Unstoppable the real estate market of the Athenian Riviera – Not affected by the changes in the golden visa program

By Konstantinos Kioleoglou

The real estate market and the real estate construction sector are important factors for the economy and for tackling unemployment in many countries. Their development brings benefits on many levels, providing jobs, boosting economic activity and facilitating citizens’ access to suitable housing.

However, there is a strong concern that the rapid growth of the real estate market may also cause some problems. One of the main concerns expressed is the increase in house prices and rents, which may make housing difficult for many citizens, especially young couples and young workers on low incomes. In Greece, some people are complaining about the rapid growth and development of the real estate market, worrying that rising rents and values will make housing unaffordable for many. But the reality is different.

The construction industry and the housing market are a magnet for foreign investment. It is significant that the real estate market has accounted for at least 40% of foreign direct investment in Greece this year, according to Bank of Greece data. This is a very significant increase compared to the recent past, when the share of real estate did not exceed 20%-25% of total foreign investment. This development is due to two main reasons. The first lies in the very significant increase in real estate investments by foreigners, mainly due to the changes that came into effect at the beginning of August in the “golden visa” program and the second in the fact that the Greek real estate market is gaining ground every day, gradually rising to become one of the dominant real estate markets in Europe.

In particular, according to Bank of Greece data, in the first nine months of 2023, total foreign direct investment amounted to 3.85 billion euros, 39.2% lower than the 6.34 billion euros that had flowed into the Greek economy in the same period of 2022. The real estate sector, in contrast to the general FDI index, moved upwards in terms of foreign capital inflows for the purchase of real estate. It is noteworthy that according to the BoE data, foreign capital inflows for the purchase of real estate in Greece in 2022 had amounted to EUR 2 billion, up 68% compared to 2021. In the first half of 2023, an additional €1.1 billion had already flowed in based on CBE data, an amount that is 40% higher than in 2022, when foreign investment had amounted to €788 million.

In 2023, total construction activity seems to have followed an upward trend compared to 2022 in terms of the total number of permits in the territory, in terms of m2 and volume. Indicatively, in November 2023 compared to November 2022, there is an essentially stable number of permits, with an increase in total m2 (+8.9%) and a significant increase in volume showing a difference of +24.2% as shown in the table below.

Important factors influencing the market trend and driving the real estate market to higher levels are, first of all, the fact that Greece has a special, unique product to offer in terms of the purchase of permanent and holiday homes, of high standards both in terms of design and construction.

Significant infrastructure and development projects in many areas of the country and especially in the Athenian Riviera create the conditions for upgrading the quality of Greek real estate standards, creating an expectation for high quality living conditions.

It is clear that areas with high market demand show large increases in both values and rents. In the context of this upgrading of the Greek real estate market, prices in areas with no particular characteristics are obviously temporarily drifting.

We often hear about the problem of high rents in many areas of the country, especially in Attica and tourist destinations. Airbnb and the Golden Visa are considered by many to be the main reason for these increases.

What is certain is that in a country that relies on tourism, alternative forms of accommodation such as short term rentals will exist in one way or another. Today, with the latest legislation, the government is creating the conditions for a controlled operation of short-term rentals, which in many cases is useful and necessary to meet the need for “beds” from the sharp increase in tourist arrivals throughout Greece. It should not be forgotten that short-term rentals create a new source of income for small and medium-sized owners who until recently could not participate in the country’s tourism market. As for the Golden Visa which is much talked about as the Greek Golden Visa investment migration program is breaking all records by setting a new record in 2023, despite the doubling of the minimum property investment threshold that came into effect last August for popular areas, such as the city centre, the northern and southern suburbs of Athens, the municipality of Thessaloniki and the islands of Mykonos and Santorini, we need to take a global approach to understand how it really affects the property market and values.

The government, after pressure, has already raised the limit once in some areas to 500,000 euros and there is talk of raising it to 800,000 euros in expensive areas. I believe that this particular increase in the limit will have the exact opposite effect to what was originally the aim of the measure. Given that the middle and lower class areas continue to maintain low thresholds for the golden visa, they will now be the first choice of those interested in a golden visa, with the result that values and rents will be pushed upwards. With foreign investors turning to “cheap” areas, i.e. where the threshold for the Golden Visa residency permit was maintained at 250,000 euros, for example Piraeus, the Peloponnese, Rhodes, Halkidiki and Crete, the number of applications has soared, making the Greek Golden Visa the most popular in the world for 2023. Only this has meant that the dispersion of investment is now limited to certain inexpensive regions that offer the opportunity to obtain a Golden Visa at the lowest price in Europe.

