The Real Estate Market in Greece and the Athenian Riviera as a Global Real Estate Destination. Analysis by Kioleoglou Konstantino
Konstantinos Kioleoglou, Managing Partner of Avakon, analyzes the trajectory and prospects of the Greek real estate market, placing the phenomenon of the Athenian Riviera under the microscope. He examines its strengths and weaknesses in comparison to other global destinations for luxury home purchases.
Konstantinos Kioleoglou, Managing Partner of Avakon, analyzes the development and prospects of the Greek real estate market, scrutinizing the phenomenon of the Athenian Riviera, its strengths, and its weaknesses compared to other global destinations for luxury property investment.
It is well-known that in Greece, the middle class was housed and, to a large extent, shaped post-war through urbanization and the multifaceted mechanisms of post-war urban development, with the most notable being the ‘antiparochi’ system, which became the backbone of the Greek real estate market. To this day, things have largely progressed under the same logic. Urban centers continue to grow and evolve, and the need for more buildings, parking spaces, environmentally friendly properties, and affordable housing solutions remains the core focus of market development.
Like any market, the Greek real estate market has gone through several cycles over the past decades. One of the most recent market shifts occurred from the early 21st century to today. Specifically, in the early 2000s, there was a period of significant growth and development in the real estate market, marked by increased construction activity, rising property values, and numerous transactions. This boom was followed by a decline during the financial crisis of 2010, when the market lost much of its activity. However, since 2018, the market trend has reversed, showing a recovery at an accelerating pace. As of now, the market has almost fully recovered its losses from the great recession in terms of prices across the country, demonstrating remarkable resilience to challenges such as the pandemic and global geopolitical developments.
The real estate market plays a critical role in economic growth, influencing both overall demand and financial stability. The experience of the global financial crisis, triggered by the collapse of the U.S. housing market, highlighted how vulnerable financial systems are to real estate market fluctuations. Variations in property prices and mortgage interest rates directly affect demand, inflation, and household savings, while also influencing monetary policy and economic stability. Therefore, continuous monitoring of the real estate market and its potential impacts on variables such as consumption and asset values is vital. In Greece, the real estate market possesses unique characteristics and constitutes a key sector of the economy, with its evolution and prospects playing a decisive role in the country’s economic development.
The Market in Numbers
The real estate market is one of the most important sectors of the Greek economy, with investments in residential properties and construction forming a significant part of total economic activity. Before the 2008 crisis, investments in residential properties accounted for 7.5% of GDP, while total construction activity reached 14.7%—figures above the European Union average. However, the economic crisis caused a steep decline in construction activity, with residential investments plummeting to just 0.7% of GDP during the 2015–2017 period. From 2017–2018 onward, a gradual recovery has been observed, with residential investments rising to 1.9% of GDP and total construction investments reaching 5.3% of GDP in 2024. Construction investments (residential and non-residential) have been on the rise since 2020, totaling €5.3 billion, with a marginal decline of 0.8% compared to the first half of 2023, which had seen a significant increase of 21.2%. The Gross Value Added (GVA) of the construction sector has also been on an upward trend since the second half of 2017, reaching €2.1 billion in the first half of 2024 (in constant prices).
Despite this improvement, activity levels remain low compared to the past, indicating the need for further sector support to drive economic growth.
Private construction activity in Greece has shown dynamic growth in the first seven months of 2024, according to recent studies. During this period, building permits increased by 20.6%, while the total volume of construction (m³) recorded an annual growth of 12.2%. This upward trend is mainly attributed to the rising demand for private constructions as the economy continues to recover. Notably, this impressive growth was observed during the first months of the year, from January to April.
Overall, the issued permits for private construction activity totaled 18.6 thousand. Most of these permits were concentrated in the Region of Attica, which accounted for 22.1% of the permits, and Central Macedonia with 13.3%. The greatest increase in the number of building permits was observed in the Ionian Islands, where there was a 51.4% rise, and in Epirus with a 44.4% increase. These regions appear to attract investors and individuals seeking development and reconstruction opportunities, particularly in tourist areas and regions with housing shortages.
