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How will the Greek real estate market move in 2021

5 January, 2021

How will the Greek real estate market move in 2021

of Mr. Babis Charalambopoulos

We must first look at the context in which the extraordinary global conditions, due to the pandemic, have imposed on the economy, the psychology of the population, unemployment, etc.

Due to this crisis from the two waves of the pandemic, which comes after a decade of suffering of the Greek economy, which had just begun to recover in the 24 months before March 2020, we have a new framework that delimits the movements in 2021, which includes:

1. GDP decline
2. Increase in unemployment
3. Shrinking the finances of a large portion of households, especially those in the private sector
4. Impact on the psychology of the world due to the commitments that have been imposed and the uncertainty about how long these various restrictive measures will be maintained
5. Dynamic expansion of e-commerce
6. Extension of work from home, to all companies that have such a possibility
7. Haircut of shop rents, etc., which were closed by decision of the state
8. Changes in the legislation for off-site plots, which affects the possibility of issuing a building permit, after the end of the transitional period of two years and four additional years for the construction of the load-bearing structure.

Residence
The existence of a three-speed market will continue in 2021. In particular we will have:
1. Stagnation in real estate of tourist or student interest, where there is a lack of demand
2. Relative demand in good areas-neighborhoods for new apartments, where at the end of 2019 and the beginning of 2020 some mobility was observed and real estate transfers took place
3. Absence of demand in the vast majority of real estate in the country, where we have a slight continuation of price reductions
The relative uncertainty in the economy, the large stock and the scenarios for mass sale of houses associated with "red" loans create a difficult framework.
There remains the reduction of sales, the restriction on the demand for large apartments, the shift to small and older properties. Also, the turn to rent continues, to the point that no one can easily find a property in some areas of Attica.

We must also note that:
1. Household finances, due to the crisis, are at a low level and can not easily support the purchase of a new home
2. Banks give mortgages with the… dropper
3. Greeks having έχ burned out of red loans, as much as they can, avoid borrowing from banks and double check before applying for a loan

We also see a serious shift from short-term to long-term leases, awaiting the landscape after the measures are completed and the full development of air and road travel.
Also noteworthy is the inaction in the real estate market with the "golden visa" program, where Chinese, Russians and others acquire properties over € 250,000 and obtain a visa to the EU.

Another factor that must be taken into account is the need to have even a small space in the house for those who work telework in consultation with the company. This means that there will be a mobility in the house (rentals and transfers), in order to meet these new needs.
The renovation of old houses and apartments and their energy upgrade, through the 'Save' program, contributes to employment and the supply of old but better quality real estate, at reasonable prices.

Finally, the launch of Elliniko's mega-project, which spans many years, will signal a series of positive developments. Therefore we will have a strong guide that will contribute significantly to the development of the region and will be a magnet for other investments.

Holiday homes

The holiday home is also moving at low to zero rates in terms of demand from both foreigners and Greeks, and this is a result of the pandemic. There was little demand from some Greeks to stay out of cities during the restrictive measures. However, in 2018 and 2019 there was a relative increase.

Offices
The crisis and the reduction of household assets certainly continue to affect the economic activity of companies, which are looking for housing in cheaper and smaller spaces or to renegotiate rents at lower equilibrium points in order to survive.

The expansion of teleworking is putting new rules in the operation of office space. This means that businesses will need somewhat less space, which will mean a reduction in prices, as the percentage of vacant, unallocated space will increase.

Also, the old type offices will not be requested or will have to be radically renovated in order to be modernized.
Where the interest of foreign companies and AEEAP is concentrated are the very high standard offices, the ‘green’ buildings, which are few, however, due to the fact that in the years of crisis very few new constructions are made. In this category there is stability of prices and rents, but there is not enough product or usually at this time we have the development of new buildings that is done to order by those interested.

Stores
The store sector, especially those related to the use of health care, as well as clothing, footwear and other industries, has suffered a major blow from the pandemic and the lockdown that was imposed.
The shops located in the shopping malls are also seriously affected. There are of course stores such as e.g. the super markets and pharmacies that have seen their turnovers grow and therefore are the lucky ones.

In general, however, the economic crisis has affected both stores with expensive items and secondary properties, where the number of vacancies has increased, and many of these stores remain unclaimed ...
The state imposed rent reductions for businesses that were closed on its orders, so what will play an important role is the renegotiation of rents, for the period after the pandemic, because a new landscape of (reduced) rents will emerge and consequently store values.

Finally, the rapid growth of e-commerce should be noted. This directly affects conventional stores and we see that in America they have already started closing malls for this reason. So here too, with some lag, there will be changes, many of which are already visible.
However, the magnetic streets of the cities will be in demand over time, but the tenants will change due to the rearrangements throughout the trade, while at the same time the shops on the side streets will have further problems, and many of them will remain unclaimed.

