The Greek Property Market and the Economic Crisis
THE STATE OF THE GREEK PROPERTY MARKET
As the economic crisis deepens and intensifies, the first tentative figures showing the current state of the Greek property market are beginning to surface. A slowdown was always expected, so the question concerned only the degree. The 2008 Q4 figures show that the world economic crisis had some impact, but the figures are certainly not disastrous. Overall, property prices are holding steady, although the inherent difficulties of the Greek market make any investment advice tentative.
A FRAGMENTED MARKET
The difficulty with trying to predict the Greek property market is that it is so fragmented and disparate. Places like Crete and Mykonos have a vastly different market from Northern Greece. This is driven partly by desirability, but also by local customs, preferences and practices. Within the major cities, moving a couple of streets away can vastly change the outlook for property owners and investors. For example, some areas of Athens are full of empty properties, whilst others see premises snapped up before they hit the estate agent.
In the larger cities, the prices are a little over-inflated, and there are signs that values are softening as people struggle to keep up with mortgage payments. There is no major panic yet, but Athens and Thessaloniki may see a few foreclosures before the year is out. Prices in the popular tourist areas, such as Mykonos, Corfu and Crete appear to be holding steady. Foreign buyers are not dumping houses wholesale, as in Spain, probably because of the high capital gains tax levied on property resale.
THE PATIENT IS STABLE
Overall, the market appears to be holding out remarkably well over most of the country. Many Greeks appear to be waiting for better conditions rather than drop their price, partly in hope, and partly because of the tax system. The property taxes initiated by the Greek government, designed to prevent speculation and flipping, have had a welcome side effect. They applied the brake to Greek property inflation, and have protected the country from the worst effects of the world economic crisis.
The weak pound and collapsing market in the UK have resulted in fewer foreign buyers, but there are a few tentative signs that city dwellers are either seeking cheaper houses in the countryside, or trying to invest money in bricks and mortar. In many parts of rural Greece, where prices tend to reflect the inherent value of the house, rather than over-inflated market values, this is not such a bad thing. Greece has one of the highest ratios of owned property in the Western World, and this tends to act as a solid security buffer to market fluctuations, making property a safer investment than stocks or bonds.
A SAFE HAVEN FROM THE TEMPEST
To summarise such a disparate market is difficult, but the overall prognosis is good. Certainly, Greece has not suffered the collapses apparent in the over inflated UK and US property markets, so it may well be a calm investment spot amongst a tempest of economic uncertainty. Greeks appear reluctant to drop prices, and hope to weather the storm; there are few bargains in Greece, but there is also less risk.
Golden Euro Photo Courtesy of Svilen Mushkatov: http://bigphoto1.blogspot.com/
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Comments on The Greek Property Market and the Economic Crisis
Hum… I’m increasingly curious about your “enthusiasm” for Greek properties. If I may, I’d say that the tone of this post is akeen to that of some of the Dubai press releases : “softening, but no problems.” Really? I mean, I know nothing about Greece – well, not much: I’ve asked questions in Mykonos 2 years ago. I wasn’t impressed: the message I got was that you have to know somebody and have a bit of spare cash to circumvent the administrative intricacies of the system, and even at that prices are (were…) comparable to those of some expensive hotpots in Europe. And in the above post I read that prices in Mykonos are “holding on steady”.
Isn’t Greece (the country) almost bankrupt? Why would the situation there be any different from Ireland or the UK or Dordogne? My opinion is skewed by what I heard in Mykonos, but, well, I guess I am a little bit suspicuous…
Hi Pierre
Thanks for commenting.
The problem with predicting any trends in Greece is the fragmented nature of the market. Across most of Greece, houses reflect the ‘real’ value, and have not been inflated by desirability. I was careful to state ‘tentative investment advice’, because things are changing on a monthly basis – the crisis is new territory for all of us. Some of the hot-spots are a completely different market, and Mykonos is one of those.
Try not to judge Greece by Mykonos, which is the domain of the privileged few. It is one of the most desirable places in Europe, so the prices for property are extremely steep – it is more akin to Monaco than Greece. So far, there have been no signs that people are dumping houses there. Whether this will be the case next year – I genuinely have no idea.
In many ways, the Greek economy is under pressure, caused by the hang-over from the introduction into the Euro. However, the banks were conservative and avoided the worst of the sub-prime crisis, so everything is holding together at the moment. That said, I fear that the predicted decline in tourism will have serious repercussions in the summer.
In terms of property, Greece is a very slow market. It is not a country where you can make a quick fortune in property investment. It really is more for those who want to buy a second home or retire to the Med. Parts of Greece still have some genuine bargains, although you need to look away from the tourist spots.
The reason that the property market seems to be weathering the storm is that it never had a property-bubble, unlike the UK, Ireland, Spain and Cyprus. The Capital Gains Tax (up to 20%) has prevented the speculators from trying to ‘flip’ properties. In addition, Greece has the highest rate of outright ownership in the EU, so is not likely to have a major problem with foreclosures.
My speciality is with lower budget purchases and renovations – if you need any help, stay in touch! I would also like to point out that I am a journalist – I am not affiliated to any agent, nor do I make any money from property, so I strive to give independent advice.