ARiadni Real Estate Blog

What will judge the future of the real estate market - The 17 + 1 factors

11 September, 2020

The Greek real estate market has entered uncharted waters since the beginning of the epidemic crisis with rental prices in many areas being reduced, while professional shops, mainly of health interest, are under pressure.

The question is how the real estate market will evolve by the end of the year, where market executives say that the most important key factors for its evolution are financial indicators, availability and ease of borrowing. Also, catalytic role will be played by development measures aimed at the economic empowerment of citizens, the tax regime, measures to support existing investors and attract young people, employees' sense of security for their work and income, and in general external stability of our country.

According to Themistoklis Bakas, President of the Panhellenic Network of Real Estate Agents E-Real Estates, any measure of reduction of real estate tax such as ENFIA and / or greater compensation of property owners than the 30% currently in force for their lost income through the discount as well as measures to support the tourism sector that the Prime Minister may announce at the TIF are measures to support the real estate market and the economy in general.

"At the same time, we believe that measures - investment incentives in the field of energy and the green economy that are largely related to the real estate market will be announced", Mr. Bakas emphasizes and adds that the real estate market requires special attention at this stage so as not to lead to a new deep and unprecedented crisis. In order for the Greek economy to recover, all its citizens must be active the next day ".

According to a study by Danos Group Property Market Overviews, the lack of modern business space and investors' appetite for office space seem to strengthen the sector against the challenges that the market is expected to face as a result of the pandemic. There is a recorded demand for office space and some important deals in the sector that are expected to close.

It is stressed that the effects of the upcoming economic crisis as a result of the pandemic have not yet been quantified in the real estate market, but so far it seems that there are willing investors and that the short-term turmoil will not affect long-term investment criteria. As he emphasizes, although 2020 is a difficult year so far, there is still a demand for quality office space.

Retail stores, according to a study by Danos Group, came under pressure in the first half of 2020 as pandemic mitigation measures greatly affected the operation of retail, which is in the process of stabilizing and adjusting.

 

The 17 + 1 factors that will judge the future of the real estate market

1. Global the effects of the coronavirus pandemic

The coronavirus pandemic has not cost and / or will cost only our country but the entire world community. Our country has received investments from foreigners - institutional or not, who today themselves have been financially affected by the pandemic in their country. The coronavirus crisis will cost banks worldwide a total of 2.1 trillion. dollars by the end of next year, due to the losses they will have from loans, estimated the credit rating agency S&P Global. According to the IMF report, the world economy will return to pre-pandemic levels in two years.

2. Tourism is a key contributor to the development of the real estate market

Tourism is a helper of the real estate market. The largest percentage of real estate purchased in our country, were properties that investors targeted in the tourism industry (hotels, short-term leases, etc.). The impact on the economy from the unprecedented crisis in tourism is very large, according to the latest estimates of market participants, revenues for the whole of 2020 are not expected to exceed 3.5 billion euros, a drop of up to 80% compared to 2019. At the same time, according to the United Nations Conference on Trade and Development (UNCTAD) estimates the damage at 1.2 trillion. dollars only for this year in the tourism industry. These losses represent 1.5% of world GDP and essentially reflect a moderate estimate of the effects of the pandemic. They could inflate to 3.3 trillion. If the blow to international leisure travel persists until March 2021, UNCTAD warns that the costs will be higher for developing economies and island countries.

3. Domestic demand for real estate

Unfortunately in the country the domestic demand for real estate to meet the housing need is at very low levels compared to the pre-memorandum years.

4. Banking system

The banking system has the highest rate of non-performing loans in the Eurozone despite recent improvements.

5. Mortgage lending

Inhibiting factor is the high own participation of the borrower. Most of the interested parties, while meeting the lending standards, have not managed in the middle of a 10-year financial crisis to save the same participation which in many cases reaches 30% -40% of the value of the property. The total new mortgage disbursements are estimated to have reached € 400 million in the first 10 months of 2019 (€ 250 million in 2018). These figures are far from the "golden" era of mortgage lending that peaked in 2007 with total disbursements that exceeded 16 billion euros annually. The average mortgage loan for new disbursements ranged between 60,000 and 65,000 euros, when in the pre-memorandum years the average mortgage loan was 110,000-120,000 euros. 75% of the new mortgages are for private use and 25% of the new disbursements were made by borrowers who borrowed for the first time, with the aim of using the property as their first home. The same participation was 50% -55%.

