The legal situation with respect to owning property in Crete is complex. You cannot look at prices / price drops and make comparisons to the Uk market. There are two markets in Crete- local purchases and suckers from overseas.
II think maybe you're a bit outdated on your info of there being two markets.
Years ago there were no estate agents and so people sold properties by chatting over a drink in a bar. If you were a tourist throwing your money about then , yes you could pay more for a property. That rarely happens nowadays. Look on all the Greek Realestate websites and you'll see that there is one price for all.
(If you were in the UK would you ever buy a house from someone in a bar)!!
The local Council has the land prices and they are priced by the square metre depending on if it's mountains or sea area. Also town is a different price. Then there is a price for a house on the land, each house priced on square metre and how many years since it's been built, tiles, balconies etc.
(Any Contract lawyer will tell you the value of a property)
Let's say that you have a small derelict house on a piece of land and the land price is 20,000, the house price could be 12,000 (with a tiled roof or 8,000 with no roof). That's 32,000 It would be worth more if it had a water supply and electric supply. It would then be about 35,000. If the house next to it had 3 floors then there is another price for the 2 invisible floors above (means it can be built up to the same height). It would probably then be about 48,000. So the value is 48,000... BUT I want 55,000. The contract price will be 48,000 but you will pay 55,000.
I hope you understand what I mean.
To buy a house you need a lawyer who will charge you 1.5% of the sellingprice
A contract man to draw up the contract and witness. will charge about 1% of the selling price
The estate agent will also charge about 1.5% of the selling price, unless the house is old and then they will charge anything from 3,000 to 6,000 for the sale.
It's true that you cannot make comparisons to the UK as the laws are very different.in Greece (Crete) ie: If you live outside the town area (outside the boundary of the street lights) you cannot get a mortgage and will therfor have to pay for the property in cash. Most Greeks pay cash for a property. Very few Greeks have a mortgage and most own several houses and large areas of land (don't assume they are poor just because they look poor). Houses and land are passed down to the children from grandparents and many times with what is known as a 'golden handshake'. That's when a buy can become difficult as there has to be witnesses to sign to say that they knew that the house or property was theirs to sell.
I bought one such property many years ago and the whole thing took about six weeks (depends on the time of year).
There are many cheap house but the villas by the sea are a whole different ballgame even Greek people can't afford those.
Lastly but the most important...UNLIKE the UK. If someone owes money, there is a law that does not permit them to sell their property until it is paid. Which means that they cannot pay a dept by selling their house. If it get's to a stage where they cannot pay they can have their property taken for the amount of the debt.
My apologies for the lengthy reply but I hope it helps in some way.