ARiadni Real Estate Blog

Which properties withstand the pressures of the pandemic

30 October, 2020

By Konstantinos Kioleoglou *

In recent months, on the occasion of the outbreak of the pandemic, the shock received by the tourism sector and consequently the country's economy, there has been intense concern about the course and dynamics of the real estate market.

The figures are not very encouraging, especially for foreign investors. The pandemic, in combination with the decline of tourism and foreign investment, has caused concern and in several cases has led to a review of the plans of many buyers and investors, in order to assess the situation that will develop in the economy, both Greek and the global.

The real estate market, regarding the investment demand from abroad, is at the lowest point since 2017. Based on the available data from the Bank of Greece, during the second quarter of this year, the inflows of foreign capital for the acquisition of real estate in Greece market, fell by 60% compared to the same period last year and amounted to 140.6 million euros, from 344 million euros. The relatively recent recovery of the Greek real estate market relied heavily on foreign investors. It is characteristic that in 2019, more than 25% of foreign direct investment, concerned real estate. In particular, 1.5 billion euros were invested in the acquisition of real estate, out of a total of 4.4 billion euros in total investments.

The internal market is also showing signs of fatigue and decline. However, it is important to emphasize that not all properties are the same and are not equally affected by developments.

Many times the analyzes have a horizontal approach by placing more or less all the properties in the same sack.

It is a fact that the value, marketability and return on investment of a property depends on many different factors. The real estate market is certainly not characterized by its homogeneity. On the contrary, it is a completely heterogeneous market which has a unique peculiarity in terms of how it should be treated in order to avoid misunderstandings and investment failures.

The location and the specific location of a property, the quality of construction, the type of property, the size, the floor, the orientation, its energy category, the accessibility to means of transport and points of interest, the view, the age, the legality , the supply, the use, the possibilities of further development of the urban fabric, the saturation etc are some characteristics that determine the value and the demand of a property, naturally influencing its return on investment.
It is therefore not possible to consider that the substantial paralysis of the short-term lease affects the values ​​and the demand in an area like Koukaki or Kypseli with Vouliagmeni or Glyfada.

Respectively, the contraction of the economy does not affect, in the same way, at the same time real estate that is addressed to medium and low-priced buyers and the property that is addressed to buyers of high purchasing power.

The location and position of a property in each case play a decisive role. With the urban fabric of Athens gradually expanding and with the largest wave of investment concentrated in the southern suburbs and the coastal front in both infrastructure and construction, it is obvious that during a crisis like the one we are going through, greater price and demand pressure is expected. in the center and in the northern suburbs rather than in the "fillet" of the real estate market located on the coastal front and in the Southern Suburbs.

Given the inactivity of construction for more than a decade throughout Greece, newly built properties are essentially emerging as the first choice for many buyers as a large supply gap has been created in recent years. The difference in quality of life offered by a newly built property in 2020 is incomparable compared to properties more than ten years old that are available used on the market.

It is a given that in the past two years, at a time when Greece was coming out of the memoranda and the economy was gaining momentum in combination with AirBnB platforms, an illusion of prospects and high returns was created for all property owners, triggering a rapid rise in prices in all the real estate. We must emphasize that the basic raw material of the construction industry in most cases showed unreasonable price increases that subsequently led to house prices. In fact, for some categories of real estate, a bubble was created once again, which burst sharply and intensely with the fall of tourism and the country's economic indicators.

What is certain is that in times of pressure, properties with strong characteristics that were bought and sold at reasonable prices will last longer and will not disappoint their owners.

Newly built properties on the coastal front within walking distance from the beach, of quality construction, without arbitrariness, in areas with developed or developing urban fabric remain today to have a good supply and demand balance. Older properties near and around the center of Athens that relied solely on the temporary and occasional development of short-term leases are collapsing with large losses and almost zero demand.

Do not get carried away by the ads. The prices demanded by the sellers do not determine the real values. These are formed exclusively by the actual completed operations both in number and in amounts. The fact that with the acquired speed that the market had developed, a lot of money was invested in new permits and constructions does not mean that all the properties that are being built are already being sold.

Buying real estate around the world may be the first investment option for any family, but it requires knowledge, research and analysis to make the right investment. Risk is part of every investment and buying real estate is no exception.

Most of the big real estate brokers and builders in the world are used to saying that there are three main characteristics that make a property stand out ... Location, location location.

So the location combined with good information and proper trading can be a solid foundation for good investment decisions with reduced risk and good returns over time, regardless of temporary circumstances that either raise or lower the market.

* Mr. Konstantinos Kioleoglou is a Civil Engineer NTUA, Appraiser REV -Tegova, Director of RED Avakon

capital.gr