Default could reduce property prices in Greece by 30%
Default could lead to a 30% drop in the price of residential real estate in Greece, Igor Indriksons, managing director of real estate investments and founder of Indriksons.ru, told Gazeta.Ru. “According to our forecasts, in the event of a default, residential real estate prices in Greece will fall by another 30%,” the expert believes. Recall that days ago Greece failed to pay its debt to the IMF and defaulted.
Residential real estate prices in Greece have been declining for several years. In 2013, the drop was 10%, last year – 7.5%, Knight Frank reported. In the first quarter of this year, housing prices fell by about 4.5% compared to the same period last year, experts estimate.
“Given that since the middle of last year, Russians have significantly cooled toward resort real estate, including the purchase of ‘second homes,’ Greek properties, along with those in Bulgaria, Spain, and Montenegro, have experienced a decline in demand from buyers from Russia,” says Igor Indriksons.
Russians who show interest in real estate in Greece mostly buy it for personal use or rental. The most popular among Russian buyers are Halkidiki, Thessaloniki, Athens, the islands of Crete and Corfu, and Russians look for luxury real estate on Santorini, the Peloponnese, and Mykonos, says Marina Kuzmina, head of the overseas real estate department at Knight Frank.
“Out of ten people, only one buys, the rest rent houses,” says Dmitry Papadopoulos, director of the local company Grekdom. According to him, purchases are increasingly made to obtain a residence permit, i.e., for amounts from 250,000 euros. “In recent months, our clients have been submitting requests to acquire real estate in Greece for the purpose of obtaining a residence permit from 250,000 euros up to a maximum of 1 million. While from 2010 to 2013, requests were also for villas in the budget of 5 million to 10 million euros,” confirms Marina Kuzmina.
“If Greece leaves the European Union, the residence permit program will lose relevance for Russian buyers, while the purchase of real estate as a ‘second home’ could become the main reason for Russians to buy, especially if prices drop sharply. But this will more likely concern properties in the low price segment, as wealthy buyers considering purchases from 3 million to 5 million euros prefer more stable destinations,” says Marina Kuzmina.
According to Knight Frank, Greece does not even make the top 10 most sought-after destinations for buyers looking for real estate worth 1 million euros or more. At the same time, France, Italy, Cyprus and Spain remain interesting from the point of view of real estate purchases. “For Spain, we are even seeing a surge in requests for luxury real estate this season (Marbella, Ibiza, Madrid and Barcelona),” adds Marina Kuzmina.
From an investment perspective, the Greek housing market has not been interesting for a long time, adds Igor Indriksons. “With modest yields of between 2.7% and 4.2% and an unfavorable economic situation, investing in local housing risks becoming a real disaster,” he says. The expert says that most investors decided years ago to stop investing in the Greek market, expecting that the country would not be able to cover its national debt.
“Nevertheless, this entire crisis situation is likely to be exploited by Russians buying real estate for their own residence: if there is extra money, why not spend it where it is now the cheapest. However, first of all, one must remember that selling a property will be very difficult.
The lack of money among the local population in the current economic situation in the country will only complicate the sale, and low demand will force the seller to reduce prices at a loss. Plus, one must not forget about annual taxes and paying other utility bills,” the expert warns.
According to Indriksons.ru, a cottage in Attica with an area of 90 sq. m costs an average of 70,000 euros, a villa in Kassandra with an area of 70 sq. m will cost 90,000 euros, and a traditional stone villa in the Ionian Islands with an area of 165 sq. m – about 110,000 euros.