Despite projections that Greece’s economy will continue to grow in the next two years, rising rent inflation could threaten the economy’s prospects, Morgan Stanley says.
In its new report, the US-based multinational investment bank projects that Greece’s GDP will expand by 2.2 percent in 2025, while for 2026 it predicts that growth will ease at 1.8 percent. However, although inflation has declined and is estimated to reach 2.1 percent in 2025 (down from 2.7 percent in 2024), rent inflation continues to rapidly rise reaching 10.5 percent, significantly higher than the 2.9 percent recorded in the Eurozone.
Morgan Stanley notes that about 35 percent of households in Greece are renters, and that lower-income households spend at least 22 percent of their income on rent. Therefore, the report says that big rent increases could hit the disposable income of poorer households that in turn, could threaten real consumption.
The report further notes that one of the reasons fueling the increase in housing prices is the limited availability as Greece has under invested in the sector during the financial crisis (2009-2018).
“The need to build more housing, thereby bringing rental houses lower, could serve as an incentive to further boost housing construction in the future,” the American bank points out.
Moreover, Morgan Stanley notes that investments are the main driver of economic activity in Greece, supported by the ongoing implementation of the EU Recovery and Resilience Fund and a rise in Foreign Direct Investment (FDI).
Greeks spend over a third of their disposable income for housing costs, the most by far compared to any other European Union (EU) country, data released by EUROSTAT in January revealed.
According to the EU’s statistical office, in 2023 Greeks spent 35.2 percent of their total disposable income on housing while the European average was 19.7 percent. Greece is followed by Denmark at 25.9 percent and Germany at 25.2 percent. Lower percentages are reported by Sweden (23.9 percent), the Netherlands (22.9 percent) and Bulgaria (21.2 percent).
Hungary, Romania, Austria (19 percent) and Finland (19.3 percent) are closer to the European average.
Those who pay the least for housing in the European Union are the citizens of Cyprus (11.6 percent), Malta at 12 percent and Slovenia (13.8 percent).
At the same time, Greeks are some of the lowest paid in the EU while their disposable income declines.
Greece ranks third from the bottom for the annual adjusted full-time wage at 17,013 euros ($17,546), followed by Hungary at 16,895 euros ($17,424). Bulgaria stands at the very bottom with 13,503 euros ($13,926) while the EU average across the 17-member bloc is 37,863 euros ($39,050).
Greeks are not only some of the lowest paid in the European Union. Greece ranks last among Eurozone’s 20 member states in the purchasing power of wages, right behind Bulgaria. High unemployment and inflation, along with Greece’s slow recovery from the economic crisis are believed to be some of the factors contributing to the decline of the disposable income in Greece.
Figures from the Organization for Economic Co-operation and Development (OECD) show that Greek households’ disposable income dropped by 23.7 percent between 2009 and 2024.
