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Greece Real Estate Report Q4 2011
Business Monitor International, Oct 2011, Pages: 55
Business Monitor International's Greece Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Greece's Real Estate industry.
It is difficult to analyse Greece's real estate market without an understanding that the country has some big changes to make, economically and practically, to get itself back into the black and so some factors affecting real estate are rather unusual. At the beginning of August 2011 Greece began a privatisation drive that it hopes will raise the necessary EUR1.7bn by the end of September 2011, according to the Guardian. It will be a big job. It includes the sell-off of everything from airports to sports stadiums. What is a real concern about the process is that the speed of the sale will cause prices to drop and state assets will be sold at prices well below the real value.
The state needs the money. The economy is depressed and the prospect of further spending cuts and tax hikes remain high. The country has one of the highest levels of home ownership in Europe. In these tough times, it also has a high level of over-supply of residential property.
Greece's central bank has revealed that during Q211 the average price of an apartment in the country fell by 4.5% y-o-y. According to Reuters, the news follows a 5.2% fall in the country's overall property price index during Q111.
The commercial sector suffers less from over-supply. Vacancy rates remain at about 10% or lower across the three cities that BMI cover in depth – Athens, Thessaloniki and Piraeus – and across the three subsectors of office, retail and industrial space. Greece's macroeconomic difficulties remain the key obstacle to any sort of growth in the sector. Despite internal real estate dynamics that have meant supply and demand of commercial real estate remains in balance, the sector is still facing severe problems in the short term. More taxes and increasing unemployment weigh heavier and heavier on the industry.
Cushman & Wakefield report that there are no major new retail space projects that are planned to be completed in the remaining months of 2011 and in 2012. The industry experts believe that all major developments that include office space are currently on hold.
Some of the key opportunities currently in the real estate market are:
- The government announced plans to create a single land registry for all state-owned real estate assets. It is preparing a sale of state assets and real estate that could raise as much as EUR50bn (US$70bn). The sale is expected to attract strong interest from international investors due to Greece's status as a tourist destination and could lead to the expansion of existing resorts and complexes.
- One measure the government has taken to improve activity in the residential market is to delay the introduction of ‘origin of wealth' forms (known as ‘pothen esches') to new home buyers for properties less than EUR200,000 or 120 square metres, according to Athens News.
Some key risks to the current real estate market are:
- Brutally austere fiscal policies will crimp domestic demand for the foreseeable future. .. The process of adjustment to the crisis must involve still lower capital values and property prices.
- Greece is the only country in Europe without a centralised deeds registry so it could face significant problems trying to sell this huge amount in property, Bloomberg reported in June 2011. When this is combined with the fact that 40% of registered state properties are disputed, the task of selling them becomes a large challenge. Bankers are sifting through properties one at a time to determine whether they are eligible for sale by the government, frustrating hopes of a quick sale to cover lending by the government.
- Local news portal Ekathimerini, points out that the ‘origin of wealth' forms (known as ‘pothen esches') were developed as part of a crackdown on fraud and the delay, which may boost the industry, potentially fuels the market with funds derived illegally.
- The government must raise tax income and is intending to add taxes to the existing 12 taxes in the real estate sector, including a change to the way properties are valued. Authorities previously taxed properties based on values set by the state, rather than by their market values and this change could result in tax values rocketing.
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