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Property and Environment

Greek property market outlook 2019

Due to the Greek economic slump, which began in 2008-2009, Real Estate faced a huge decline. For almost a decade prior to the global financial crisis of 2007–2008, the real estate market and property values increased with an impressive ratio. The main reason for this incredible performance of the real estate sector was the unlimited and easy access to cheap finance which was available both to developers, investors, and buyers. In reality, the Greek economy could not, in any possible way, sustain the level of prices and could not absorb the huge number of new properties that were constructed all over the country with a super-fast pace.

Seeking luxury standards of living and hoping for easy profits, Greeks rushed to participate in that irrational market. All interested parties and stakeholders dazzled by the amazing performance of the sector were not prepared for the downward part of the cycle and definitely not for a global recession. The 2008 financial crisis is considered by many economists as one the worst financial crisis since the Great Depression of the 1930s. It has affected each and every market around the world.

Markets backed by strong economies such as Germany or the UK faced the side effects of the global crisis but in a soft manner and recovered fast. Other countries such as Greece, Cyprus or Portugal had to face the harsh reality. Overspending citizens, weak banks, impoverished economies, heavily indebted households, and governments had to face the ugly ruthless face of the financial and capital markets.

In Greece where property traditionally was considered as one of the safest, almost risk-free investments, the impact of the property market crash was destructive, dragging almost all the sectors of the economy including the banking system into an incredible swirling fall. After several assessments on the internal and external debt of Greece, the huge increase of unemployment, the collapse of the stock market, still, no one has presented the real loss in nominal value of the real estate in Greece as an asset class during this period of recession.  By providing temporary and futureless protection of property ownership, all the governments is doing is to try and cover the huge losses of the property assets.

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This temporarily stops the processes of forced liquidation but property owners who cannot sell their properties won’t understand the losses they will have to face upon the sale or confiscation of their assets. It is human to forget and adjust to the new established environment in order to survive. After ten years of real estate inactivity and annual price declines, Greeks have become used to the new levels of the market. Only after a bank or a fund will auction their properties for a fraction of what they initially paid will they realize that not only they lost the asset but they still owe a fortune to the lenders.

Property owners will not understand exactly what happened and how irreversible the situation is. According to the Bank of Greece, at the end of 2017, real estate in Athens was 44% cheaper compared to its peak of 2008. However, the fall in property prices is slowing down. In 2015, the price per square meter fell by 5.3% in 2015, by 1.8% in 2016, and by only 0.9% in 2017. In quarterly terms, prices have even stopped falling – they remained constant in the last quarter of 2017. House prices finally showed a marginal increase in the first three quarters of 2018, after declining since 2008. It is true that this is a very positive sign.  There are two important elements that the report of the Bank of Greece and other reports cannot display.

First, the fact that all the figures and numbers would be completely different if the market was allowed to operate properly without government intervention. That means allowing auctions to happen without any restrictions. Secondly, the last three years have seen a lot of real estate investment related to the increase of tourism. This is affecting the numbers and the market dynamics, which is not representing the correct market outlook for the residential and commercial/office properties around the country.  Another reason that we are observing a small positive change in the market is the mandatory increase of the tax values which has been implemented over the last few years. This increase is completely artificial and does not change or affect positively the market values.  The reality of the Greek property market remains misty.

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There are some areas such as popular islands where holiday houses show an increase in demand based on the impressive current status of Greece as a popular tourist destination in the region as well as the golden visa program. In reality, the core section of the housing and commercial market around the country is still suffering from low demand and lack of affordability as the average purchase power of the Greek family has been weakening year after year since the beginning of the recession.

Source: Property Investment News

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