ATTRACTIVE REAL ESTATE
The Investor Greece 2019 I Real Estate I Analysis
THERE ARE SIGNS OF STABILIZATION OF THE GREEK REAL ESTATE MARKET GENERATING A POSITIVE DYNAMICS DUE TO MANY FACTORS INCLUDING THE GROWTH OF TOURIST ATTRACTIVENESS OF THE COUNTRY.
RESIDENCE BY INVESTMENT
All of the EU Member States have various incentives in place to attract foreign investment from non-EU nationals. 'Golden visas' or 'golden passports' usually refer to specific 'policies developed by countries seeking to attract wealthy people to become residents or citizens. Different official terminologies exist to designate these types of policies: economic citizenship programmes (ECPs), immigrant investor programmes (IIPs), citizenship by investment (CBI) and residency by investment (RBI) schemes.
National schemes designed to attract foreign investment are found across the globe and in almost every country. Some of these schemes offer residency or citizenship rights, in exchange for sizeable investments. Residency schemes have increased dramatically in the past decade. While countries like Australia, the United States (USA) or the United Kingdom (UK) have offered residence rights in exchange for investment since the 1980s and the 1990s, the Caribbean islands of Saint Kitts and Nevis were the first to offer citizenship rights in exchange for investment.
In the aftermath of the global 2007-2009 financial crisis, many countries, including in the EU, developed these schemes to boost their weakened economies. The Henley & Partners/Kochenov quality of nationality index (QNI)has become a point of reference that explores the various factors that make one nationality better than another in terms of legal status, economic strength, human development, peace and stability, as well as visa-free travel and the ability to settle and work abroad without undertaking cumbersome formalities. In the latest QNI released in 2018, all the EU Member States are ranked in the top 30 most desirable citizenships around the world. The reasons why EU Member States are ranked so high include, in addition to economic prosperity and stability, the fact that EU nationalities come with the right to be welcomed by other countries and societies, they come with extra-territorial rights. European countries have received €25 billion in the last decade thanks to applications for the golden visa.
Following the launch of several European investment visa programmes, the Golden Visa program in Greece was introduced by the government in 2013 to encourage investment into the country. The government introduced a procedure to obtain residence permits, which can be renewed every five (5) years, for owners of real estate by third-country citizens, the value of which exceeds €250.000, which is the lowest investment level among all real estate residency visa schemes in Europe.
The investment may consist of more than one properties, residential or commercial, and there are no restrictions regarding the location, the age or the exploitation of the assets. There is no minimum stay requirement for the investors and their families who can very quickly obtain the 5-year Residence Permits. The Residence Permits are automatically renewed every five (5) years, provided that the ownership of the assets is maintained. The holders of the Golden Visa may apply for Greek Citizenship and a European Passport after seven (7) years of lawful residency. Greek citizens enjoy visa-free or visa on arrival access to 171 countries and territories, ranking the Greek passport 7th in the world. Once applicants have acquired citizenship, they can dispose of their investment in Greece as no further visa renewals are required.
Today, Greece's Golden Visa Program is considered the most competitive permanent residency scheme in Europe. Through the removal of all bureaucratic obstacles and the initiation of a rapid licensing procedure for the implementation of investments, accompanied by a minimized time limit for the issuance, the contribution of the Immigration becomes essential to the promotion of the national economy. Therefore, the law has adopted a rapid licensing procedure (fast track) for the entry and residence of third-country nationals who fall within the Greek residency scheme. These investments are considered to have a positive impact on national economy.
With lower property prices in Greece which are are, in some cases, 40% below their pre-crisis peak of 2009. Property prices are recovering and foreign investors are increasingly interested in the Greek Golden Visa. From only 444 applications in 2014, it has grown to 4154 in 2019 reaching for the first time in history a higher number of applicants than the United States. People seeking a residence permit in Greece were coming not just from China (almost 50%) but also from Russia, Turkey, and a multitude of other countries such as Lebanon, Egypt, Irak, Syria.
