The Behaviour Of House Buyers In Greece Under Bubble Conditions

As is the case in most European countries, during the last five years housing prices in urban areas of Greece have increased by about 10% annually. This phenomenon was particularly extreme during the period 2005-2006, while the number of property transactions and the rate of new construction recorded was higher than ever. This pattern cannot only be attributed to globalisation, liberalisation of the financial system, the fall in credit interest rates, or any other national and international factors. State policies have undoubtedly played a major role. More specifically, state agencies anticipated the announcement of the date of the imposition of VAT on real estate and the increase in taxes on properties transactions. These proposals were inflated and highlighted by the media and also by professionals such as real estate agents, construction companies and banks. The result was the appearance of a movement mimicking the features of a housing bubble, althoug h the consequences of the new system of taxation would not really have had such a significant impact on housing prices. This paper explores the role such an environment has in the decision process about buying a home, and also its interpretation from a socio-economic perspective, which further differentiates this work from Robert Shillerís well-know research on US cities in the 1980s. To this end, questionnaires were circulated to home buyers in two Greek cities after the implementation date of the new taxation system (1.1.2007).