Real Estate Greece – Covid 19 September 2020

Katsaros VasilisAttorney, Taxspirit

Real Estate Greece – Covid 19 September 2020

Short-term leases

The short-term leases apply only to residential properties, and after the great rise that occurred in Greece during the years 2016 to 2019, in the last period of time the market has been saturated due to the abundance of real estate and low demand.  As a result, yields have fallen sharply ( even before the outbreak of the pandemic ) with property owners turning to long-term leases temporarily, expecting the market to recover after the first months of 2021 ( once the vaccine for the Covid 19 has been found and normalcy is gradually restored). What has been happening for months is that the easy profit margin of short-term leases is a thing of the past. Τhe only ones who may be less affected – compared to owners who rent through Airbnb –  are those who own a property in a very good location. Ιn the center of big cities (Athens-Thessaloniki), close to a tourist attraction, public transport etc. However, during the decade of financial crisis in Greece, the owners of good buildings did not proceed to «hasty» sales, except  those who were in real need. By analogy, the trend is similar today with Airbnb (micro)investors, who in many cases invested savings of a whole life on an old property with the aim of renting it out in the short term.So , they appear unwilling to sell immediately at a low price, because they believe that the crisis due to the coronavirus will sooner or later be over and from next summer the tourists will return massively. The short-term rental market has brought the biggest changes in the real estate map of Athens in the last fifty years. The heart of Athens has become an access point for buyers. This also happens in the southern coastal area of Athens, called the Riviera of Athens. Τhe real estate experts say that the development of real estate in Elliniko (Old Airport), which is considered the largest urban regeneration project in Europe, will have a significant impact on the real estate market, especially in the southern suburbs of Athens, further raising prices for both rental and buying real estate in the years to come. However, some real estate agents warn of a possible long-term bubble in some areas where prices have already skyrocketed, especially the adjoining neighbourhoods at the old airport.        

Hellinikon Project  

Located at the former Athens International Airport, in the suburb of Elliniko, the 8 billion euro project will cover 6.2 million square meters. During the construction phase, the project is projected to contribute 2% to the country’s economy and create 85,000 jobs. Ten thousand jobs will be created on a permanent basis. Tax revenues for the state will exceed 14 billion euros over a period of 25 years, while there will also be many intangible benefits.  Ιt is located in a privileged coastal suburb which is seven kilometres away from the city centre. The development of the project includes luxury homes, hotels, yacht marina and casino. All will be situated in a park area that rivals the size of Hyde Park in London or Central Park in New York. This will contribute a lot in the transformation of Athens, which today offers less green spaces than most European capitals. The general plan for the Hellinikon also allows sports and leisure facilities, museums, cultural sites and the construction of an educational purposes centre. The Hellinikon Project is the largest urban regeneration development in Europe and is considered as the project to promote the Greek economy in the future for the next decades.  

The prices 

Property prices remain stable despite the crisis due to Covid-19. However, if the economic climate gets worse in the fall, if the unemployment rate significantly increases and disposable income becomes limited, then  it is not impossible to be found properties that are sold at prices approaching the levels of 2016, ie before the real estate market entered a path of recovery. That is, properties sold at prices up to 1,000 euros per square meter tend to be, again (as happened in recent years) a critical mass of the real estate market, then this is a strong indication that the real estate market has entered a new spiral of crisis. But this time, as those who know explain, it will be short-term, due to the development strategy implemented by the government, and the new large investments in Real Estate.  

 

The luxury properties

At the same time, luxury homes for sale for at least half a million euros are in strong demand. Ιndeed, according to brokers, demand increased within the lockdown, with the successful pandemic management to have made Greece a safe destination. Indicative of this trend is the fact that in March and April, 21 people of high income category submitted to the Foreign Tax Office an application for the transfer of their tax residence in our country.

