Greek house prices are rising, but more slowly
Lalaine C. Delmendo | April 10, 2021
In Greece's urban areas, house prices rose by a modest 3.38% during the year to Q3 2020, less than the previous year's 8.49% growth and the slowest expansion in two years, according to the Bank of Greece. When adjusted for inflation, house prices rose 5.38%. Quarter-on-quarter, house prices in urban areas were up slightly by 0.56% in Q3 2020 (2.3% in real terms).
This slowdown was also seen in the major cities:
- Athens led with an annual house price increase of 5.61% in Q3 2020 (7.65% in real terms) but it was a sharp slowdown from the prior year's 11.66% growth. During the latest quarter, house prices rose by 0.73% (2.47% in real terms).
- In Thessaloniki, the country's second largest city, house prices rose by 4.26% (6.28% in real terms) y-o-y in Q3 2020, a slowdown from an annual rise of 7.75% in Q3 2019. Quarter-on-quarter, prices increased slightly by 0.1% (1.9% in real terms) in Q3 2020.
- In other cities (excluding Athens and Thessaloniki), house prices fell slightly by 0.35% (but increased 1.58% in real terms) during the year to Q3 2020, in contrast to a y-o-y rise of 5.37% a year earlier. During the latest quarter, prices increased 0.5% (1.58% in real terms) in Q3 2020.
Greek residential property prices fell 42.5% (-47.7% in real terms) from 2007 to 2017. The housing market started to recover in 2018, with house prices in urban areas rising by 3.51% and by another 7.56% in 2019. In fact, Athens registered an even stronger house price growth of 11.57% in 2019 (11.47% inflation-adjusted).
Foreign demand has fallen sharply due to closed borders and other coronavirus-related measures. In the first three quarters of 2020, capital inflows from abroad for the purchase of properties declined 42.5% from a year earlier, to just €593 million. But it remains 43% higher than the 2017 level.
The property market accounted for 25.3% share of total foreign direct investments (FDI) in Greece, down from 32.3% in the previous year. Revenues from the Golden Visa program plunged, with the number of permits issued in 2020 unlikely to exceed 20% of the total in 2019. In 2019, a record number of permits were issued, at 3,428, with about €1 billion investments, according to the Migration Policy Ministry. However in the first nine months of 2020, only 368 permits were issued.
The Golden Visa program was launched in 2013 to revive the housing market from a prolonged slump. It offers residency to non-EU investors purchasing or renting property worth over €250,000, similar to Hungary, Spain and Portugal. The plan is valid for five years and is open to renewal.
The government is now considering the introduction of new incentives for foreign investors.
Construction activity remains robust despite the pandemic. During the first nine months of 2020, the number of permits rose by 15.5% y-o-y to 13,568 units, following annual rises of 13.5% in 2019, 10.1% in 2018 and 9% in 2017, according to the Hellenic Statistical Authority. The floor space and volume of permits also increased by 14.5% and 10.7%, respectively. But the total is far below the 70,000 to 80,000 permits issued annually from 2004 to 2007.
Greece, which saw a quarter of its GDP shattered by almost a decade of financial crisis, finally emerged from recession in 2017 – growing by 1.5% in 2017 and by 1.9% annually in 2018 and 2019. But the Greek economy is believed to have contracted by 9.5% in 2020, mainly due to the adverse impact of the COVID-19 pandemic, according to the International Monetary Fund (IMF). In fact, in the central bank's latest view, the economy is projected shrink by as much as 11%.
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 9% to 44%.
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, from 9% to 44%.
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 to see its worst contraction this yearWith the second wave of the virus forcing the government to impose a new set of lockdown measures, the pandemic now threatens to undo all the improvements achieved in recent years and in fact, could make things worse.
The Greek economy is expected to contract again by a huge 9.5% in 2020, according to the International Monetary Fund (IMF) – in contrast to last year’s 1.9% growth. In fact, in the central bank’s latest forecast, the economy is now projected shrink by as much as 11%.
In September 2020, Mitsotakis announced an additional stimulus package worth €6.8 billion to fight the impact of the COVID-19 pandemic on the economy. This is on top of the €24 billion aid unveiled in spring.
Greece is projected to record a budget deficit of 6.9% of GDP this year, in stark contrast to a surplus of 1.5% in 2019, according to the European Commission.
The country’s debt is expected to surge to 207.1% of GDP this year, according to the European Commission, sharply up from 180.9% in 2019 and 184.8% in 2018.
Unemployment was 16.1% in September 2020, down from 16.5% in the previous month and 16.9% a year earlier, according to the Hellenic Statistical Authority. Despite this, Greece’s jobless rate remains one of the highest in the EU.
Overall inflation stood at -2.1% in November 2020, down from 0.2% a year earlier, according to the Hellenic Statistical Authority. Inflation is projected to slow to -1.3% this year from 0.5% in 2019, based on projections from the European Commission.