2/18/2025

Capital Economics forecasts active growth in the construction sector in Greece over the next two years. According to experts' analysis, this is facilitated by a favorable macroeconomic environment, a stable labor market, and a high level of investment in real estate.

Factors Driving Construction Sector Growth

In recent years, the real estate market in Southern Europe, including Greece, has shown significant development. Since 2019, investment in housing in Greece has tripled, contributing to a 1.7% increase in GDP. Key factors supporting the construction sector's growth include:

• Rising housing prices – from 2019 to 2024, real estate prices in Greece increased by 54%, making construction investments more attractive.
• Stable labor market – wage growth supports purchasing power and increases household confidence.
• Golden Visa program – stimulates an influx of foreign investment into the Greek real estate market.

Construction Market Growth Forecasts

Experts at Capital Economics expect Greece's construction industry to continue expanding. Important growth factors include:

• Construction costs are rising more slowly than housing prices, creating incentives for new projects.
• The region's ongoing economic growth supports demand for real estate.
• Increased consumption due to rising household wealth driven by property appreciation.

Risks of a Real Estate "Bubble"

Despite the significant increase in housing prices, Capital Economics assesses the risk of a "bubble" as low. This is due to:

• Limited mortgage lending – household debt levels remain relatively low.
• Banking system stability – the ratio of non-performing loans is decreasing.
• Small construction sector size – despite rapid growth, construction volumes in the region remain moderate.

Southern Europe: Housing Price Growth and Its Causes

The real estate market across Southern Europe has experienced rapid growth. Since 2019, housing prices have increased by:

• 54% in Greece,
• 30% in Spain,
• 57% in Portugal.

One of the main drivers of rising housing prices has been population growth due to migration. In Spain and Portugal, the population increased by 5% from 2019 to 2023, while the housing stock grew only by 1.1% in Portugal and 2.4% in Spain over the same period.

In Greece, migration flows were less significant, but price growth is attributed to an active influx of foreign investors, which has also stimulated the construction sector.

Conclusions

The construction market in Greece and Southern Europe as a whole is experiencing impressive growth. A stable labor market, rising housing prices, and the region's investment appeal create favorable conditions for sector development. At the same time, despite active construction, the risk of a "bubble" remains minimal due to banking system stability and moderate mortgage lending. Further growth in the construction industry is expected in the next two years, contributing to the overall economic development.

Source: https://trustate.gr/en/news/strong-growth-of-the-construction-sector-in-greece-prospects-and-possible-risks/