Shocks in the Greek real estate market from the rumored changes in the tax and legislative framework

 

The development and sustainability of the real estate market are critical issues for the economic prosperity and sustainability of a country. Despite significant efforts in the past, the inadequacy of a stable fiscal and legislative framework has often weakened efforts to sustainably develop the real estate market. In the current era, where globalisation and rapid technological change are bringing about dynamic changes, the enforcement of a stable framework becomes even more important.

In recent years, the Greek real estate market has been on an impressive upward trend, being a key factor in the development of the Greek economy and the reduction of unemployment. Direct and indirect, small and large investments in the real estate sector create great expectations for the future. Permanent and temporary measures taken by the government, such as energy upgrade incentives, VAT suspension and the possibility of golden visas, among others, have pushed the real estate market to positive growth rates and values on an upward trend.

 

The real estate market is one of the key sectors of the economy that is influenced by various factors such as political stability, tax policy, property legislation, as well as commercial and economic policy. Lack of stability in these areas can create uncertainty and discourage investors from developing and exploiting real estate markets. This can lead to volatility in property prices and a deterioration in property values, thus undermining economic growth and prosperity.

A stable tax framework is essential to ensure fair taxation and encourage investment in the real estate market. Transparency in tax provisions and the minimisation of tax burdens are important elements to be taken into account. A fair tax code that promotes growth, but at the same time protects the interests of all parties involved, is essential to achieve long-term benefits.

In addition, the existence of a stable legislative framework protects the rights of those involved in the real estate market, encouraging confidence and security of investment. A key factor is the creation of legislative frameworks that promote sustainable management of real estate markets, protecting natural environments and ensuring the efficient use of resources.

However, achieving a stable fiscal and legislative framework requires cooperation between the public and private sectors. Encouraging private sector involvement in the development of legislative frameworks can lead to more comprehensive and effective policies that respond to real market needs.

In today’s reality and although the real estate market is a key pillar of the Greek economy’s growth, we are experiencing a strange reality where the market is moving in a volatile environment which in no way supports the growth path of the market.

Temporary VAT suspension measures, decisions of the Council of State annulling existing provisions and articles of the Law, changes in building conditions, rumours of the abolition of energy upgrade incentives, confusing interpretations of existing legislation are causing turmoil and upheaval in the market.

In recent months, rumours of a new impending change to the New Building Code (NOC) and especially to the articles concerning energy upgrade incentives (known as bonuses) have already caused a nightmare for everyone involved. Apart from the design part which will obviously be directly affected, changes in the NOC and especially with regard to energy incentives on the one hand, problematize the competent building services which are called upon to check new applications for building permits and on the other hand, directly and significantly affect the values of both plots and properties, new and old. Investment schemes that have invested in real estate – plots of land with specific land development potential are faced with new data every time the NOC changes. The same applies to private individuals and smaller developers who are required to adapt each time to any changes that arise in a volatile environment full of uncertainty.

It is a fact that Greece as a whole, and especially the Athenian Riviera, has been enjoying an impressive residential development in recent years, with beautiful, highly energy-efficient buildings of exceptional aesthetics and quality. Small but also landmark projects of Greek and international investment groups have attracted investments unprecedented for Greece. An important role in this process has been played by the existing legislative framework (NOC) with all the incentives for energy upgrading of both existing and new buildings. The temporary (expires 12/2024) suspension of VAT on real estate is also a dominant measure to stimulate the real estate market. The temporary measures and the continuous changes in taxation and the NOC are hurting the dynamics and potential of the market in the long run. The market needs permanent solutions in both the tax and legislative framework that will ensure that everyone involved has certainty about the framework in which they are obliged to operate when they decide to get involved in the real estate market. The Ministry of Environment has a duty to protect all involved Greeks and foreigners, small and large owners and investors from extreme, often regressive, voices and trends that try to stop the upward trend of the market and turn the urban development of the country many decades back both aesthetically and in terms of investment.

For many decades, the entire political-economic system in Greece has been evangelizing and seeking growth, giving it various names (modernization, extroversion, investment, etc.) depending on the dominant ideological framework of the time. These names are followed by the policies of the governments of the day, which come to change the legislation, rules and the framework in which the markets (and not only) operate, each time according to their political convictions, often disregarding the obvious, the logical and the need for a stable investment environment that inspires confidence. The result of this policy is that we are leading to a fragile economy, with strong turbulence and economic and productive dependencies, unable to find its stride, and experiencing economic waves, more pronounced in the downturn and less satisfactory in the upturn, with uncertainty dominating the markets over time.

At an overall level, the creation of a stable fiscal and legislative framework (coupled with serious infrastructure projects) is the basis for the development of a dynamic and sustainable real estate market. Only by implementing coherent policies and maintaining stability can we ensure the sector’s growth and protect it from potential risks and uncertainties that threaten economic growth and sustainability. Obviously, legislation must follow developments and adapt to the requirements of each era. Any change should be made taking into account the impact on the property market, the economy and the environment. The Greek market today more than ever needs a stable investment environment, at least as far as the domestic parameters are concerned and to the extent that they can be controlled in order to be able to overcome all the issues arising from the international situation of recent years.

* Konstantinos Kioleoglou REV, Managing Partner Avakon, Civil Engineer, E.M.P., MEng in Structural Engineering, N.T.U.A, MSc in Real Estate Investment and Finance, Heriot Watt University, Recognised Expert Property Valuer & European Valuer, Tegova

 

Original Article @ Capital.gr