G. Petras (Engel & Völkers): The development of the real estate market
By George Petras
A look at the evolution of the Greek market gives cause for optimism.
The market is once again on a noticeable uptrend since 2018. Prices have risen sharply in recent years. On average, over the past four years, real estate has recovered about half of the 40% loss in value caused by the protracted financial crisis.
In premium locations, prices have risen even more sharply. The financial crisis from 2010 to 2018 also resulted in a very high level of building activity, which, combined with increased demand, is now leading to a shortage of new/prime properties.
Greece is again very popular with domestic and international investors and the wait-and-see attitude – especially in the first home market – is gradually giving way to great interest in attractive investments. Property prices that remain subdued compared to European countries – both in the metropolitan areas of Athens and Thessaloniki and on the islands – combined with other good properties and the corresponding incentives from the Greek government, seem to keep the market stable despite the turbulence. Due to the dynamics of the Greek economy and the real demand for real estate, market participants are likely to abandon the current restraint in the coming months.
The temporary restraint of buyers in the market caused by the pandemic crisis as well as the war in Ukraine have also left their marks since last year. The consequences included rising construction costs, increased interest charges and rising inflationary pressures.
In practice, however, the rise in interest rates had different effects: Mortgage rates were burdened by the rise in Euribor, thus increasing costs for the borrower, but on the flip side, the desire to offset inflation through a property became greater. . Currently, about 25% of sales are through mortgage. For 2023, it raised new mortgage growth to about 30 percent, although demand for new mortgages has weakened in recent months due to rising interest rates.
Despite the challenges of recent years and the successful handling of them, or perhaps because of them, Greece continues to develop into a place worth living. The country has a lot to offer and at the same time arouses supra-local interest through excellent projects. The Tower of Piraeus, for example, has received a positive response. The second tallest building in Greece has been empty for many decades, but after spectacular measures of conversion and renovation, it will be handed over at the end of the year to its new use as a modern business building.
Finally, the spectacular Elliniko project located on the site of the former Athens airport is now considered the largest urban construction project in Europe. Here, on the outskirts of Athens, a state-of-the-art urban extension with commercial, residential and tourism infrastructure is being built on a large area of 6.2 million square meters. The Greek economy also expects positive results from this project, not only through international investors but also through the creation of approximately 70,000 new jobs.
First Residence
As already mentioned before, Greeks today are partly hesitant when it comes to real estate investments. On the one hand, prices have risen sharply and, at the same time, construction prices have also risen – as in most countries. In addition, rising interest rates and the energy issue arising from the war in Ukraine can lead to financing difficulties, especially for small home buyers. Greece is making great efforts to protect the domestic population from additional energy costs related to the crisis through extensive support programs, but will not be able to use all the expected negative factors due to inflation. One of the various support programs currently running is that the Greek government is giving to 10,000 new first-time home buyers, thus helping to support home ownership as part of the national development program.
Tenancy
The lack of ownership has been further exacerbated by multi-unit tourism (e.g. Airbnb) and thus has a major use in driving up rents in these areas. In addition, the lack of housing construction that occurred between the years 2010 and 2017 in major cities also had a negative impact on rental prices. Therefore, under these circumstances, there is no way that rental prices will change significantly in 2023.
Second Residence
For private investors looking for a holiday home, Greece has once again attracted many buyers. German, Austrian and Swiss buyers currently top the list, followed by American, English, Spanish and French buyers. The still attractive prices, combined with the use of the properties are the main arguments that make Greece their first choice. The reduced supply of holiday homes on the most popular islands, such as Mykonos and Santorini, has buyers interested in new areas, such as Paros and smaller islands, which are now being discovered and prioritized by these target groups. It can be assumed that this trend will continue in 2023.
Summary
Regarding the transaction time required to sell a property, the upcoming elections in Greece may affect the course of the market this year. Already more time to complete a transaction for a property and that the pace will slow down again during the pre-election period from the relevant authorities, mortgage offices etc.
In this context, it also remains to be seen under what conditions the Greek state will continue the Golden Visa program in 2023. Until now, third-country nationals in Greece had to invest at least €250,000 in a property to obtain a residence permit for themselves, which gives them the right to travel to all other Schengen states. Currently, it has decided to proceed in two categories: In some metropolitan areas, investments of 500,000 euros are required to qualify for the golden visa, while in less crowded areas, only 250,000 euros are enough to enjoy its business.
Finally, the reforms of recent years have reduced red tape and therefore also led to faster processing of procedures. foreigners moving their main residence to Greece will continue to enjoy tax benefits in the future.
The prospects of the Greek market for the next few years cannot be described as positive and promising. In 2023, it can be considered that, after the upcoming spring elections at the latest, the market will continue to rise significantly.
* Mr. George Petras is the CEO of Engel & Völkers Greece