Investors Zone

What makes Greece a property investment “hot spot”?

Greece regularly features in the top 10 world tourist destinations. Combined with some Greece’s unique characteristics (climate, culture) and above all an underdeveloped property market, Greece is considered one of the investors’ hot spots for the next decade.
Until today, restrictions for foreign buyers, complicated tax and legal systems and lack of coordinated state development strategy prevented a lot of individuals and companies in investing in the Greek property market (i.e. it is estimated that only 50,000 foreigners own property in Greece when in Spain the number is around 2 million). But this is about to change. Greece is a member of the European common currency zone, enjoys political and economical stability and has very low crime rates as well as low cost of living compared to other European countries. Since the introduction of the euro, Greece has seen the meteoric growth of its banking industry, which allowed to Greek and EU citizens to invest in Greek properties. This industry is still at its infancy but recent government initiatives aim at giving it a substantial boost. Estimates report for an extra 500,000 new holiday homes to be built until 2015. Therefore there are plenty of long-term profit-making opportunities in the Greek property market. Let’s see some of them  

Investing in the Greek residential property market

Buy-to-let (small) flats:

Investors in Greek property mainly focus on the holiday home market. The buy-to-let market in Athens and other big cities is relatively unknown to investors (both domestic and foreigners) and not without reason. With the introduction of the euro, and the low interest rates credit is readily available from the newly developed mortgage market, which allows many young families to buy their own first home. The developers focused exclusively on that market (2-3 bed flats). As a result, the small flat market remains very old (the average age of small flats in Athens is 30 years). At the moment with the property boom reaching its peak, there is a huge demand in the rental market for new small flats in areas close to universities and/or metro or railway stations. However, developers cannot build (a lot of) new small flats at the moment for two reasons: The scarcity of available land in central Athens and the total absence of a domestic buy-to-let investment market. Difference in rents between old and new flats can be up to 50%. Current investors enjoy on average an annual yield between 4.5-5.5% with capital growth of around 8-9%.
 
Buying new small flats in central Athens is one of the best options for long-term investors.

Investing in the Greek tourist industry

Plots for holiday home development:

Prices of plots remain relatively expensive but investing in Greek land is definitely a wise investment choice for mid to long term investors. The reason is of course the growth of the Greek tourist industry. The minimum size of an off plan plot that can be built is 4,000 sqm and allows for the construction of 200 sqm net. Bigger size plots may allow construction of more than 5% depending on the local authorities’ regulations.

Some of the options for the investor are:
To build one villa and rent it to a tour operator or privately. Rental agreements will depend on the location and the quality of the construction. It is recommended to build the villa at the highest possible standards. Arrangements can allow the use for a specific period as well (i.e. two weeks per year).

To build two villas; one for family use and the other for generating rental income.
This option is suitable for those who wish to retire in Greece where the extra property can generate some very good extra income.

To build four villas; (or how to get your dream villa in Greece for free!)
Depending on the location (that affects the value), investors can build and sell one by one the villas and the profits made from the sales of the three may pay for the construction of the fourth!

Why not building a small hotel business subsidised by the EU up to 60%.
Recent legislation makes that option very attractive to medium/big investors. Although it may be more complicated but managing to get quite a big plot (20,000 sqm or more) in a good location, you can have the flexibility of creating a small hotel business with some properties for sale.

Of course not everything can be rosy. A foreign investor will need the advice of someone who knows how the Greek market works, can save a lot of hassle (and money!) from the hazards caused by the underdeveloped public services sector and be able to deliver the true goal of the investment: a profit.