Is Greece a good market for foreign property investors?
Just a few years ago Greece was a country in deep crisis. Government finances were wrecked, and the economy was contracting. Now, it's over the worst, and the economy has been growing again since 2017 - which should be good news for the property market.
After the crisis, Greece saw 7 years of falling house prices; prices in 2017 were 43% lower than when the crisis hit in 2008. New development practically stopped, and even now is only running at about half the level experienced during the boom years 2004-7.
A quick look into property market in Greece
Prices appear to be increasing fast. House prices rose 8.8% in the second quarter of 2019, according to the Bank of Greece, accelerating from 5.2% in the previous quarter. That's been driven by Athens and Thessaloniki, the two major cities, which have seen a massive increase in interest; as well as seeing prices rise, Athens has seen a big upswing in property transactions, 30% higher in 2018 than the year before - 2019 figures aren't out yet.
Developers are back, in both the commercial and residential sectors. 2018 saw a 10% rise in the number of new building permits issued, after 7 years in freefall, and money is heading back into the sector. New five-star hotels have opened on Crete - one of Greece's more resilient local markets - as well as on Corfu, and other areas are now seeing more investment, too.
Demand for holiday properties has been stimulated by growth in the tourist market - tourist numbers hit an all time high of 3.9m in July 2019. That's helping the islands, but is also increasing demand in Athens, where AirBNB has taken off dramatically in the past few years.
Achievable yields for investors
Finance remains tricky for individual borrowers, particularly those from outside the Eurozone. A mortgage is difficult to secure without both an impeccable credit record and a hefty deposit, and Greece remains vulnerable to interest rate movements, as most mortgages are only fixed rate for the first year. Currently, borrowers are paying between 2% and 3%.
Rental yields in Athens and on Crete have been squeezed. Larger (eg three bedroom) apartments in Athens might attract a 4% yield; smaller flats do better, and in the suburbs, flats can secure 4.5%. Houses, on the other hand, have very thin yields right now. In Crete, apartments might rent for a 3% yield.
Investors looking for good yields should consider the smaller islands instead; Mykonos produced an 8% yield in 2018, with Santorini and Paros both around 6.5%. On Rhodes and in Porto Heli, yields over 5% are still available, easily beating returns in other Mediterranean destinations such as Marbella, the French Riviera, or the Balearic islands.
The Greek government has recently taken several actions to kickstart the property market. Value added tax of 24% on new buildings has been suspended for three years, and tax breaks of up to 40% for renovation costs have been announced.
There is one slight concern about the Greek real estate market at the moment. It's foreign investors who are driving the market forwards - if they get cold feet the market could weaken. In the first 6 months of 2019, the Bank of Greece says foreigners invested EUR 736m in real estate, almost double the figure a year before - and more than 5 times the 2016 figure.
More than two thirds of this investment comes from other EU countries. But since 2013, the Golden Visa scheme has aroused interest from around the world, with China, Russia, Egypt and Turkey the major sources of demand. (With a EUR 250,000 investment enough to secure residence, Greece has the lowest cost golden visa scheme in the EU.)
None the less, there's probably not too much need to worry if you're buying a property on one of the islands or in the Peloponnese. The most heated market, and the one where golden visa money has made the biggest impact, is central Athens. That particular market could well be overheated - though it's still very far below the prices of capitals like London, Paris, or Berlin - but for the moment, the rest of Greece looks as if it can continue its progress for a good few years to come, and the economic fundamentals underpin that analysis.