REAL ESTATE SECTOR
The property market in Greece was traditionally considered as a safe safest, almost risk-free investment. The economic crisis had a destructive effect in the market, bringing almost every sector of the economy into a swirling fall. Today, after a period of seven years of tumbling house prices, the market is turning around due to improving economic conditions. There are signs of stabilization of the Greek real estate market generating a positive dynamics due to many factors including the growth of tourist attractiveness of the country, increasing tourist traffic. Demand for short-term properties is buoyed by demand from tourists, so property investors that cater to this particular market have the potential of higher and constant returns. Since last year, the fall in prices for real estate properties stopped.
Greece has become an attractive investment destination for foreign buyers. The Bank of Greece indicates that at the end of 2017, real estate in Athens was 44% cheaper compared to its peak of 2008. The Athens property market is undergoing a slow revival on the back of growing investor demand. House prices finally showed a marginal increase in the first three quarters of 2018, after declining since 2008. In 2015, the price per square meter fell by 5.3%, by 1.8% in 2016 and by 0.9% in 2017. Athens led the country’s housing market with an annual house price increase of 3.71% in Q3 2018. This was the capital’s best performance since Q4 2007. During the latest quarter, house prices rose 1.65%. The number of real estate transactions in the capital grew by 18% in 2017, and by 1.5 times in the first two months of 2018 compared to the same period in 2017. Athens is the city with the second-fastest rate of growth in the number of tourists in Europe while the first is Heraklion.
After almost ten years of dormancy in the construction sector all over Greece, there is a serious deficit of newly built properties. Over the past year, especially in Athens Riviera, some new constructions are coming up. It is a fact that there is a gap in the market creating an opportunity for the specific type of properties that are needed to cover the needs of a niche market which is looking to buy modern new apartments in this specific region.
The two main market boosters currently are the foreigners looking to buy properties in order to secure temporary residence permit via the residency by investment program in Greece, offering visa-free travel to investors and their families. The majority of these people are targeting properties of specific value located in specific areas. The other market boosters are new properties targeting a limited number of Greeks who can afford to buy property without using finance.
The office market in Europe is growing at unprecedented scale, with the total volumes of 2018 at the same level as 2017, being by far the most active year in the last decade. Commercial real estate investment volume in Europe reached €261 billion in 2018, a similar level to 2017. Activity was strengthened in the sixteen largest city markets with a 10% increase breaking the €100 billion bar, an absolute historic record. Offices remained the most sought-after assets on the market, sustained by record levels of office take-up. They represented 45% of invested volumes in Europe and were characterized by a large share of mega deals. Thanks to an impressive growth of invested volumes (+26% y.o.y.), Paris was back to being the leading European city market.
Athens has benefited from improvements in the Greek economy which have greatly helped the office market and attracted further interest from foreign and local tenants. The economic crisis has contracted the market and today there is little supply of higher quality building in prime office areas with shortage especially in Grade A and B. Rental values in prime areas have increased over the last three years, in areas as Kifissias, Syggrou Avenues and CBD. The stock of Grade C and D offices remain higher than other countries as demand has greatly reduced. Athen City Centre is expected to reach higher rent values in 2019 growing at the same pace than the economy. The co-working and flexible workspace boom seen in other European capitals is also a reality in Athens with more than 20 buildings being converted into co-working spaces in the capital.
The improvement of the economy also boosted the interest of institutional investors. Greek REICs and real estate investors plus foreign private equity funds are looking at the market for properties with good tenants. High quality single assets or property portfolios are sought-after, which led to yield contractions especially for properties in prime office locations (to around 7%-7.75%), and also in secondary locations if the property is leased to a good tenant (to around 8%-8.5%).
Given figures recorded in tourism during the recent years, some owners have chosen to convert offices into hotels in order to take advantage of the extremely positive trend in tourism. The year was also marked by the introduction of new investors in the Greek real estate landscape, adding competition for prime but distressed situation assets with good prospects to produce income.