6. The Funds are leaving

A concrete example is a fund with funds from Israel that has already invested many millions of euros in the center of Athens and its planning for 2020 was to invest an additional 100 million Euros in offices, accommodation, malls and students flats, in the middle Coronavirus pandemic, decided to stop any investment in Greece. It has already transferred all the available funds intended for the Greek real estate market, to Spain and New York, which was already active before settling in our country, while they plan to be placed in Italy as a new market for real estate investments. It is worth mentioning that in the first months of 2020, it had made offers for the purchase of large independent buildings in the center of Athens with a total value of over € 50 million.

7. Returns at 8% are demanded by investors

Already, many investors who invested in real estate with a desired return of 5% -6% and in cases of very good real estate even 4.8%, today are looking for investments with returns at 8%. This difference has an impact on the sale price of real estate between -20% and -30%.

8. Return on investment interest with a limit of 1,000 € / sqm

 A large part of investors today, are now looking for properties that need renovation, mainly independent, at prices that remind us of the 2016-2017 season.

9. Lack of tax incentives and co-investment incentives

At this time when our country has the advantage of low levels of fatalities compared to other EU countries, we should be helped by the financial results of 2019, the investment opportunity, and the feeling of insurance for public health, to introduce direct tax incentives for investors, to support with strong incentives co-investment programs with foreign investors - so that the existing investors remain in our country and do not turn to other markets that plan to offer the above incentives, reflecting the crisis and mainly to attract new investors who will fill part of the financial gap that will be created due to the coronavirus by reducing the need for bank lending.

10. Funds - Real estate portfolios

22,300 properties are included in the red loan portfolios sold or to be sold by the Banks in the coming months to investment funds, which are expected to be placed on the market, either through direct sales or auctions, with all that that implies for the course of prices.

11. Auctions

As for real estate prices, they will certainly be affected by the start of auctions at lower values, while in many areas, even in the pre-Corona era, it would act as a bulwark against the rise and / or maintenance of prices.

12. Investment opportunities - Fast returns

Yields even 30% -40% in 3-4 years for those who invested in the real estate market of the center of Athens at the end of 2015. So the question is whether the real estate market is ready to offer these returns again in order to immediately approach the intense investment interest .

13. Sale Prices

In order for the selling prices, mainly in the used properties of 30-40 years old, to continue their upward trend or to be maintained without recording reductions, there should be development measures that will strengthen the incomes of the middle class, which is traditionally the main buyer. housing for the purpose of housing.

14. Rental prices

Rental prices will be particularly pressured for commercial real estate and especially health stores, while rental prices for housing will be adjusted in the near future and especially after mid-October, especially in areas where the requested rent had reached the highest price level previously. while a significant decrease will occur at the beginning of the new year if the economic data are not positive. The support measure through the 40% discount on commercial real estate rents and for affected businesses has already created new data in the real estate market - it has largely predetermined the future of rental prices.

15. Damage from rents increase

The real estate market has already faced the increase of non-payment of rents, especially in commercial real estate where rents in many cases are several thousand euros, while this phenomenon has begun to develop in "neighborhood" stores with lower rents and tends to expand with rapid rates and housing rents where the rate of increase in uncollected rents is increasing day by day.

16. Golden visa

Since 2013, when the "Golden Visa" program was launched, Greece has granted 6,692 residence permits to real estate investors. According to the data of the E-Real Estates Real Estate Network, from the beginning of the program until December 2019, 4,371 Chinese have invested, the specific numbers of purchases and in fact in specific areas of our country, can not maintain - support the domestic real estate market. Especially at a time when 120 families of Chinese buyers, who have already bought properties worth 250,000 euros or more, can not travel to Greece to address their pending documents but also can not enroll their children in Greek schools.

17. Unemployment - Income

In its analysis, BSE predicts an increase in unemployment of close to 20%. The Commission's estimates are similar. Let us not forget that the total number of people fired in March alone reached close to 40,000. According to competent officials of the financial staff, in their recent statements, they stated that the average disposable income of the citizens will shrink. The president of EVEA (Athens Chamber of Commerce and Industry) Mr. Konstantinos Michalos, in a television interview a few days ago, said that based on a study by the chamber, 22,000 stores of health interest are expected to close by the end of the year. We understand the magnitude of the problem, the increase in unemployment, the decrease in purchasing power, the increase in rented shops but also the decrease in values.

18. The real estate market follows the economy

The course of the economy, both Greek and global, will be the one that will determine the course of the real estate market. In its analysis, Morgan Stanley estimates that the turnover of the Greek economy will decrease this year from 6.6% to 21.3% in the unfavorable scenario due to the coronavirus and as a more probable version, however, considers that the recession this year will be -13.3% and GDP recovery will range from 1.1% to 4.3% in 2021. To have a comparison measure to estimate the data, our country's GDP within the nine years (2008-2016) of memoranda decreased by 26% , we realize the blow of the economy the next day.

Eleni Stergiou

Source: www.in.gr