However, the available statistics present a not so scary picture as the market share attributable to the gold visa markets is too small to have a significant impact on values and rents horizontally. Based on available data from the BoE, the number of residence permits (golden visas) issued since mid-2014 to date is 12,126. These permits are also for business investments and not just real estate as the legislation gives multiple options for obtaining a golden visa. So in essence the property market since 2014 has been affected with an average of 1,200 property transfers per year across Greece. The number, as is obvious, is too small to affect the supply and demand of the Greek real estate market.

The market has been on an upward trend steadily since October 2019 until today.

According to available ELSTAT data, during the period from October 2022 to September 2023, the size of Total Construction Activity (Private-Public) based on issued building permits, in the whole country, amounted to 26,778, corresponding to 6,091,853 m2 of surface area and 28,175,766 m3 of volume. Compared to the corresponding period October 2021 – September 2022, there was an increase of 9.6% in the number of building permits, an increase of 11.4% in surface area and an increase of 14.7% in volume. Essentially, we are talking about more than 45,000 new properties entering the market in twelve months, adding to the existing available properties. It is well known that construction activity is on a constant upward trend and this is creating an ever-increasing stock of new properties. As shown in the graph below, private construction activity since 2016 has been on an upward trend in terms of both the number of permits, m2 and volume.

The market certainly takes all parameters into account and it is certain that both short-term leases and the golden visa are influencing the real estate market to some extent. But markets are influenced by dozens of factors macroeconomic, geopolitical, investment, and certainly by the product itself. It is unfair for the Greek market to ignore the special product we have. Greece is one of the safest countries, with endless blue beaches, cultural heritage, history, infrastructure, a member of the EU, offering unique tourist options all year round. Especially in the Athenian Riviera and on some islands, in recent years the Greek real estate market has upgraded its product, offering very high quality properties in areas with unique characteristics such as the coastal front of Athens at prices much lower than the corresponding options of the French, Spanish or Italian Riviera, but also many other European capitals.

The dynamics of the Greek real estate market seem unstoppable. Some of the world’s largest construction companies are investing dynamically in the Greek housing market and beyond. Despite all the circumstances that are shaping an unstable environment in the region, demand remains high. It is no coincidence that in recent years the rise of the real estate market has relied on private capital and investment with minimal involvement of the banking system, differentiating the dynamics and fundamentals of the market today from the past.

The increase in tourist arrivals and the expansion of the tourist season are an important factor supporting the real estate market, constituting a continuous advertising campaign of the real estate market.

The low cost of property transfer following the re-extension of the suspension of the VAT measure on real estate, together with the modernization of the land registry and the commitment of the Ministry of e-government for quick and easy transfers, which has already proceeded with legislative regulations concerning a series of interventions that reduce bureaucracy, have boosted the purchase and sale of new properties.

The overall development of the real estate market is a long-standing pillar of the Greek economy.

The development of the real estate market leads to an increase in investment and economic activity. As construction and sales cause a strong circulation of money in the economy, especially when the market attracts foreign investment. In addition, companies involved in the construction sector are usually major employers and producers, thus contributing to GDP growth and generating additional revenue for the government through taxes and fees.

In summary, the development of the real estate and construction sector is a driving force for the economic growth of the country and the reduction of unemployment. Through job creation, increased investment and improved infrastructure, the development of these sectors contributes to strengthening the economy and increasing prosperity. In terms of increases in rental and housing costs, this is the result of the general upward trend in the real estate market and inflationary pressures due to both internal and external factors, while high rental taxes and the way they are applied play an important role and are little affected by sectors such as golden visa and short-term rentals. The market does not operate horizontally and the golden rule of “location- location- location” is crucial in shaping values and yields. A significant price correction is expected in the near future in many non-prime areas, while sought-after destinations such as the Athenian Riviera still seem to have room for very good returns.



Source  : Capital.gr 

**translated from the original with Deepl translate

Written by Kioleoglou Konstantinos

* Konstantinos Kioleoglou is a Civil Engineer, Meng N.T.U.A., Msc Heriot Watt University  International Real estate INvestment and Finance , REV by Tegova, Managing Partner for Avakon Real Estate Development