25 May 2019 – Greece (Athens)
Last week I was in the beautiful, historic city of Athens looking at the residential property market. Towards the end of the week, I was fortunate enough to have time to make the trip up to the Acropolis. Looking out at the Aegean Sea from the shadow of the Parthenon, I afforded myself a moment to recall some of my favourite ancient Greek myths and legends. Not least, Theseus tragically returning from Crete in his black-sailed ship.
After a decade of dramatic falls in property prices year-on-year, the market in Greece has recently begun to recover. 2018 was the first year since 2008 in which positive growth was recorded in both activity and asking prices for residential real estate on a national scale. Earlier this year, the Bank of Greece reported that property prices grew by 1.5% in Greece in 2018. The table below demonstrates the percentage change in residential property prices for Athens and Greece as a whole between 2008 and 2018.
Athens led the country’s housing market recovery in 2018 both in terms of prices and transactions. In fact, in the first 8 months of 2018, the number of residential property transfers recorded at the Athens land registry surged by 59.6% from a year earlier. During the first nine months of 2018, the total number of construction permits rose by 9% to 10,817 units from the same period in 2017, according to the Hellenic Statistical Authority. However, this figure remains far below the 70,000 to 80,000 permits issued annually between 2004 and 2007.
The residential market in Athens is by its nature fragmented and, therefore, trends on a city-wide basis do not always tell the whole story. While prices have, on average, increased, homes valued at the lower end of the market have not experience any significant price growth and in most cases, particularly on the edges of the city, have continued to fall, though modestly. This is due to these properties falling outside the influence of the two primary drivers of growth in the market, namely Airbnb and the Golden Visa program.
Despite the well publicised market recovery, these improvements must be seen in the context of a decade of steep decline. For example, the Bank of Greece reported that the number of real estate transactions in Athens grew by 18% in 2017, and by 1.5 times in the first two months of 2018 compared to the same period in 2017. However, the market had virtually ground to a halt in the five years leading up to 2017.
After almost ten years of dormancy in the construction sector all over Greece, there is a serious deficit of newly built properties, particularly in Athens. Considering the fact that finance is not available in the country, a general market boom or even a significant market correction seems unlikely in the foreseeable future. The market in Greece is completely segmented and each segment is almost operating in a vacuum. For example, the primary driver of growth, non-EU nationals seeking Golden Visas, are generally seeking properties in specific areas and at specific prices. Therefore, it is only these types of properties which, in reality, are seeing their values increase. At the upper and lower ends of the market, demand has not increased in any meaningful way and therefore, true values have largely stayed the same.
Furthermore, Greece continues to have the reputation of being a risky investment, which is reflected in relatively high yields. A city centre apartment in Athens will generally produce a yield of 5-7%, compared with an average of 3% for many
The old and the new- Athens from the Acropolis