Greek house prices are rising again, as economy continues to recover
Lalaine C. Delmendo | February 02, 2019
In Greece's urban areas, house prices rose by 2.51% during the year to Q3 2018, the highest annual increase in house prices since Q1 2008, according to the Bank of Greece. When adjusted for inflation, house prices increased 1.53%. Quarter-on-quarter, house prices in urban areas were up 1.2% in Q3 2018 (2.01% in real terms).
This improvement was also seen in the major cities:
- Athens led the country's housing market with an annual house price increase of 3.71% in Q3 2018 (2.71% in real terms). In fact, it was the capital's best performance since Q4 2007. During the latest quarter, house prices rose 1.65% (2.48% in real terms).
- In Thessaloniki, the country's second largest city, house prices rose by 1.9% (0.9% in real terms) y-o-y in Q3 2018, in contrast to last year's 1.3% annual fall - the highest growth since Q1 2008. Quarter-on-quarter, prices increased slightly by 0.5% (1.3% in real terms) in Q3 2018.
- In other cities (excluding Athens and Thessaloniki), house prices rose 1.2% (0.2% in real terms) during the year to Q3 2018, an improvement from y-o-y decline of 0.5% a year earlier. In a quarterly basis, prices increased 0.6% (1.4% in real terms) in Q3 2018.
Greek residential property prices have fallen by 42.7% (-46.3% in real terms) from 2008 to 2017.
During the first eight months of 2018, the number of residential property transfers recorded at the Athens land registry surged by 59.6% from a year earlier.
During the first nine months of 2018, the total number of construction permits rose by 9% to 10,817 units from the same period last year, according to Hellenic Statistical Authority. But it remains far below the 70,000 to 80,000 permits issued annually from in 2004 to 2007.
To revive the housing market, the Greek government recently offered residence to non-EU investors purchasing or renting property worth over €250,000. The residence plan is similar to measures adopted by Hungary, Spain and Portugal. The plan is valid for five years and is open to renewal.
However, high property taxes in Greece continue to discourage demand. In fact, property taxes have increased seven times since the global financial crisis. In 2018, the 6.3 million property owners in Greece are being required to pay a total of €3.15 billion in property tax (ENFIA), up from €500 million in 2009. Rental taxes have also increased. For the first €12,000 annual rent revenues, the tax rate is 15%, up from 11% until 2015. For rent revenues between €12,000 and €35,000 per year, the rate soars to 35%.
The Greek economy grew by around 2% in 2018, according to the European Commission (EC) – an improvement from last year's 1.5% expansion and the highest growth since 2007. After a short-lived recovery in 2014, Greece's economy returned to recession in 2015, with GDP contracting by 0.3% and by another 0.2% in 2016, amidst the imposition of capital controls and the closure of most of its banks. Before this, the country's real GDP had contracted by 3.2% in 2013, 7.3% in 2012, 9.1% in 2011, 5.5% in 2010, 4.3% in 2009 and 0.3% in 2008.
The EC expects the Greek economy to grow by 2% this year but the International Monetary Fund (IMF) is more optimistic, projecting 2.4% growth.
Rental returns are moderate to good in Greece
How much will you earn? In the centre of Athens gross rental yields on apartments are quite good, at around 4.2% for apartments of 120 square metres (sq. m), but proportionately more for smaller apartments (5.7% for 75 sq. m.). To define terms, the gross rental yield is the rent the landlord will earn - before taxation, vacancy costs, and other costs - compared to the purchase price of the property.
In Kolonaki, an area where the elite of Athens used to live before many moved to the suburbs, full of high end shops and ritzy cafes at the base of Mount Lykavettos, the gross rental yield for smaller apartments (50 and 85 sq. m) averages 6.3%. For larger apartments the return is less good.
The gross rental yield in suburbs of Athens is also surprisingly good. In Glyfada, 50 sq. m. apartments can yield 6%, 120 sq. m. apartments 4.7%. In Voula, 120 sq. m. apartments have average yields of 5%. In lush Kyfissia returns are similar, as they are in Paleo Psichiko. 20 kilometres south of Athens on the seaside in Vouliagmeni returns are somewhat lower.
Again, smaller apartments will earn proportionately more.
How much do apartments cost? In our latest survey, the average price per square sq. m. in Central Athens ranges from around EUR 2,400 to EUR 3,600.
In the suburbs of Athens, i.e., Ekali, Kifisia, Psychiko, Glyfada, the average price per sq. m. of apartments ranges from around EUR 2,400 to EUR 3,650, while houses cost around EUR 3,200 per sq. m.
Apartments and villas in Crete cost around EUR 1,400 per sq. m.. Yields are lower here than in Athens, at least for apartments (for which we had yields research the year before last, but not this year) at around 3%.
How easily will you rent your property? Properties are reasonably easy to let. Athens is a large city with traffic problems, and many people need to rent. Crete has a thriving Airbnb letting scene.
House prices in Greece have begun to recover. When buying property, take into account the fact that round trip transaction costs are quite high in Greece. See our Residential transaction costs analysis for Greece and Residential property transaction costs in Greece, compared to the rest of Europe.
Income tax is moderate to high in Greece
Rental Income: Rental income is taxed at progressive rates, from 15% to 45%.
Capital Gains: Capital gains realized from the sale of property held for less than 5 years are taxed at a flat rate of 15%.
Inheritance: Inheritance tax is levied at different rates depending on the relationship between the deceased and the beneficiaries.
Residents: Residents pay taxes on their worldwide income at progressive rates.
Total transaction costs are moderate in Greece
The total roundtrip transaction cost, i.e., the cost of buying and selling a property, ranges from 6.88% to 11.04%. Transfer tax is levied at a flat rate 3% as of 01 January 2014.
Tenant protection laws are neutral in Greece
Rent: Rents are freely negotiable between the tenant and the landlord. There is no legal limit on the deposit.
Tenant Security: All residential rentals have a minimum legal duration of three years. If a contract for a lesser period is negotiated, the three years period applies to the landlord, but not to the tenant. A contract for three years or longer terminates automatically at the end of the contract period, without need for notice.
Greek economy returns to growthThe Greek economy grew by around 2% in 2018, according to the European Commission (EC) – an improvement from last year’s 1.5% expansion and the highest growth since 2007. The EC expects the Greek economy to grow further by another 2% this year but the IMF is more optimistic, projecting a 2.4% growth.
After a short-lived recovery in 2014, Greece’s economy returned to recession in 2015, with GDP contracting by 0.3% and by another 0.2% in 2016, amidst the imposition of capital controls and the shutting down of most of its banks. Before this, the country’s real GDP had contracted by 3.2% in 2013, 7.3% in 2012, 9.1% in 2011, 5.5% in 2010, 4.3% in 2009 and 0.3% in 2008, according to the IMF.
Greece saw a budget surplus of 0.6% of GDP in 2018, after surpluses of 0.8% in 2017 and 0.6% in 2016, according to the European Commission. Greece registered an average budget deficit of 9.7% annually from 2009 to 2015. The county is expected to remain in surplus in the next two years.
The country’s debt is expected to fall to 174.9% of GDP this year and to 167.4% of GDP in 2020, according to the European Commission, down from 182.5% of GDP in 2018.
Unemployment was 18.6% in September 2018, down from 20.8% a year earlier, according to the Eurostat.
Inflation was 0.6% in 2018, from 0.7% in 2017, zero inflation in 2016, according to the Hellenic Statistical Authority. Inflation is projected to accelerate to 1.2% this year.