Tuesday 28 February 2023
Greek Real Estate Market Prospects for 2023
By Marios Christodoulou, CEO, FERIMMO Platform
- Factors which support the real estate market development
- Uncertainties and Risks
- New trends in the real estate market in Greece
The Greek economy, exiting its greatest financial crisis of the last few decades, has entered a new growth circle during the last four years and is now called to operate in a difficult political and financial context. The market shows impressive endurance and positive prospects in comparison to other European countries. This course has been supported by state support programs for the market, a practice applied by all European countries in the assistance framework provided by the European Union. However, the economy still has to show its actual endurance, once the support measures are completed, since the Greek economy’s structural issues more or less continue to exist. Significant steps are being made in the right direction, in order to strengthen the structures and function of the basic sectors of economy, so that they can support the country's growth in the long-term, without severe instability.
According to the Bank of Greece estimations, the Greek real estate market has preserved its dynamics, despite the fact that it also had to deal with effects of international incidents and the uncertainty they carry - both due to the continuing war in Ukraine and the increases in energy cost.
Although investors have been reluctant due to the war, the inflation and increased interest rates, as well as the already observed downturn in building activity, significant growth of the Greek real estate market is expected during the second six-month period of 2023, after the parliamentary elections in the country.
The factors contributing to these positive prospects are cited below.
In particular, the significant total drop in real estate prices over 40% and the limited financial activity of the last twelve years have led to emerging significant opportunities and capabilities which, in combination with the gradual support of investments, the effort to combat bureaucracy by completing the state's digital upgrade, the routing and acceleration of important infrastructure projects, the dynamics of tourism and the further recovery of the economy, are expected to give an additional boost to the positive dynamics gradually developed in the real estate market.
The even lower real estate prices in combination with the higher return on investment in the Greek real estate market, in comparison to the conditions in other European countries, render the Greek real estate market more attractive and potentially one of the most dynamic markets throughout Europe.
According to real estate market and the Central Bank experts, the most popular property in demand is real estate associated with tourism, short-term and long-term leasing and investments on professional real estate (offices, stores). Also increased is market interest for vacation homes and high-specifications residential property. This tendency is expected to continue in 2023 as well.
The positive prospects of the real estate market in Greece are also confirmed by the research completed by PWC and the Urban Land Institute (ULI) in their annual report Emerging Trends in Real Estate 2023 on European capitals.
In this research, Greece retains the 23rd position for 2023, as it did in 2022, managing to improve its rating by 5 positions - versus the 28th position of 2021 - with the criteria of “investment potential” and “potential of real estate development”.
During the last two years of the pandemic (2020/21), the economy was reinforced by state support policies, low interest rates, adopting flexible forms of working and remote working, which increased demand for lower-sized residential property.
The average increase of real estate prices in Greece in 2022 amounted to 11.2% (3rd quarter 2022) versus the respective quarter of 2021 (BoG). Market analysts forecasts for the next 3 years with regard to the Greek real estate suggest the increasing tendency will be maintained at 4%-5% annually (Alpha Bank, Piraeus Bank). The real estate prices increases expected are even more significant during a time when real estate prices are reduced in Europe, as indicatively shown in the German real estate market, due to increased interest rates and building cost.
Factors which support the Greek real estate market development
- Increased tourism
- More favorable taxation regime
- “Greece 2.0” Plan
- New major investment projects in progress
- Restoration of housing credit (despite recent interest rate increases)
- Housing loan subsidies for young people up to 39 years old
- Upgrading the promotion of Greece abroad as an investment destination – attracting major multinational companies (Microsoft, Pfizer, Intel, Amazon, etc.)
A series of factors are expected to have positive effects on the Greek real estate market growth in 2023, including the dynamic growth of tourism, which remains the most significant development leverage for the economy in general.
Positive effects are also expected by the more favorable taxation regime, with a series of regulations and incentives facilitating transactions and investments on real estate, such as reduced ENFIA, suspension of VAT for new construction, tax-free threshold for parental transfer up to 800Κ, tax discounts for renovation works etc., banks opening up and offering more building loans, the Greece 2.0 National Plan and the country's increased promotion abroad as an investment destination in sectors which include real estate.
