RPT-Fitch: Legislation Changes Have Limited Impact on Greek Real Estate Market

Source: Reuters
Feb 5, 2014

Fitch Ratings says there has been a slowdown in the number of new borrowers in the Greek housing market getting into mortgage distress, although the volume of loans in late stage arrears continues to increase due to low foreclosure activity. In 4Q13 the level of loans in arrears more than three months including defaults reached 10% of current collateral balance compared with 8% in 4Q12.

Two key pieces of legislation were passed in the Greek Parliament in 4Q13 – Law 4224/2013 and Law 4223/2013. The former extended the suspension of property auctions until the end of 2014 but now takes into account the borrowers’ income.

“The majority of the defaulted borrowers remain protected, despite the fact that the revised foreclosure ban may have a lower coverage,” says Sanja Paic, Director in Fitch’s RMBS Surveillance team. Fitch expects recoveries to remain stagnant for the rest of 2014 with the 4Q13 index reporting cumulative recoveries as a percentage of cumulative net defaults at 2.6%.

Law 4223/2013 consolidated various property ownership taxes and reduced the property transfer tax. “The recent changes to property taxation remove some uncertainties in the minds of potential purchasers and may support sentiment in the real estate market, but the macroeconomic backdrop is still putting overwhelming downwards pressure on values,” says Andrew Currie, Head of EMEA Structured Finance Surveillance at Fitch.

Greek home prices continued to fall as the market remains weak, with the peak-to-current decline reaching 34.3% in 3Q13. However, the quarter-on-quarter trend shows that the price falls have decelerated, decreasing only 0.9% from 2Q13. The agency expects a further home price decline of 6% in 2014.

Data collected by Fitch suggests that servicers continue to actively pursue permitted variations and repurchases in RMBS transactions. This was the main reason behind the superior performance of the RMBS transactions compared with the Bank of Greece’s data on non-performing housing loans for 3Q13 at 25.8%.

Fitch’s ‘Mortgage Market Index – Greece’ is part of the agency’s quarterly series of index reports. It includes information on the performance of residential mortgages, predominantly from RMBS transactions, but also those held on bank balance sheets. The report sets the housing market against the macroeconomic background and provides commentary on the emerging trends. The report is available at www.fitchratings.com or by clicking on the link below.


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