The drop in the prices of holiday homes in Greece today compared to the period before the crisis stands at up to 45%, according to Taylor Scott International’s research as well as other market professionals at the 2nd Greek-Russian Real Estate Forum in Athens organized by the Greek-Russian Chamber of Commerce.
The reduction in prices in the Greek market and the huge stock of unsold properties, estimated at somewhere between 25,000 and 40,000 units, have led the market to its lowest point in the last 15 years.
However, decline in prices may prove to be the redeeming feature of the market as Greece is now becoming a much more competitive destination for foreign buyers in general, rivaling countries such as Spain and Portugal, although its prices are still less attractive than those in neighboring countries including Bulgaria and Turkey, which attract a considerably higher number of buyers.
Russian buyers are most interested in holiday homes in the 100,000-200,000-euros price range, and especially apartments, while the most popular areas are Halkidiki, Skiathos, Corfu and Crete. In general, Russians seeking such properties tend to be entrepreneurs with a family, aged between 35 and 45, and willing to spend an average of 115,000 euros on a holiday home.
The number of residential property appraisals-transactions in Greece fell by 23.1% in 2013 to 23,801 transactions, according to the Taylor Scott International’s researsh and market analysis for 2013. The number of building permits dropped 27.7%. Likewise, total new floor space, measured in square metres, fell by 28.3%.
To revive the ailing housing market, the Greek government recently offered residence to non-EU investors purchasing or renting property worth over €250,000. The residence plan, which is similar to measures adopted by Hungary, Spain and Portugal, is valid for five years and open to renewal,but is not attracting yet as many investors as originally was expected.
Greece and Spain are among the top choices of Russians in search of holiday homes, while as far as Greece is concerned, 93% of interested buyers look for apartments. More than two-thirds (70%) seek out secondhand properties.
Mr. Kosta Kioleoglou who is a Tegova Recognised Expert Valuer and holds a masters degree in civil engineering from the National Technical University of Athens and who is also the chief property strategist at Taylor Scott International says…”Greece’s property market remains depressed. House prices are still falling after almost six years of declines, albeit at a slower pace. Property demand remains weak. Construction activity continues to struggle.. The real estate market has an important bearing on macroeconomic developments and financial stability. Systematic monitoring of real estate market developments and prospects are therefore very important for a comprehensive analysis of the macroeconomic conditions and for spotting the opportunities in the market.
The Greek economy shrank by about 4.2% in 2013, after GDP contractions of 6.4% in 2012, 7.1% in 2011, 4.9% in 2010, 3.1% in 2009 and 0.2% in 2008, according to the IMF.
The economy is expected to grow this year, with GDP growth forecast at 0.6%.
Taylor Scott International’s report also points out that affordability for new housing transactions has improved as house prices have fallen further, supported by the prolonged low interest rate environment.
When it comes to lending interest rates remain much lower compared to the pre-crisis period following the deep monetary expansion programmes initiated by the European Central Bank following the crisis.
Funding costs have therefore remained quite low for financial institutions and this has translated into lower mortgage rates for borrowers. Due to central bank support,Taylor Scott International does not expect interest rates to change much in the near term and believes mortgage rates will remain stable over 2014.
Also, the level of new arrears has begun to shrink as the economy begins to recover, however the overall volume of non-performing loans is expected to continue to increase as Taylor Scott International expects a slow orderly wind down of the foreclosure pipeline.
Overall mortgage lending levels are expected to remain flat. The level of new gross mortgage lending has reached a new low, driven by both supply and demand. On the supply side, Greek banks continue to deleverage, underwriting standards remain strict, and the competition among lenders has also remained at lower levels. On the demand side, mortgage applications remain at low levels as HPI (Home Price Index) continues to decline.
In line with the house price forecasts and credit availability for borrowers Taylor Scott International expects relatively flat lending volumes over the coming years. Borrowers incentives as well as their ability, to refinance is likely to be impaired due to a combination of lenders’ reduced access to financing, banks’ plans to deleverage and tighten lending criteria, rising default rates and declining house prices.
Taylor Scott International’s view and forecasts:
According to Taylor Scott International’s view,Q2 2014 is expected to see further improvement in the Greek commercial real estate sector with the depression in the market showing signs of having finally bottomed out. An improving outlook for the sector is based on projections for positive economic growth in 2014 and a steadying export sector. While conditions are slowly improving, the real estate sector continues to face a number of headwinds, including weak demand and falling prices. Meanwhile, rental rates continue to trend some way below pre-downturn levels.
With a focus on the country’s principal cities of Athens, Thessaloniki and Piraeus, Taylor Scott International’s Q214 Greece Real Estate report covers rental market performance in terms of rates and yields across the commercial office, retail and industrial sectors. TSI’s core scenario of rents remaining stable over H2 2014 remains in place and we expect rental rates to retain their year-end levels during the early part of the year. The industry remains fragile, however, and should further economic distress emerge, over the course of 2014 such as a disorderly default, market contraction will be prolonged.
While the government has overcome a number of obstacles, a return to sustainable growth is predicated not just on successful economic reforms, but also on targeting policies at future growth industries and restoring confidence in the market. The short-term outlook for the real estate sector is not likely to restore investor confidence. The risks for the real estate sector as a whole are therefore firmly weighted to the downside, though there are signs that larger investors are starting to find their way back into the market to take advantage of the devaluation of real estate assets over the past few years. Foreign investors are currently behind the bulk of all transaction activity.