This is the non-dom regime that allows the imposition of a flat tax of 100,000 euros in exchange for the implementation of an investment of at least 500,000 euros either in real estate or in matter less titles. The Croesus, however, basically choose to settle in luxury properties. Strong demand has been observed in the luxury housing market in the popular islands of Greece, from financially strong investors who wanted to shield the security of themselves and their family, in a luxury villa without the risk  of pandemic. They wanted to invest in the luxury housing market, with the prospect that when normalcy returns, they will have surplus value from the sale or increased income through short-term rental.

 

Commercial real estate

The commercial real estate has been hit hard by the pandemic, mainly because companies have realized a) that teleworking is just as efficient as physical presence in the workplace and b) the operating costs were greatly reduced resulting in the increase of business profitability. The consequence of this is the tendency of companies to find small offices instead of the large ones they had before the outbreak of the pandemic. So, there has already been a downward trend in the rental of large and luxurious offices and a shift to smaller ones, even remotely from the center of Athens, as long as they have easy access to a public transport station. 

Also the big department stores owners received a strong blow due to Lockdown and started a pressure on the owners to reduce the rent by more than 40% until the market to find a balance again. In the indoors malls and since the consumers avoid crowding , the traffic has been decreased  quite significantly, in some cases over 50%. The required social distance, led the small businesses and the large chain stores to sell online. During the quarter of Lockdown the e-shop sales  in Greece increased by more than 60%. Maybe the next day  will find the big food, clothing and footwear chains to close several of their stores, and rent large warehouses to operate their sales through logistic.

Hotels

The paradox is that despite the big decrease of tourism in Greece, the hotel chains completed large projects and established many hotel units. At the same time, many new investors have started or are about to start large investments in the hotel sector. Typical examples, Kassiopi in Corfu, project Kilada of Dolphin Capital in Argolida-Peloponnese, 5-star hotel complex in the area of Koumbara-Diakofto (budget 43 million euros), a 5-star boutique hotel and summer residences in Pikri Nero (budget 45 million). a hotel complex in Barko of Aktio (budget 107 million euros from RND Investments Greece), 2 hotels (Raffles Mykono & Fairmont Mykonos) in Mykonos (budget 104 million euros from White Mulberry Development IKE) and a resort in Ilia ( budget EUR 104 million from Killini SA).  Also, the investment process will include the Elounda Hills project in Crete which amounts to 410 million Euros, “Mykonos Project” development of a 5-star resort in Karpetis Beach, west of Kalo Livadi Beach in Mykonos.

Talking about Athens and Omonia, 3 large investment projects are expected to be completed in the next few months. a) At Saroglio Megaron, the Dimand and Prodea companies are preparing the reconstruction of the 8-storey property at 65 Stadiou Street. There will be built  the first Moxy Athens (Moxy Athens),  an investment of about 19 million. Euro. According to the original plan, the hotel was to be completed by the spring of 2021. b) One of the emblematic buildings behind the fountain of Omonia is the La Mirage. Once has been an emblematic hotel of Athens is preparing to reopen. Brown Hotels is involved in the project. c) Ιn the old building at the corner of 10 Piraeus Street with Zenonos, the Chinese interest CTY GROUP INVESTMENT SA will completely renovate the property and  converted it into a 4-star hotel with a capacity of 49 rooms. The project planning wants the building to be completed by 2022, with the amount of the investment approaching 4 million euros.

So the investors in the hotel market continue and complete large investment projects expecting  the recovery of the tourism sector in Greece in the next two years.

 

Investments in the real estate market of Attica

At this time, 11 large investments are being made in Attica in the real estate sector, except for HellinikonProject.

  1. Eleonas tourism and culture pole

The Noval AEEAP company, a subsidiary of the VIOHALCO Group, plans to proceed with the development of a complex of touristic, cultural, conference, medical, commercial and business use in the area of Eleonas. The investment amounts 117 million euros and includes two hotels, a museum, a center for technological research and development, a park over 30 acres, playgrounds and sports facilities.

  1.  Mall River West Egaleo extension

The project has to do with the expansion of the River West shopping center at 96-98 Kifissos Avenue in Egaleo, after obtaining a license from Noval Property, a subsidiary of VIOHALCO. The investment amounts to 18.5 million euros and concerns the adding to the shopping center new commercial areas that will have coverage and construction of 1,600 and 963 sq.m. and the creation of 174 parking spaces.

