Greek house price growth accelerating!
Lalaine C. Delmendo | January 17, 2020
In Greece's urban areas, house prices rose by 9.32% during the year to Q3 2019, far higher than the previous year's 2.35% growth and the highest annual increase in house prices since Q4 2006, according to the Bank of Greece. When adjusted for inflation, house prices increased by 9.39%. Quarter-on-quarter, house prices in urban areas were up 2.23% in Q3 2019 (3.46% in real terms).
This sharp improvement was also seen in the major cities:
- Athens led with an annual house price increase of 11.91% in Q3 2019 (11.99% in real terms), the capital's best performance since Q2 2006. During the latest quarter, house prices rose by 2.21% (3.43% in real terms).
- In Thessaloniki, the country's second largest city, house prices rose by 8.52% (8.59% in real terms) y-o-y in Q3 2019, a sharp improvement from last year's 1.32% annual rise - the highest growth since Q2 2007. Quarter-on-quarter, prices increased by 0.7% (1.9% in real terms) in Q3 2019.
- In other cities (excluding Athens and Thessaloniki), house prices rose 6.87% (6.94% in real terms) during the year to Q3 2019, an improvement from y-o-y rise of 0.8% a year earlier. During the latest quarter, prices increased 2.5% (3.7% in real terms) in Q3 2019.
Greek residential property prices fell 40.8% (-45.1% in real terms) from 2008 to 2018.
Demand is now surging, with residential property transfers in Athens rising by double-digit figures in the past four years. Construction permits soared 24.5% to 11,744 units during the first nine months of 2019, following annual rises of 10.1% in 2018 and 9% in 2017, according to the Hellenic Statistical Authority, though the total remains far below the 70,000 to 80,000 permits issued annually from 2004 to 2007.
To revive the housing market, the Greek government has offered residence 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.
Other measures introduced by newly elected Prime Minister KyriakosMitsotakis of the centre-right New Democracy party:
- Suspension of VAT payments on new building permits:PM Mitsotakis announced in October 2019 a three-year suspension of VAT payments on any new building permits and unsold properties built after January 1, 2006.
- Reduction of the single property tax (ENFIA): The ENFIA for individuals was reduced last year: 30% reduction for properties valued up to €60,000; 27% for those valued up to €70,000; 25% for those valued up to €80,000; 20% for those valued up to €1 million; and 10% for properties valued more than €1 million. A further 10% reduction, on average, will apply on all property owners from the year 2020.
High property taxes had discouraged many potential buyers, because property taxes had increased seven times since the global financial crisis. In 2018, ENFIA tax revenues amounted to €3.15 billion, up from €500 million in 2009.
Reducing taxes has been one of the priorities of the Mitsotakis government.
The Greek economy grew by around 2% in 2019, according to the International Monetary Fund (IMF) – slightly up from last year's 1.9% 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 0.4% and by another 0.2% in 2016. 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 IMF expects Greek GDP to grow by.2% this year but the European Commission is slightly more optimistic, projecting 2.3% 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 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 continues to recoverThe Greek economy grew by around 2% in 2019, according to the International Monetary Fund (IMF) – slightly up from last year’s 1.9% expansion and the highest growth since 2007. The IMF expects the Greek economy to grow further by another 2.2% this year but the European Commission is slightly more optimistic, projecting a 2.3% growth.
After a short-lived recovery in 2014, Greece’s economy returned to recession in 2015, with GDP contracting by 0.4% 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 1.3% of GDP in 2019, after surpluses of 1% in 2018, 0.7% in 2017 and 0.5% 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 169.3% of GDP this year and to 163.1% of GDP in 2021, according to the European Commission, down from 175.2% in 2019 and 181.2% in 2018.
Unemployment was 16.8% in September 2019, down from 18.6% in September 2018, and 20.8% two years ago, according to the Eurostat. Despite this, Greece’s jobless rate remains the highest in the EU.
Consumer prices rose slightly by 0.2% in November 2019 from a year earlier, according to the Hellenic Statistical Authority. Inflation is projected to accelerate to remain low at 0.6% this year and 0.9% in 2021, according to the European Commission.