The upward trend in private construction activity began in 2017, with a slight decline observed only in 2022. This temporary drop is linked to the sharp rise in construction material prices, which started in 2021 and accelerated the following year, negatively impacting the construction sector. The Construction Materials Price Index for New Buildings recorded a cumulative increase of 27.4% from July 2021 to September 2023, challenging construction activity and driving up the cost of new buildings.
Notably, there was a significant increase in the prices of two key categories of construction materials: cement and ready-mix concrete, as well as basic processed metal materials. These materials saw cumulative price increases of 23.3% and 28.3%, respectively, contributing over 44% to the overall index due to their high weighting. The rise in material costs poses a major challenge to the sustainability of construction growth, as it affects expenses and ultimately reduces demand for new projects.
The construction sector’s contribution to the Gross Value Added (GVA) of the Greek economy has decreased significantly, from 9.4% in 2006 to just 1.5% in 2017, with a modest recovery to 2.1% in 2023. However, this sector continues to have a multiplier effect on the economy. The construction and renovation of properties mobilize a wide range of services and products, including maintenance services, the purchase of raw materials (e.g., cement and paints), and construction equipment, while boosting demand for durable consumer goods such as furniture and household appliances. Additionally, housing enhances household income through rental revenue and supports numerous professional groups related to the real estate market, such as plumbers, electricians, engineers, and real estate agents, highlighting the sector’s broad economic significance.
The Role of Real Estate in Greece’s Development
Many argue that the real estate market cannot significantly contribute to a country’s development, especially in Greece. However, this is clearly not the case, as we will see below, since it has significant multiplier effects on the Greek economy.
It is important to highlight that the real estate market, especially in its current form, attracts a substantial influx of “fresh money.” A significant proportion of buyers and investors are foreigners who bring their funds into Greece by purchasing or renting properties and investing in the real estate market. Gradually, these individuals establish permanent spending patterns within the country, thus contributing continuously to the GDP.
Real Estate as a Key Contributor to the Economy
As previously mentioned, real estate has multiplier effects on the Greek economy, directly and indirectly linking various sectors and significantly contributing to both employment and state revenue. Its impact on employment is considerable, with a large portion of the workforce engaged in construction and housing sectors. Before the 2008 financial crisis, approximately 8.7% of total employment—equivalent to 400,000 workers—was in construction. However, during the financial and health crises, this share dropped dramatically to 3.6% in 2020, involving 140,000 workers. Although there has been gradual recovery since then, this percentage remains low at 4.2% in 2024. Notably, this figure does not include employment in related fields, such as real estate agencies and housing-related businesses. Beyond employment, real estate transactions have significantly boosted tax revenue, contributing €520 million from property transfers and €2.5 billion from regular property taxes in 2023.
Unique Characteristics of the Greek Real Estate Market
The Greek real estate market has unique features that influence its development. Historically, Greek households have trusted real estate as a safe way to accumulate wealth, securing steady rental income and achieving long-term returns of approximately 7% annually. Homeownership in Greece stands at 72.8%, one of the highest rates in Europe, with about two-thirds of Greeks’ total wealth held in real estate. However, only about 2% of properties are sold annually, indicating limited market mobility. Most homes are old and energy-inefficient, with many properties remaining vacant. The absence of social housing, unlike in other European countries, exacerbates housing issues for vulnerable households. Greece is undeniably part of this broader housing challenge.
Challenges in the Housing Sector
The housing issue is among the most significant challenges for Greek households. Continuous price increases since 2017—driven by foreign demand, rising construction costs, and higher borrowing costs—have created property prices disproportionate to average income. This has made homeownership increasingly difficult, negatively affecting even lower-quality properties and rental prices. Consequently, a growing portion of the population, especially young people, is excluded from the housing market. Data indicate a worsening in housing affordability, with housing costs consuming 35.2% of household disposable income in Greece compared to the EU average of 19.7%. Furthermore, 28.5% of Greeks live in households where housing costs exceed 40% of their income, compared to just 8.9% in the EU. The ratio of house prices to disposable income has risen by 24.1% over the past five years, with an even steeper 44.4% increase in the price-to-rent ratio.