  1. Metamorfosi shopping center

The plan has to do with the development of a shopping center and a leisure center in Metamorfosi Attica by PANITA LTD. The investment amounts 93.5 million euros and includes the construction of a complex mall, which will be placed in the Municipalities of Metamorfosi and Lykovrysi-Pefki

  1. Plato Academy Trade Park

The ambitious project “Academy Gardens” of 300 million euros had been started by Blackrock but eventually passed into the “hands” of Hines. The amount of the investment has not been officially announced but it is estimated that it will exceed 15 million euros, with the additional cost of buying the property.

  1. Office complexes, Syggrou Avenue and Paradisos Maroussi

The construction of an office building complex on Syggrou Avenue is one of the largest projects that Prodea is “running” in the office market in collaboration with Dimand Real Estate. The investment amounts 40 million euros and has to do with an office complex of 24,000 sq.m. in Syggrou Avenue, near Lagoumitzi Street.

Prodea is expected to build a new office building on a privately owned plot in the area of Paradise of Maroussi. The investment amounts 15 million euros with the plot value estimated at 2 million euros and the additional 13 million euros required for its development.

  1. Cambas Project, Kantza

The REDS, of the ELLAKTOR group, implements the Cambas Project. It is a mixed investment of offices, together with a shopping center and a hotel, on a plot of 157,383 cubic meters. The investment is expected to exceed 220 million and create 1,600 new jobs. The Cambas Project will be built on a plot of 315 acres, in the area of the old Kampa winery in Kantza with a buildable area of approximately 89,000 sq.m.

  1. Tower, Piraeus

The Dimand aims to reclaim the Tower which stands out at the port of Piraeus. It is a 22-storey building, which remains unused for about 46 yearsThe investment exceeds 50 million euros and is expected to start immediately. The Tower will be reconstructed and will host on the ground floor commercial spaces and on the upper floors offices for mainly shipping companies.

  1. Stars, Glyfada

The investment, including acquisition costs, amounting  90 millions euros for the property in which the hotel “Stars” used to operate. The property is planned to be completely reconstructed in an urban resort under the management of a hotel chain. More specifically, the investment includes the 5-star hotel with 400 beds, suites and furnished villas, spa complex, sports facilities, swimming pools, playgrounds, restaurants and entertainment centers, individual infrastructure projects and facilities, internal road network, water supply and sewerage networks and networks of electromechanical installations.

  1. Μarina, Alimos

Τhe contract for the concession of the right to use and exploitation of Alimos marina for 40 years to the company “Aktor Concessions SA” signed in May 2020. The investment is of about 50 million euros and concerns the reconstruction of the marina and its return to the market as an important attraction pole of visitors and hospitality. The total value of the agreement amounts  177 million euros.

  1. Hotel unit in summer Athinaion, Athens

A new unit of the French group Accor is expected to be built in the place of the Athinaion Theater in the center of the capital. The property is located at the junction of Patision and Marnis 2 streets and has already been demolished. The total amount of the investment is estimated at about to 30 million euros, given that this is a construction of the hotel from scratch and not a reconstruction of an existing building.

  1. Modern residential complexes, Piraeus

The new investment of Dimand Real Estate in Piraeus aims at the construction of houses for long-term lease. The investment amounts  50 million euros and will be implemented in the area of Agios Dionysios in an area of three existing buildings and small plots.

 

Conclusions

My personal opinion on what is happening now in the Greek market is the following. As for the investor trend, I think we have the “big players” mainly in the tourism sector where they invest huge sums according to their plan, let’s characterize them strategic investors. The funds that are circulating are huge and this indicates that they have not abandoned the perspective of Greece. On the other hand, the smaller investors, mainly foreigners, began to turn to more attractive destinations (Italy, Spain) due to falling real estate prices from the pandemic, believing that after returning to normalcy they will have greater financial gain, let’s call them “gamblers”.  what is certain is that no one can predict the next day because we do not know how long it will take to return to the safety of travel, whether for touristic or business. The tourism in Greece has suffered a huge decrease, but the location of the country as its history and culture, make it quite an attractive destination. If we take into account the low price of accommodation in relation to what the tourist product offers, as well as the existence of several islands, I believe that the chances are in favour of Greece for a quick recovery.  We also need to count people’s desire for new adventures and fun, especially after social distancing, so mood, which I think plays the most important role, will change to a desire for exploration and travel.

