Greek bank expects pressure on property prices

During 2019, there were significant real estate investments. The data, however, has changed because of the pandemic, the impact of which, at least in the long term, will be significant.

Recent events related to the coronavirus pandemic and the uncertainty about the wider impact on the domestic and global economies are creating new conditions that could have a significant, at least short-term impact on the real estate market, according to a 2019 report from the Greek Central Bank.

As noted, “given the high dependence of the real estate market on tourism and other sub-sectors of the economy, it is expected that in the first months of 2020 real estate prices will remain unchanged or, in some cases, be subject to pressure, the size of which will depend mainly on the duration of the current special circumstances. . The speed of recovery of foreign investment and improvement of domestic demand will depend on the speed of their return to the previous level. ”

During 2019, as reported in the report, there were significant investments in real estate, both from the inside and from foreign portfolios. In addition, the inflow of foreign direct investment, which amounted to EUR 4.1 billion in 2019, which is 2.2% of GDP, is mainly associated with real estate investments and secondary capital growth in subsidiaries located in Greece.

The report also emphasizes that, despite the trend towards an improvement in the real estate market, construction activity remains limited and has a negative indicator both for offices, and for shops and hotels in terms of volume (ELSTAT data).

In general, in the first nine months of 2019, compared with the corresponding period of 2018, activity in the field of commercial real estate increased by 1.4% in terms of the number of new licenses and by 4.2% in terms of volume, which, however, is not It is associated with the construction of offices, shops and hotels, which at this stage are the key pillars of market development. As a result of the construction of hotels, an increase in the number of new building permits was registered by 24.1% compared to 57.5% in 2018 and a decrease in volume by 6.4%.

Reductions were recorded both in the quantity and in the volume of new licenses both for offices (-32.0% and -20.5%, respectively) and for stores (-11.6% and -25.2%, respectively). The lower, and in some cases negative indicators of hotel activity in recent months in the hotel business are estimated to be a temporary correction of particularly high positive indicators of the previous period, which in many cases exceeded 50% year on year.

On the contrary, significant negative indicators in the other two categories may reflect the lack of demand dynamics either for the use of new or for filling existing vacancies, in contrast to the high demand for rental investment property.

The report, however, notes that real estate investment companies significantly increased capital during 2019 and invested more than 400 million euros in investment property, and another 200 million euros in investment. It is estimated that just over 60% of their investment funds were already or were intended to be directed to the Greek market, while a significant amount of investment was made in Cyprus. During 2019, about 74% of the capital invested in the Greek market was invested in offices, 15% in stores, 7.5% in hotels, and the rest was invested in warehouses, other commercial use or development plots.

As for the geographical distribution of investments, more than 70% of the funds were directed to the Attica market, and, with few exceptions, the rest were placed at tourist sites throughout Greece, almost exclusively in hotel units.

It should be noted that the interest of investment companies is primarily focused on housing with organized specialized income, for example, in student hospices and elderly care departments, which are expected to cause additional interest in the coming years, since they are an unused market segment, certain growth prospects.

Significant investments were made by other foreign investment portfolios, which are currently aimed at the development of new real estate and high-risk businesses, such as shopping centers and parks, theme parks and recreation areas, as well as tourist city residences.