2023 _ Facing the greek real estate market of 2023

Greece is back … or is Greece back?

The Greek real estate market has been on a noticeably upward trend for several years. Prices have risen sharply in more or less all real estate sectors over the past three years, and yields have now also ‘adjusted’. Greece’s real estate market is interesting again and consequently also on the radar of national, but also – in a considerable number – international, partly institutional investors.

During the past four years, real estate has been able to compensate about half of the sometimes more than 40% loss in value of the crisis years. At AAA locations, prices increased even more. In any case, there is still good potential for value growth in the market, based on the prices of the base year 2009 (beginning of the crisis). In addition, due to the construction slump in the crisis years and also current, positive economic impulses, there has been great demand in some real estate sectors. The continuing shortage in the sector of high-standard office properties and modern logistics space would be an example worth mentioning. Incidentally, the corona pandemic only temporarily slowed down the revival of Greek real estate but did not really stop it. Many of the international investors quickly reappeared when the travel bans were lifted. Accordingly, until a few months ago, a strong buying wave and a situation resembling a construction boom were observed.

However, because of the general global situation, there is currently a kind of ‘wait and see’ on the Greek real estate market. After all, real estate prices have skyrocketed very quickly, while construction prices are also at an all-time high, similar to other countries. At the same time, rising interest rates and the now again attractive, ‘low-risk’ government bonds of certain countries are factors that do not always favor investments in real estate. On a “psychological” level, the war and the energy issue are – in addition to the borrowing itself – other factors that currently represent risk factors, especially for small homebuyers, even though the Greek government, at least for the domestic population, is applying extensive support programs to absorb the additional costs for energy caused by the crisis. On the other hand, the strong inflation speaks for investments in real estate, which certainly also moved the market in Greece in 2022.

As a result of the circumstances mentioned, construction activity has slowed down somewhat since last summer. According to the Greek Statistical Office, the number of building permits increased (+9.1%) in September 2022 compared to the same month of the previous year, but at the same time the number of approved areas fell by 22.1%. A somewhat similar picture also applies to the 9-month comparison. When considering this, however, one must consider that in 2021 a 10-year high was reached in both the number of building permits and the approved areas.

Due to the dynamics of the Greek economy and the actual need for real estate, market participants should slowly give up the wait and see attitude from the second half of 2023.

But what are the prospects for the Greek real estate market in 2023?

The Greek real estate market is currently going through a major change. This is being driven, among other things, by international investors, by new large – partly international – users and the current, new demand. Strong demand, relatively low prices and good location potential are some of the arguments in favor of Greece. Greece is again a ‘place to be’, and projects such as the Hellinikon project on the site of the former Athens airport and the Tower of Piraeus, but also the whole Athens Riviera and some Greek islands are just some of the highlights that also entail positive developments in the wider regions. The expansion of the Athens Metro, the commissioning of the Thessaloniki Metro before the end of 2023, as well as the upgrading of the infrastructure with new expressways, new logistics centers, but also new or enlarged airports such as Heraklion (Kastelli) and Paros will provide new impetus for growth in the affected regions. Incidentally, according to Euromonitor, the four Greek cities of Athens, Thessaloniki, Rhodes and Heraklion are among the top 100 city destinations of 2022.

I was already able to mention the shortage in the high-quality office sector and logistics spaces, which certainly represents a good investment opportunity. In general, however, there is a need for modern real estate with high, sometimes international standards in almost all sectors, and interested parties are willing to pay higher prices for this. The topic of “ESG” (environmental social governance) is now also a topic of conversation in Greece and represents immense investment potential for both new and existing properties due to the need for adjustment together with the topics of “energetic upgrading” and “old building renovation”.

