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House Prices Fall Further as Greek Economy Struggles -

16 February 2011 - News (Tony Osust)

A holiday home on the Greek mainland or islands has long been on many a wish list. The clear blue waters of the Aegean and the Mediterranean, a temperate climate, natural beauty, historical associations, clean beaches and a laid back lifestyle have made Greece a favorite with those looking for relaxation, fun and something different.

And there’s an interesting variety of homes on offer. While celebrities and millionaires buy villas and mansions on the islands or on the coast near Athens, others have lots to choose from among modern apartments as well as quaint rural houses. Prices range from as low as 20,000 euros for a cottage in one of the more remote villages to millions of euros for beautifully located luxury mansions and villas.

But of late, Greece’s economic woes have affected the demand for real estate. Last year as the country found itself in the throes of a sovereign debt crisis, the IMF and the EU approved a bailout to the tune of 110 billion euros on the condition that the government would implement stringent austerity measures in order to slash the country’s high fiscal deficit. The measures, which include public spending cuts, tax increases, privatizations and ways to control tax evasion, have taken their toll on the residential real estate market. Moreover, international media coverage of protesting public sector workers has deterred tourists and potential foreign buyers.

According to the Bank of Greece, the average y-o-y price decline for apartments in Q3, 2010 was 4.3%. In Athens, prices declined by 3.1%, in Thessaloniki, the average price fall was much sharper at around 9.7% and in other cities, average prices fell by 5.9%. Outside the cities, average prices dropped by 2.7%.

Given the uncertainty, prices are not expected to look up in the near future. At the end of 2010, Greece’s fiscal deficit stood at 9.4% of GDP, way above the EU maximum of 3%. Analysts are not optimistic about the government’s ability to trim the deficit to 3% within the stipulated period. Only a convincing economic recovery can stimulate demand for real estate in Greece again.

Also, over the last few years rental returns have fallen considerably, with the average rental yield on a small apartment in the heart of Athens being around 2.8%. Along the periphery of Athens, returns are slightly higher. In Crete, average rental returns on apartments are 3.5%. Investing in rental properties is not a good idea as of now.

There’s a silver lining to all this though. Declining house values could mean opportunity for those who’ve always wanted a holiday home on the Mediterranean. With prices likely to fall further, interested buyers would do well to start looking for bargains. In some places on the mainland and the islands, the prices of luxury homes have fallen by as much as 45% as a result of higher real estate taxes being imposed on high-end properties valued above 400,000 euros. Many properties are on the market but buyers are also reluctant to invest and have begun looking for homes in France or elsewhere. In such a scenario, buyers who are seriously interested have room to negotiate.

Investors, however, might want to look for definite signs of recovery before investing. According to the Greek Finance Ministry, the economy is expected to contract by 2.6% in 2011. Many analysts have expressed doubts about the country’s ability to resume borrowing from financial markets this year. On the whole, the outlook is pretty uncertain. Under the circumstances, investors are wary about the investment potential of Greek real estate.

Tips on buying property in Greece:

• It is essential to appoint a reputable lawyer who will conduct a title search on the property, check whether the seller has paid all property taxes and verify that it is free of legal encumbrances. Ensure that your lawyer is independent of your real estate agent.
• In general, citizens of EU countries are free to purchase property in Greece. Citizens of some non-EU countries require prior permission from the local prefecture before they buy Greek property.
• All buyers, domestic and international, require a tax role number or AFM, which is issued by the local tax office. Foreign nationals who obtain tax numbers are required to file an annual tax return in Greece irrespective of whether they reside or earn money there.
• You will need to open a bank account in Greece. Any money that you transfer to Greece will have to be supported by a pink slip, which indicates the source of funds and taxation details.
• A public notary presides over the transaction. A preliminary contract is drawn out, after which the buyer pays a 10% deposit. Following this, a binding contract of sale is drafted and signed by the buyer and seller in the presence of the public notary and the estate agent.
• If you intend to rent your property to tourists, it is necessary to get a license from the Greek National Tourist Organization.
• You want to spend enough time shopping around and comparing prices because several agents often try to sell the same house at different prices. It’s important that you choose a reputable and licensed real estate agent.
• If you are thinking of buying property in a remote location, verify whether your contract of sale includes the cost of utility, phone and internet connections.

By (February 16, 2011)
Greece Property for sales | Greece Holiday rentals | Greece Monthly lettings



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