2015 | Dec
Access to owner-occupied housing through mortgage lending, 1990-2013: Loan-holders’ housing mobility towards the suburbs and exclusion from mortgages in the city centre
This article investigates the transformation of the Greek housing system from the 1990s until the 2008 crisis, by highlighting the interconnection of housing and the banking system via mortgage loans . The main documentation is based on data from the Department of Real Estate Market Analysis of the Bank of Greece.
In Greek cities, housing typically functioned as a social mobility lift, pushing lower social strata into the middle class (Burgel 1976). The two dominant and complementary systems of dwelling provision that were traditionally used (flats-for-land and self-built), circumvented the banking system to a large extent and mainly operated through family savings. The flats-for-land method (antiparochi) is a joint venture between the landowner and the builder-contractor to share the end product between them based on price estimates of the contribution of each party. . Notwithstanding the gradual domination of market mechanisms since the 1970s, these housing provision systems resulted in limited housing segregation and shaped a spatial and social continuum in urban space, without extreme segregation phenomena (Μαλούτας 2009). Up until the ’90s, fragmented ownership and general control over land and construction ensured the geographical and social diffusion of rents. Thus the distribution of profit was distributed unequally but without exclusion, between all the parties involved in development: land owners, contractors, buyers/residents (Βαΐου et al 2004). Housing covered multiple functions within the context of the family unit, such as accommodation for members of the extended family, work for unskilled workers, a “safe” investment strategy, additional rental income and physical and symbolic inclusion in urban space.
After the country joined the Eurozone in 2001 and the credit market was deregulated in 2003, bank lending became the main method for households to access housing. This form of credit increased spectacularly from 2002 to 2007 (Σαπουντζόγλου et al 2010). The expansion of bank credit provided consumers with unprecedented purchasing power, much greater than what they typically possessed through family savings, which they invested in housing. In the end, by fuelling purchasing power, the increased offer of loans created a surge in demand for housing, resulting in high housing price inflation, without upgrades in the quality of dwellings (Emmanuel 2004).
In this way, from the ’90s and until the 2008 financial crisis, gradual commercialisation and financialisation processes in the housing sector brought by new spatial conflicts. Therefore, previous findings that indicated low segregation in Greek cities had to be revisited. In particular, the activation of banks in the housing sector significantly reduced socially diffuse control over land and development while the banking sector’s control over the allocation of funds for housing purchases grew. Increasing housing prices rendered savings-based access to owner-occupation nearly impossible. Loans became necessary, thus excluding a section of the population, who were forced to rent (Emmanuel 2004, Μαλούτας 2009). In addition, bank capital invested in land development altered the distribution of urban rents, excluding actors or transforming their strategies. For example, small-scale builders had the opportunity to finance the purchase of land for future development through bank lending. This way, they could often increase their profit by altering the established exchange relationship with land owners (flats-for-land) . In general, mortgage loans reinforced the pre-existing trend towards the marketisation of home acquisition as well as in letting the market determine the spatial location of social groups in the urban fabric.
These developments influenced -but were also reflected in- the spatial characteristics of the housing credit market. The way in which mortgages are distributed in Attica is not merely the aggregate result of household choices but illustrates the banking system’s discrimination policies as regards loan provisions. The findings presented here are a result of quantitative analysis of Bank of Greece data for the Prefecture of Attica during 2006-2013 and of interviews with banking sector employees and executives as well as borrowers.
According to the analysis of the addresses, in the Prefecture of Attica, of the dwellings for which residential property valuations were carried out by commercial banks during 2006-2013 (85,000 in total), properties valued for mortgage purposes are not uniformly spread across Attica On the contrary, there are significant cluster formations, due to the characteristics of demand and the unequal access to mortgages. However, we should bear in mind that selective concentration of loans in specific areas of the city indicates that the focus is placed on specific desirable social groups, who do receive financing, while other “high credit risk” groups are excluded.
In particular, mortgage loans were spatially concentrated on suburban neighbourhoods, while very few loans were approved for properties in city centre areas. More precisely, in spite of the absence of mortgage lending for purchases in central areas of Athens, many purchases were made in the area by social groups with no access to loans by commercial banks, such as the migrant population. As maps 1 and 2 show, significant loan concentrations are to be found in Petroupolis in the west, the municipality of Acharnes in the north, in Mesogia in the east and in Glyfada and Voula in the south. Access to loans is characterised by a two-fold geography: on one hand, by the separation between the city’s east and west due to the different types of loans (bigger loans in the east and smaller in the west) and, on the other hand, by a substantial distinction between the centre and the periphery.
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