In the big cities, there is great demand in the housing sector, especially since there was hardly any construction during the crisis years. The shortage of real estate, which has been exacerbated by the tourist use of many units (AirBNB), has led to a sharp increase in rental prices in the regions in question, which can be assumed to continue slightly in 2023 – certainly to a lesser extent. It is very unlikely that rental prices will correct in 2023, especially since it is not to be excepted that the supply situation will change quickly. After all, construction activity in this sector has been ‘stuttering’ for a few months and it can be assumed that construction will only be intensified again in the second half of 2023. The scarcity of plots in central locations should also be noted here.

In addition to new living trends, such as working from home, the corona pandemic has also triggered a ‘small’ flight to the suburbs. This means that smaller suburbs close to major cities with good transport links will provide a good alternative for families to live in. The south of Attica is the best example here. The high prices in the metropolitan areas will certainly be a good reason to move away from big cities in the future. According to current market researches the willingness to move and to invest in own home will tend to increase over the next five years.

For 2023, it can also be assumed that investments in tourism real estate will continue, especially since tourism-related income was at a record level in 2022 and the prospects for the coming season are again very promising. In addition, state subsidy laws that subsidize new construction and renovation as part of a hotel investment make investments in this sector even more interesting.

However, Greece is again a strong magnet for private investors who want a holiday home by the sea. At the top of the list are buyers from Germany, followed by Americans, English, Spanish and French. Certainly the currently still low prices but also the availability of good plots of land are arguments that lead to Greece. The improvement of the infrastructure should also be noted here. It is assumed that this trend will continue in 2023. It is worth noting that Halkidiki, located in northern Greece, has recently entered the list of interesting regions, although in these latitudes the summer season is much shorter than, for example, on the southern island of Crete. From this one can conclude that locations are now also interesting that have a milder climate than the ‘hot’ islands and that can be easily reached all year round via direct flights. Halkidiki can be easily reached via Thessaloniki. Incidentally, Thessaloniki itself has also been a destination for international real estate investments for several years.

But “the land where the gods vacation” is also becoming increasingly interesting for digital nomads. For the following years it is assumed that the ‘constant travellers’ will settle down even more intensively in Greece – at least temporarily – and consequently it is a realistic assumption that the demand for corresponding properties will also increase in the primarily tourist regions, which currently are more visited during the summer season. Finally, for some digital nomads, living in nature and by the water is important, and locations that meet these criteria, including good flight connections and good internet and mobile phone connections, are ideal for this clientele. This will certainly contribute to the positive growth of new regions.

A real estate product that has been neglected in Greece for many years, but is currently being targeted by investors, are modern student houses with furnished apartments in the “right” locations, in which services are also offered. All cities with higher educational institutions are well suited for this, and this product would in most cases also be of interest to digital nomads.

In 2023 it would also be necessary to monitor how the Golden Visa program will be continued. Here, the Greek state recently decided to provide for two categories. In certain metropolitan areas, investments of at least 500,000 euros are required to qualify for a Golden Visa. For the other, non-‘prime’ locations, however, the level of investment will remain at 250,000 euros, which would certainly favor investments in said locations. Second, it would be necessary to track how the Greek government’s income tax breaks for foreign citizens and retirees who transfer their permanent and tax residency to Greece will affect the real estate market. If this benefit is widely accepted, one can assume that in the coming years some new “expensive” locations will develop here due to this clientele. Some ‘new’ locations, as Paros, have developed during recent years into ‘prime’ locations for luxury holiday homes, since the supply of plots in the “classic” luxury spots, such as Mykonos and Santorini, has been greatly reduced.

Based on past and current developments, it can be assumed that the Greek real estate market will continue to grow for a longer period of time, even if stagnation and a possible slight price correction can be assumed for the first half of 2023 due to the current waiting period already mentioned and the general situation. However, this will certainly not greatly affect the medium to long-term trend. Interest in Greece and Greek real estate will continue to be lively in 2023, especially since the prices are cheap compared to other locations despite the previous increases and there is immense potential in the market. The fact that we can look back on a record year with direct, foreign investments in Greek real estate in the range of possibly even 1.7 billion euros also allows optimism for 2023. It is not yet foreseeable whether the record value of 2022 will be reached again in 2023 or even exceeded but based on the ongoing Hellinikon project it can be assumed that larger foreign investors will position themselves again. After all, domestic banks are now also granting loans to foreign investors under certain conditions. Incidentally, in 2022 investments in commercial real estate also reached a record high of 1.65 billion euros.

