Property auctions resume in Greece; bank executives say 'strategic defaulters', high-end units the targets

By A. Doga

Greece’s systemic banks have resumed – after a state-imposed hiatus of several years – legal action leading to foreclosures and auctions of property, with the emphasis, according to bank officials, on so-called “strategic defaulters” and high-value real estate.

The resumption of auctions of foreclosed real estate by Greek courts – which occurs at the justice of the peace level – initially involved arrears to the state.

Foreclosures and property auctions is an intensely unpopular concept in crisis-plagued Greece and contains increased political risks for the central government, which lifted a previous temporary suspension of such legal redress under institutional creditors' pressure, and even municipal administrations seeking back taxes.

Beyond arrears to the state, some 500 auctions of property have been conducted in Greece this year, after credit institutions went to court and won judgements allowing for foreclosure and sale to the highest bidder. Another 500 such auctions are forecast to take place by the end of the year.

For 2017, in fact, Greece’s four systemic banks calculate that some 6,000 to 7,000 auctions for foreclosed properties will take place, primarily summer homes and commercial units, although the process has not ruled out primary residences of borrowers who avoid paying loans even though they are financially healthy, “strategic defaulters”.  

In a bid to quell rising concerns and shrill disapproval in the country over a possible “avalanche” of forthcoming foreclosures and auctions, Greek bank executives have claimed that such legal action will not be initiated for “meager amounts”, with an unofficial threshold being 100,000 in arrears and with a mortgage linked to a property of commensurate value. Otherwise, bank officials said, the process would not be justified by the costs entailed.