Eurobank EFG held a conference on the subject “Are real estate prices over-valued? International trends and investment opportunities”

Eurobank EFG held a conference on the subject “Are real estate prices over-valued? International trends and investment opportunities” on 20 January 2006 at the Pallas Athina, with the participation of ten (10) speakers from Greece and abroad.

At the conference, which was organised by the Bank’s Economic Studies and Forecasting Division, were also presented the results of a Greek household survey conducted in the last two months with the support of the Eurobank EFG Group with the view to determining expected developments in the real estate sector in this country.  

The organisation of the conference is part of a new series of initiatives of Eurobank EFG as part of its efforts to contribute to public debate on the one hand and provide, on the other, comprehensive and systematic information to its clients as well as the public at large on critical issues regarding the economy, markets, society and economic policies.

This initiative was launched in 2005 with the staging of a similar conference on the topic of “Sources of growth: Can Greece follow Ireland’s example?”

Opening the conference that was attended by over 600 people,  Eurobank EFG CEO,  Nicholas Nanopoulos, referred to the constructive role of the domestic banking system, which successfully finances the sectors of real estate construction and the tourist industry as well as other sectors of the economy which are directly or indirctly related to building activity. “To determine whether this important interaction operates smoothly and without any distortions to the benefit of the community as a whole, now that the Greek real estate market has reached a sufficient level of maturity thanks to low lending rates, we should also establish whether it is supported by appropriate institutional mechanisms such as an adequate regulatory framework, the existence of a land registry, proper determination of land uses, as well as financial institutions and instruments capable of attacting foreign investors in the real estate market” stressed Mr. Nanopoulos.

In his introductory speech, the Bank’s Deputy Managing Director, Nikolaos Karamouzis, referred, inter alia, to the dramatic increase in total housing value,  in developed countries in the past five years, an increase that is very close to the GDP’s value in those countries. “This dramatic price rise, which is not unusual for share or other securities markets, has led a number of analysts to affirm that this is an excessive, unsustainable increase, a

distortion with severe effects, a significant deviation from real estate fair value. Most extreme statements describe it as a value bubble that will collapse leading to a real estate market with high price volatility” noted Mr. Karamouzis.

Speakers were introduced by the Bank’s Financial Adviser and Head of the Economic Studies and Forecasting Division,Gikas Hardouvelis.

The conference included three thematic sessions and the speakers were all  senior executives of investment companies, real estate development companies, central banks and distinguished academics.

The conference speakers at the first thematic session were:

Dr. Jonathan McCarthy, SeniorEconomist, FederalReserveBankofNewYork, who  maintained that although housing  prices in the USA are at historically high levels, there is no  overvaluation on a national level.

Dr. Fernando Restoy, DirectoroftheMonetaryandFinancialStudiesDepartment, BankofSpain, who stated that the overvaluation of house prices cannot be ruled out in the case of Spain, a country whose economy’s characteristics are similar to those of the Greek economy and that any future drop, were it to happen, would be gradual.

Dr. Matteo Iacoviello, Assistant Professor at the Boston College Economic Department in the US, analysed the factors, which impact on housing prices in the US and the effects of monetary policy, as well as the positive impact of the housing market on economic growth and quantified these relations.

The second thematic session focused on investments.

Ian Marcus, General Manager of the EuropeanRealEstateInvestmentBanking Group of CreditSuisse, former CSFB, presented the REITs (RealEstateInvestmentTrusts).

MichaelWalton, Founder and Managing Director ofRynda Property Investors, a London holding and property development company, expanded on the role of private equity funds in real estate, saying that private equity funds contribute to the alignment of interests of investors and managers, whilst offering a wide choice from a broader range of investment options.

Costas Tsatsaronis, HeadofFinancialInstitutions, BIS, Head of the InternationalInstitutions Division of the BankforInternationalSettlements (BIS),presented a comparative analysis of house price behavior in 17 developed countries.

In the last thematic session, which focused on the Greek market, Eurobank’s adviser Dimitris Malliaropoulos, Professor at Piraeus University and Stratos Fanaras,CEO of METRON ANALYSIS,  presented the results of a nation-wide survey on a sample of 1,400 Greek households, which analyses the real property system in Greece and presents households’ expectations regarding the future of the Greek real estate market.

Aristotelis  Karytinos, Eurobank EFG Deputy General Manager and Head of the Real Estate sector, focused on the REIT institutional framework in Greece and abroad.

The last speaker of the conference was Dika Agapitidou, General Manager of Athinaiki Oikonomiki and representative of JonesLangLaSalle in Greece, who outlined the prospects for investments in office premises in this country.

The conclusions were summarised by Gikas Hardouvelis, who emphasised the risks of the international real estate market, as well as the relative optimism of the speakers and Greek households regarding the market’s progress.