Problems on the main markets of international real estate investors and an unstable environment certainly do not present the ideal conditions for investing abroad right now. Also, ‘problematic’ projects at other international locations, which are now or soon to be in crisis, could become interesting and attract investments there. However, ‘jumping’ into strongly rising markets like Greece could also be seen as a chance to offset losses in a major market. The rising borrowing costs should also be considered in this context. Considering the credit-related leverage effect on equity, investments in Greek real estate could currently make more sense than investments in other international locations due to the better returns (at the source) and with the addition of the assumed increase in value. This would certainly have to be analyzed in detail on a project basis.

A special feature of the Greek real estate market, which can represent a great opportunity, is that there are only a few large project developers active in Greece. In many cases, building contractors act as project developers, who, however, are often somewhat limited in terms of project sizes due to equity capital. Sometimes there is lack of know-how. Accordingly, the market also offers a promising field for developers. Since many good properties have changed hands in recent years, “bargains” are very difficult to find. Accordingly, there is a need for action here and there is also first-class potential for experienced, internationally active real estate developers, as once a project has been completed and, in the best case, is fully let with good contracts, national and international investors and funds are found very quickly and promptly take over the properties. In addition, experienced project developers can establish ‘special products’ for which there is space and potential on the Greek market.

Finally, it should be mentioned that the prospects of the Greek real estate market for 2023 are further positive because the Greek state will subsidize loans for 10,000 young homebuyers (aged up to 39 years) for apartments with a size up to 120 square meters, built until 2007 and priced up to 150,000 euros. Furthermore, in 2023 and the following years, the real estate market will still be supported by subsidy programs – both direct and indirect, provided within the framework of the national growth program (Greece 2.0).

What can still go wrong with all these positive aspects?

As previously mentioned, the cost of borrowing money will continue to rise in the foreseeable future. First, this represents a fact that can affect the real estate market immensely. In first instance this will be a major problem for homebuyers and some of the units may take a long time to sell. It is still unclear to what extent this “slowdown” will lead to an actual price correction given the current demand. However, since the construction costs largely influence the prices for new buildings, the possibility of an extensive price reduction is relatively limited. In addition, the increased credit costs generally make some investments more difficult to be profitable. Nevertheless, or perhaps because of this, Greece is a good alternative. In the case of commercially used real estate, the yields are generally higher than in other international locations (also due to the comparatively lower construction costs in Greece), which of course favors the project calculation, provided that investors do not demand excessive, location-related risk premiums. Incidentally, there is also an upward trend in rental prices for commercial real estate.

Secondly, foreclosures of properties associated with bad loans (non-performed loans) are to be continued in 2023. As in previous years, however, it cannot be assumed that creditors will bring an excessive number of properties onto the market, which would depress prices immensely, because this would certainly only be in buyer’s interest. In addition, we are talking about – sometimes old – existing properties, often small to medium-sized residential units, which are also geographically distributed – i.e. not in one location – and are therefore of no interest to many investors. On the other hand, this type of property can be ideal for some certain investors, as it represents a special category, that case by case could hide good opportunities. Accordingly, the developments in this market segment should be followed.

Thinking again about all the parameters, 2023 appears to be a year of transition for the Greek real estate market. After the jumps of the last few years – and after a short transition and waiting period – the market will transition into a mature, promising market for long-term investments. Now, at the latest, the time should have come for even the most conservative of all conservative investors to look towards Greece. Getting to know each other with the Greek real estate market is recommended, but caution is also required in any case!


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