27 aug Investing in Greek Real Estate in a Post-COVID-19 Era
Why Should You Invest in Greek Real Estate Now?
After a decade long decline in residential property prices, the Greek real estate market saw growth again in 2018. Thanks to an improving economic outlook, a robust tourist sector and measures taken to attract foreign investment, the Greek housing market is set for a strong recovery. According to the Bank of Greece, house prices in urban areas rose by 7.4% in 2019 and were projected to rise 6.9% in the first quarter of 2020. The recovery is most noticeable in Athens, where house prices increased by 10.4% in 2019 – a sharp improvement from the previous year’s 2.8%.
The Greek real estate market is alive and well, with transactions and constructions permits increasing year by year. Foreign investment in the Greek real estate market totalled €1.13 billion in 2018 and €1.45 billion in 2019 – more than 3 times the investment in 2017. The Greek government has adopted many different measures to attract investment, including a golden-visa scheme that allows non-EU residents to obtain a 5 year residency when buying or renting a property, a 3 year suspension of VAT payment for newly build houses and a reduction of the annual property tax (ENFIA). The government measures have proven to be effective as the housing market turned to a steady recovery.
But while the economic prospects for investors have greatly improved, Greece is now facing a new roadblock on its way to prosperity. The COVID-19 pandemic has prompted governments to implement restrictions on cross-border traveling, putting a sudden halt to global tourism. For Greece this a major headache as its economy is heavily reliant on its tourist sector. Throughout the decade long economic recession, tourism has shown to be the most resilient sector, emphasizing its vital importance to the Greek economy. Tourism directly accounts for 11.7% of the Country’s GDP and is estimated to account for 25.7% to 30.9% of the GDP if indirect contributions are included. Several islands in the Aegean Sea even rely on tourist revenue for more than 90%.
Tourist revenue mainly comes from abroad, which is why Greece is keeping its borders open for tourists to the largest extent possible. For 2020, The Ministry of Finance forecasts a decrease between 10% and 13% in Greece’s GDP, but says that the damage could be mitigated to a decline of 5% to 8% if sufficient support measures are taken. Similarly, the European Commission estimates Greece’s GDP to decrease by 9 % in 2020 and to increase by 6% in 2021. So it seems safe to conclude that the COVID-19 pandemic will take a heavy toll on Greece’s economy as long as travel restrictions remain.
Greece is widely deemed to have handled the pandemic particularly well in order to remain a (relatively) safe travel destination and preserve its tourist industry. Hotels started to reopen in mid-June and early July, and incoming international travel resumed. At the time of writing, Greece is welcoming travellers from all other European member States and 13 non-EU countries, including China. But the chilling effect on travelling continues to have a severe impact on the Greek tourism sector: The Greek Ministry of Tourism expects that Greece will be able to retain less than half of last-year’s tourism revenue.
Greece was lauded in the international press for handling the health crisis exceptionally well – a stark contrast with the bad publicity surrounding Italy and Spain. The relatively favourable epidemiological statistics are expected to give Greece a strong competitive advantage over other popular tourist destinations. In fact, tour and cruise operators now have fewer available destinations to include in their catalogue, and recent marketing evidence suggests that Greece remains a popular choice. This might even allow Greece to capture a relatively larger market share of European tourism, as long as other countries struggle to regain the confidence of travellers and restart their tourism industry.
The COVID-19 pandemic will change how the tourist industry works and how travellers choose their destination. The sense of security will be the primary focus of any support measure or marketing campaign. This is why the Greek government launched a new ‘Health First’ campaign together with plenty of hygiene protocols and quality standards. Greece’s favourable reputation together with its rich culture, beautiful coastlines and pleasant summer climate will certainly keep attracting the interests of many travellers.
So, what does all this mean for the Greek real estate market? Greek houses have only recently started going up in value after having lost over 40% of their value between 2007 and 2018. Up until now, the housing market only recovered a fraction of its value, meaning the possible downside is relatively small. Furthermore, in the period leading up to the Great Financial Crisis of 2008 house prices skyrocketed due to cheap lending facilities. Thus, a strong correction in property prices was an unavoidable consequence.
The COVID-19 pandemic may have a strong impact on the core industry of Greece’s economy, but this does not directly relate to the correct appraisal of residential real estate (although an economic recession will undoubtedly have a negative effect on house prices, be it less severe than the period prior to 2018). Furthermore, the Greek government is, arguably, handling the situation exceptionally well and in a best case-scenario tourism revenue will return to pre-COVID levels by the end of 2022.
Although there is a lot of uncertainty surrounding global travel, the Greek real estate market remains attractive for both business and private purposes. By taking advantage of the relatively low housing prices, an investor can capitalise on the increase in value and a stable rental income. An investor who is willing to take the risk may snap up a great investment at a bargain price and reap the benefits for the years to come. To sweeten the deal, foreign pensioners who move their tax residency to Greece will be granted a single tax rate of 7% on all foreign income for the first 10 years of residency. In sum, Greece is a major tourist destination with a flourishing Airbnb scene, making every holiday home a pleasant and sound investment.
Are you interested in buying Greek real estate or moving your tax residency to Greece, but are you unfamiliar with Greek laws and procedures? Feel free to contact us for more information. We are happy to be of assistance to you.