Declining Homeownership and Rising Real Estate Values
Homeownership in Greece has declined, now standing at 69.6% nationwide and 64% in Athens, according to Eurostat. The sharp increase in residential property values—reaching double-digit percentages in the past two years—has been a key factor. Since 2017, when property values were at their lowest, Athens has seen a 90% rise. Compared to 2008, the peak year for real estate performance, the increase is just 4%. The majority of properties on the market are old (over 40 years) and have seen their values skyrocket, with increases of up to 100% overall and 70% in central Athens. Meanwhile, disposable income has decreased by 20% since 2008, and a decline in building permits since 2011 has worsened the situation, as the permits issued from 2011 to 2024 are equivalent to those issued in 2005.
Legislative Uncertainty and Its Effects on Construction
The issuance of new building permits has been abruptly halted due to ongoing issues with the 2012 Building Code (NOK). For months, the construction sector has largely paused new permits and projects while awaiting the outcome of legal proceedings regarding the NOK’s constitutionality.
This uncertainty poses challenges for all stakeholders in the real estate market and the government. The lack of legal clarity and the general atmosphere of doubt surrounding Greek legislation deter investments, buyers, and sellers alike. In a market where supply-demand dynamics determine property values, returns, and housing costs, suspended construction activities exacerbate the problem, driving prices and rents to new highs.
The Athenian Riviera: Opportunities and Trends in Luxury Housing
The Athenian Riviera, with its breathtaking coastline, modern developments, and excellent infrastructure, has become one of Europe’s fastest-growing destinations for luxury real estate. The combination of extensive infrastructure projects and the development of high-end, contemporary homes with unique features has made the southern suburbs of Athens a hotspot for international buyers and investors who previously favored destinations like the French or Italian Riviera.
The Rise of Luxury Housing
Luxury and ultra-luxury housing—or “prime” real estate—on the Athenian Riviera attracts considerable international interest. These newly constructed, high-specification properties often feature smart home technology, energy efficiency, stunning sea views, and proximity to exquisite beaches. Although demand remains high, supply is limited, driving up property values. Recent legal uncertainties have further slowed new construction permits, making these properties even more exclusive, with prices in some cases exceeding €10,000 per square meter.
Infrastructure and Appeal to UHNWI
Significant investments, such as the Vouliagmeni Marina redevelopment, have elevated the Athenian Riviera as a hub for Ultra-High-Net-Worth Individuals (UHNWI). This segment increasingly drives demand, aligning the Athenian Riviera with other prime destinations like the French Riviera and Sardinia.
Outlook for the Real Estate Market
Given the limited supply and increasing demand, the luxury housing market on the Athenian Riviera seems poised to maintain its positive outlook. While price growth is expected to continue, it will likely be more measured compared to previous years. These properties represent high-value investments with relatively lower investment risk compared to other European locations.
Foreign investors continue to view Athens as an attractive real estate market, with the available infrastructure and amenities enhancing the sense of luxury and quality. Despite rising prices, properties on the Athenian Riviera are still considered more affordable compared to other destinations. This affordability creates opportunities for further growth and investment potential.
In a competitive international environment, the Athenian Riviera possesses characteristics that could establish it as one of the premier destinations for luxury home purchases, making it one of the most promising segments of the European real estate market.
Currently, the critical issue that will shape the trajectory of the Greek real estate market, including the southern suburbs and the Athenian Riviera, is the need for a stable legislative and tax framework. Such stability is essential for ensuring the legal security and trust that any market requires to sustain steady growth.
In recent months, a combination of legislative changes concerning real estate and the constitutional debate surrounding the Building Regulation Code (NOK 2012) has caused significant disruption among buyers, investors, and developers. This turbulence has effectively frozen the construction sector. The government must ensure legal security and establish a stable legislative and tax framework aligned with the potential and significance of the Greek real estate market.
Kioleoglou Konstantinos, REV
Civil Engineer, NTUA
MEng in Structural Engineering, NTUA
MSc in Real Estate Investment and Finance, Heriot-Watt University
Recognized Expert Property Valuer & European Valuer, TEGoVA
Certified Safety Engineer by the Greek Ministry of Labor
Source NOUPOU.gr
Translated with Chat GPT4