An important role in the real estate market development is also played by the “Greece 2.0” Program. The National Recovery and Resilience Plan “Greece 2.0” which was approved in July 2021 by the European Union Economic and Financial Affairs Council (Ecofin) includes 106 investments and 68 reforms, collecting 31.16 billion Euro in European funds (18.43 billion Euro in aids and 12.73 billion Euro in loans) and it is expected to attract an additional 60 billion Euro in total investments in the country within the next five years. The “Greece 2.0” program is not going to improve only the lives and daily conditions of residents, by reforms in various areas of the country (e.g. Elaionas, Western Athens, the southern beach front of Attica, Thessaloniki, Patras and other cities) but it will also attract new investments and provide building upgrades based on the new standards of green development, significantly improving the quality of the available property and rending them more attractive for investors.
The increased savings of households during the pandemic, due to limited consumption and investments in the same period, will also contribute positively to the increased demand for real estate property. In combination with high inflation rates, they have a significant contribution on directing these funds investments to real estate, as the best possible investment option.
Another equally significant factor further boosting the positive prospects of the Greek real estate market for 2023 is the fact that the Greek state will, for the first time, subsidize loans for 10.000 new buyers (aged up to 39 years old) for apartments up to 120 sq. m., constructed until 2007 and priced up to 150,000 Euro.
The new major investment projects in progress, as well as those scheduled in the next three years are the best proof for the support of economy’s basic infrastructure and sectors, further enhancing the improved financial conditions and economy prospects, as well as the real estate growth. Some indicative examples include investments in Elliniko, the renovation of the Piraeus tower, the Thessaloniki Subway, the expansion of the Athens Subway, the expansion and upgrade of the regional airports of Iraklio and Kalamata, the construction of three new green hospitals by the S. Niarchos Foundation in Thessaloniki, Komotini and Sparta etc.
Finally, we should also mention the opening made to new markets, such as Germany, which during the last three years of the pandemic occupies the top position in searches for real estate in Greece from countries abroad. important role in this development has been assumed by new companies active in PropTech (property technology), such as the Greek real estate promotion platform FERIMMO (ferimmo.de), which has further internationalized the Greek real estate market, promoting it to all German-speaking markets (Germany, Switzerland, Austria) and via the strategic partnership it has forged with Greek-German Trade and Industry Chamber (AHK) the German Bellevue group of companies (the largest publishing and media company in real estate in Europe), the DHW- German-Greek Business Association, and the Athens/Attica Association of Realtors.
Uncertainties and Risks
- Political uncertainty
- Ukraine war
- constant threats by Turkey
- Financial uncertainty
- Inflation
- Energy crisis and increased cost in energy and raw materials
- Disturbance in the international supply chains
- Excessive increases in real estate property prices
- High interest rates
- Health risks
- Pandemic (fears for the coronavirus pandemic outbreaks, due to new variants, and fears for new pandemics)
Despite the optimistic forecasts for the current year, there are certain uncertainties which carry significant risks for the expected positive developments in the real estate market and the economy in general. These include the continued war in Ukraine, inflation and in particular the high cost of energy and raw materials, which exorbitantly increase the construction cost of new real estate, the continued aggressiveness by Turkey and difficulties in international supply chains, without ignoring the consequences of the pandemic which are expected to continue for quite some time.
When uncertainties exist for an extended period of time, they may disrupt the rhythm of building activity and limit the expected capital yield in the real estate market.
New trends in the real estate market in Greece
Real estate property which will attract interest from investors in 2023 and the following years includes the following:
- Property with advanced specifications of bioclimate design, ventilation and lighting
- Property with increased energy autonomy
- and technologically up-to-date infrastructure
which respond in a better manner both to the current health requirements and the new energy challenges.
The expected investment activity for 2023 attracts interest to the following categories of property.
- Vacation homes
- Tourism property (hotels and short-term leasing)
- Professional property (offices and stores)
- Logistics
A rather promising sector with very positive prospects for the entire Greek economy is Silver Economy and the ever-increasing demand for a second home by European pensioners and particularly by Germans. In their articles, the German Press (Handelsblatt, Spiegel) confirms the increased interest of German pensioners in purchasing a home in Greece and spending their golden years away from their country, transferring their residence to a different location, with better quality of life, sunshine and of course tax and financial advantages. Greece is also attractive due to its low cost of living in comparison to Germany.
The Greek real estate market is beginning a dynamic growth course for the next years and it is now the best moment for even the most conservative investors to focus on Greece.
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