By Teti Igoumenidi
According to Bank of Greece (BoG), the net receipts for the purchase of real estate from foreign nationals are still high as a percentage of all investments (42.5%) and exceed 2 billion euros, up 8% compared to 2022 (2,133 million euros compared to 1,975 million euros).
“Expectations for the Greek real estate market remain moderately positive in the near future, as the uncertainties related to geopolitical instability at the global level remain significant,” according to a BoG report released on Monday.
High inflation and construction costs along with high interest rates affect the investment profit margin and increase the requested yields from the real estate sector, which may gradually affect the prices of the domestic market, significantly fueled by foreign investments.
In the short term, however, and as long as overseas demand remains strong, prices are expected to continue their upward trend in the high-end segment of the market, also affecting prices in the secondary markets.
It is stated that “the serious problem of housing costs recorded over the last years, as a result of the extensive investment exploitation of the residence, raises important issues for the possible adoption of measures by the state.
Interventions in the direction of strengthening the supply and limiting the investment demand for residential properties (short-term leases, Golden Visa) in primary residence areas are estimated to moderate the price growth and possibly lead locally to price corrections.
Greece’s real estate prices galloping against slowdown in most European countries
In 2023, Greece followed an opposite course in relation to the European average and most European countries in terms of real estate prices, while this difference is expected to continue this year, with market representatives expecting high prices especially in new buildings.
Eurostat’s data on the course of real estate prices clearly reflected the stagnation or even falling prices in many European real estate markets. The average for the European Union stood at -0.3% and for the eurozone at -1.2%, as at least eight major European markets recorded a drop in prices.
The course of real estate prices in Greece is not included in the Eurostat survey, which is due to the fact that the recording and monitoring of the relative index is done by the Bank of Greece. Despite the different methodology, the basic conclusions are as follows:
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1. “Fatigue” is already evident in the European real estate market and it will be very interesting to see what the course of the prices will be during 2024.
2. Greece is included among the “champions” of revaluations for 2023 and it is most likely that it will hold this position again this year, because the factors that push the prices, especially of newly built properties upwards, have not disappeared. The 2023 figures showed a price increase of 13.4% on an annual basis compared to 11.9% in 2022.
The main reasons
There are several reasons why this different speed of change in real estate prices is recorded.
First, the difference in growth rate plays a key role, which also affects property prices. On the other hand, Greece, coming out of a multi-year crisis, has clearly a greater lack of newly built properties compared to the rest of Europe.
Nowhere else in Europe have we had such a “freeze” in construction activity for 10 consecutive years. This has affected the balance of supply and demand and this is why more than 210,000 properties are missing from the market.
Property supply is not meeting demand, building material prices continue to rise at twice the rate of inflation, there is very high demand for newly built and energy-upgraded properties due to the climate crisis, while demand (and thus price increases) is fueled not only from the domestic buyers but also from foreigners.
Greece is also presented as the last chance to invest and obtain a European passport on favorable terms following the recently upgraded and stricter “golden visa” measures that will be implemented as of October.