Logistics
The pandemic brought the rapid growth of e-commerce and for this reason, the demand for logistics facilities with modern specifications and in current locations close to the major cities of the country. There is also a demand for smaller logistics buildings, which will be on the outskirts of cities or within them and will serve the needs of the day or two.

The increased demand combined with the limited availability of such modern spaces has led to an increase in values and rents, which will trigger the development of such buildings where this is possible from land use commitments.
Due to the growing demand for goods via the internet, there is a serious shift that marks the placement of products in warehouses with a wide variety of features, depending on the items sold. In essence, a percentage of sales leave the classic stores and go to the Internet, which can be warehouse buildings, because they do not need shop windows or presence in expensive stores.

The important placement of AEEAP in Logistics areas is also noteworthy, because in this way they acquire more dispersion in their real estate portfolio while at the same time they record significant returns.
In conclusion, the future of quality logistics, which brings together good features of position, accessibility and size, is very well defined in the visible horizon.

The usable land
We used to say that the land was a very good shelter in times of economic crisis. Nevertheless, today the building usable land has undergone very serious reductions in its value while at the same time the interest for land purchase is limited, due to the very low construction activity.
Of course, this does not mean that there are no exceptions to this rule of the current period.

The off-plan land, based on the latest legislation, will enter a new, tighter framework in terms of building potential and therefore its values will change. There is a transitional two-year period for the issuance of licenses under the previous provisions and 4 years after the issuance of the license for the implementation of the carrier organization.
It should be noted here that after 2017 the increase in the issuance of permits for new constructions had started slowly, but after the first four months of 2020, this rate was almost completely stopped, due to the pandemic and the uncertainties that have arisen.

Hotels
As we all know, tourism, aviation, cruising and catering have been hit hard by the pandemic that is still going on and maybe something will start moving in the second half of 2021.
Already in the area of Athens, there was a large increase in beds before the pandemic and we noted then that there have been phenomena of oversupply, taking into account some competition from short-term lease.

The lack of customers creates financial suffocation in the hotel business, especially those that were borrowed to be renovated and modernized, have to face great difficulties.
Depending on the evolution of the measures for the pandemic and the gradual return to normalcy, the hotel units will start to have fullness and therefore revenues.

Many are of the opinion that the full return of tourism to pre-pandemic levels should be expected in 2024, if it all ends in 2021 with the pandemic.
Consequently, in the current period with the many uncertainties, the market in this area moves with consideration and only cases of very good units, with prospects but also with financial problems for their owners, they move and where and when transfers are made by necessity.

Ιn conclusion
The pandemic with its two waves so far has had very serious effects on the economy and of course on real estate, but with a different blow size, depending on the category to which the property belongs, its location, its size, its age, etc.
At the same time we must realize that we are still walking in uncharted waters, where week by week new conditions and conditions of operation of the market, services, etc. are formed.

So we have the following as the most likely scenarios for the new year:
1. Real estate that has a clientele from tourism is going through a very difficult period with its currently unknown duration, so their prices are being pushed.
2. Homes will have a period of price stagnation or decline in 2021, due to the fact that the maximum percentage of potential buyers has seen a squeeze in their finances, while he also feels an insecurity about future developments.
3. First quality office buildings (Grade A) are in constant demand due to lack of product. The other offices will feel pressure on prices and rents.
4. Shopping on street magnets will have the least impact of the pandemic. Everything else will be in a reshuffle program, after negotiation between the two parties. There is a visible possibility that some of the shops that operated before the pandemic will not open due to the inability of the shopkeepers, which occurred due to the pandemic. One sub-sector, which is the super markets, saw in this crisis the turnover increase and so here we may see small changes upwards.
5. Logistics buildings are in an advantageous position and are in demand. So we have a rise in prices and returns.
6. The holiday home is in a waiting state…
7. Off-plan plots of land have a transitional period to obtain a building permit, while some of them, after the deadline, will not be able to issue a building permit and therefore their values will decrease.

The real estate, business and corporate taxation sector, combined with household finances (which are severely shrinking due to pandemics, unemployment, part-time and taxation, direct and indirect) as well as state aid programs, will play an important role, as the multifaceted dimensions of the phenomenon come to confirm the view that the real estate market is directly linked to the general course of the Greek economy.

The country must look for ways to produce goods that can be exported and substituted for imports. Only in this way will unemployment begin to decrease and "wealth" be produced, at which point real estate will also begin to recover.
The location of the property and the right quality of construction, are timeless values, which are more resistant to such shocks.

The solution…
One is the solution: Incentives (tax and other) for the Greek to invest in his country to start producing wealth. Foreigners have to choose between many countries that have more favorable conditions for entrepreneurship.
If the Greeks try in the country, then it will be easier for the foreigners to come…

* Mr. Babis Charalambopoulos is the former President of the Hellenic Institute of Valuation, Scientific Advisor of SOLUM Property Solutions
 

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