High Cost of Living vs. Real Estate: What do the Bank of Greece’s new warnings regarding real estate mean?

The Governor of the Bank of Greece, Yannis Stournaras, issued a clear warning regarding the Greek economy, emphasizing that growth and improved public finances are not enough to ensure long-term prosperity, as inflation and the high cost of living threaten citizens' purchasing power. The major challenge ahead lies in transitioning from mere resilience to a new productive model—one that secures a sustainable increase in real incomes and a substantial improvement in the standard of living.

The key points of his intervention are summarized in the following thematic areas:

• Inflationary Divergence & High Cost of Living: Inflation in Greece accelerated to 5.6% in October 2026 (compared to 4% in the Eurozone), with core inflation reaching 4.7% and services inflation hitting 6.3%. The high cost of living is attributed to energy, food, and strong demand, as well as domestic market distortions—necessitating the strengthening of competition and interventions in the housing sector.

• Growth & Investment: Economic growth of approximately 2% is projected for the 2026–2028 period, driven by investments and private consumption. The need for a transition toward a self-sustaining model following the conclusion of the Recovery and Resilience Facility (at the end of 2026) is underscored, with an emphasis on innovation and export capacity.

• Banking Sector: Banks recorded high profitability (€4.7 billion in 2025 and >€2.5 billion in the first half of 2026), distributing €2.83 billion to shareholders. The new challenge lies in qualitative credit expansion toward the real economy (SMEs, green transition) and the strengthening of competition through the creation of a fifth banking pillar.

• ECB Interest Rates: The deposit facility rate stands at 2.5%. Future decisions will be made on a meeting-by-meeting basis, guided by incoming data, with the objective of ensuring price stability without exerting an excessively negative impact on economic activity.

• Shipping: This sector serves as a robust pillar, generating €18 billion in annual receipts—a 15% increase during the first eight months of 2026. Mr. Stournaras recommended channeling a portion of these revenues into domestic infrastructure, shipyards, and training, rather than into excessive vessel orders.

• Public Debt: The debt-to-GDP ratio declined to 145.4% in 2025, alongside a primary surplus of 5.1%. Although the specific characteristics of the debt limit direct exposure to interest rate hikes, maintaining fiscal credibility remains essential. The Challenge Ahead: The Greek economy now possesses stronger defenses, yet it faces structural obstacles such as persistent inflation, a high current account deficit, low productivity, and demographic pressures. Success will depend on the creation of more and better-paying jobs, the enhancement of skills, the leveraging of technology, and the effective functioning of institutions and the judicial system.