guidelines have been largely ineffective as it is ultimately down to the lenders' discretion to override them.
"Given that for a creditworthy customer, Greek banks would anyway exceed the 75% LTV threshold, the new scheme may effectively encourage underwriting of marginal credits," says Spyros Michas, Associate Director, in Fitch's European Structured Finance team in London. "The possibility of excessive risk-taking is there, raising the need for adequate regulatory supervision aimed to preserve responsible lending, while increased credit is flowing through the economy."
Overall, Fitch expects continuing deterioration in Greek mortgage asset performance. As the new measures aim to stimulate new lending without addressing existing mortgage borrowers, there is no immediate rating impact on the outstanding Greek mortgage-backed issues; securitisations (RMBS) and covered bonds. However, Fitch will consider the potentially inferior credit risk profile of high-LTV-guaranteed loans when assigning new ratings to Greek transactions.
Existing Greek RMBS transactions are structurally protected from an inflow of new high-LTV loans, given the tight loan substitution conditions in place. As for the Greek covered bonds, Fitch will closely monitor the evolution of such loans - should they be introduced into the cover pools - as part of its periodical surveillance. Given the reduced costs and increased tax incentives in place, loan prepayments could potentially increase from borrowers seeking to benefit from the new regime. Nevertheless, no major prepayment impact is foreseen at this stage, owing to the high prevailing interest rates on offer.
Facing its first recession this year since 1993, Greece has recently seen an increase in the national unemployment rate along with a contraction in residential construction activity. According to the BoG, business and household confidence have also declined significantly, leading to lower residential investment and reduced demand for credit by households. Based on unofficial market sources (in the absence of a timely national house price index), Fitch understands house prices are currently experiencing considerable downward pressures, largely in line with international trends. Nevertheless, the fundamental characteristics of the Greek market - including high home ownership ratio, a relatively debt averse culture, and strong family ties - are expected to support house prices against a severe downfall scenario.
It is unclear as to when the new measures take effect. As more information becomes available, Fitch will evaluate the incremental impact of the measures on the market and any subsequent credit implications for the outstanding Greek RMBS transactions and Covered Bond programmes.
Sunday, 10 May 2009The cost of living in Greece is considerable lower than in most other EU countries, but it offers a good standard of living and a wonderful quality of life. Studies indicate that the cost of living in Greece is about 30% lower than Cyprus’ and Cyprus’ is 30% lower than Spain’s and Portugal’s. Over and above the lower cost of living, those who purchase property in Greece will be amazed by how inexpensive houses are. In addition Greece has a very low crime rate, low pollution, and plenty of sunshine. All things considered purchaser of holiday homes in Greece have an extremely attractive package.
The example below are referring to UK citizens living in Greece
A couple living permently in Greece can expect to require an annual income of around £10,000 (14,000 Euros). Example:
House running costs + food……………………………£4816
Two people eating out twice per week………..………£1664
Garden maintenance…………………………………… £984
Car insurance……………………………………….…… £310
Petrol 5,000 miles per year at £2.25p per Gal............. £360
Return trip to the UK to visit family and friends.............£600
Total per year…………………………………………£10,000
Prices have risen quite steeply since the introduction of the Euro in 2002. Locally grown produce is cheap when in season. Imported and processed foods are often highly priced.Furniture/Appliances
To give you an idea of the price of furniture and kitchen appliances, here are some examples for a typical starter package:
Electric cooker £350 (€500)
Fridge freezer £350 (€500)
1 x double bed £275 (€400)
2 x single beds £350 (€500)
Dinning table & 4 x chairs £350 (€500)
Three piece suit (1 x sofa 2 armchairs) £730 (€1200)
Patio furniture (plastic table & 4 chairs £90 (€150)
TOTAL COST £2586 (€3750)
If you should be unlucky enough to buy a faulty product in Greece you have the same rights of complaint against a Greek retailer as in any other EU country. For further information or advise contact INKA, free tel: 11727 or 210 363 2443.
Car Running Costs
To purchase a small saloon car in Greece (Fiat Panda or similar) would cost around £4,600 (6,700Euro)
Fully comprehensive insurance and road tax is likely to be about £310. (450 Euro)
Petrol is about 65p per litre (0.91Euro)
Car Rental will be £20-£30 per day, depending on size and duration of hire. For 15 days plus, the smallest might cost £18, and a 4WD between £25 and £40
Monday, 29 October 2007
A strong currency in the long term will have adverse effects on the Greek economy
By Dimitris Kontoyiannis - Kathimerini English Edition
The euro continues to gain ground against the dollar, hitting one record high after the other, but the authorities and most people in Greece are more preoccupied with developments in the ruling conservative New Democracy party and the main opposition PASOK party.
Wednesday, 17 October 2007
Economy and Finance Minister Giorgos Alogoskoufis (right) is said to fear that European Union Economic and Monetary Affairs Commissioner Joaquin Almunia (left) will press for a value-added tax hike next year, when the ambitious budget revenue targets may look unattainable.
The newly sworn-in Greek government has to show results soon or it is bound to earn discontent. It became clear at last week's first Cabinet meeting - a whole 20 days after the election
Thursday, 31 May 2007
Greece operates a capitalist economy that produced a GDP of $251.7 billion in 2006. The principal economic activities mainly include the tourism and shipping industries, banking & finance, manufacturing and construction and telecommunications.