There are also investors who want social isolation, they are mainly quite wealthy, and they are looking for villas in Greece either on the famous islands or in the South of Attica (Vari, Voula, Vouliagmeni). There, the short distance from the sea offers many possibilities for buying a house. In these areas there are still several plots of land for purchase and building a house,  it concerns mainly residential properties. These investors are mainly from China and Israel. Of course, there is an increase in of the prices in the wider area after the increased demand.

There are also the investors who are looking for large areas to create warehouses to operate them as logistic. The location of Greece, in combined with the increase of online sales (E-Shop) due to the pandemic, widened this market a lot and there will probably be a big increase in the coming years, because the habit that we shop everything online I think that will be established in the following years. The new generations, who are the future customers, I believe that they will have it in daily use, so the existence of huge warehouses will be a solution to reduce the cost of transportation and storage of products. The possible creation of a free zone for the movement of goods Free Zones (rumours are heard about the area of Elefsina or the port of Thessaloniki due to Cosco), would launch this investment because Greece would become a huge distribution center not only in Europe but also in Asia.

Some are looking at the commercial real estate market to convert them into houses or hotels, they are mainly in the center of Athens and despite the reduction of the tourist product in Greece they do not abandon their plan. This is proved by the non-fall of property prices, especially in the center of Athens, after the pandemic. The owners believe that sooner or later the vaccine will be found so that normalcy can be achieved, and they do not want to drop their prices. Purchases and sales may not be as fast as they used to be, but the big deals are completed with quite high prices regarding this period. Maybe after the fall, if there is no progress with the vaccine, prices will be down. Investors who bought buildings massively (mostly Chinese) so as to take advantage of short-term leasing (Airbnb). I think is an area I should not mention, Airbnb is over and will hardly return to most countries.

Lately there is a very small trend in industrial real estate, for their acquisition and operation. This is a sector that I have not explored but I consider it quite interesting and with good prospects.

Finally we have the investment in Elliniko, a huge investment project that can end in a big bubble. This can happen because the prices in areas around this project have gone up, as an example a plot of 3000sqm is sold for 10,000,000 €, that is 3,333 € per square meter, which builds 2400sqm. If you calculate the construction cost of either a house or a small hotel unit, it will take several years to pay off your initial investment. Of course, if you succeed and attract wealthy people, mainly Arabs with several millions, then you will be able to have an over-return. Let me mention that, maybe we can get involved in attracting wealthy people, I do not know if there are the right acquaintances to make Elliniko an international destination of rich people like Monte Carlo. We may be the middlemen who will organize the purchase, the building, the completion of all their Project staff, but we have to refer to people who have a lot of high incomes and in my opinion Arabs. I think the construction of the Casino as well as the marinas for the yachts helps a lot to that.

So after my above analysis I will briefly point out what is happening with investors in Greece:

Α) Investments for hotel units. There is intense interest, prices have not fallen.

Β) Investments for residential properties. There is interest in villas in the southern suburbs of Athens, also on the islands, mainly by wealthy people.

C) Investments in large storage spaces. Τhere is an increased demand, but big deals are not concluded, it mainly concerns smaller investors who see what is coming in the future, maybe a pretty good investment that depends on what will happen with the neighbouring countries (mainly Turkey)

Ε) Project Ellliniko. Quite a promising project, certainly the prospects are great, there is great interest, I try to find how we can get involved in this huge project.

 

I hope that the above analysis will help in the perspective of possible investments in Greece.  Our team will be happy to serve anyone who wants to invest in Greece. Call us at 0030 215 5300749 or send us an email: info@taxspirit.gr.

 

Yours sincerely

Katsaros Vasilios