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Crisis in Greece – is it time to invest in Greek properties?

Greek economic situation

All mass media have been discussing the theme of economy crisis in Greece not the first year  and say about possible bankruptcy notice of the country.

Indeed strikes have become an integral part of life of Greek people.  Almost all categories of population go on strike: state employees, teachers, layers, transport. 1st of May  in 2011 in Greece was celebrated with strikes again: employees of Greek trains, ferries, trams, underground went on strike against unemployment and decreasing salaries. The largest trade-unions of state government and private sector employees, Communist party of Greece and worker’s organizations organized their 1^st of May demonstration to the Parliament in Athens.

At the present Greek government denies the possibility of restructuring of external public debt (the loan was received from EU and IMF and was given in exchange of reforms aimed to contractionary adjustment and increasing of taxes in May 2010 and saved Greece from default). Though many experts predict the imminence of restructuring.

Nevertheless Greece decreased in 2010 their budget gap from 15,4% to 10,5% GDP, however, it is over declared plan of 9,4% GDP.

Decreasing of expenses and strict measures of economy cause more recession. The level of unemployment reached its record 15%. However, Greek residents have one of the highest index of housing per capita in European Union. It means that a lot of Greek people living at the seacost (what is more the longest  in Europe) own apartments which they  lease in tourism season. Some of them do it officially and pay taxes, but the most part do it illegal. In such a way the most part of population have an extra income besides official salaries which as a rule which provide them more than necessary means of subsistence.

Situation in Greek construction market

What is happening in a construction sector? There had been a housing boom during several previous years. Profitability of investments in construction  exceeded the profitability in  bank deposit. Both private investors build for the purpose of onward sale and construction companies.  The feature of Greek construction market was always the presence of illegal square in buildings. As a rule, all ground floors are declared as a garages, though are build like a separate apartments, many rooms  “under roof” are also illegal. The Greek government gave an opportunity to legalize “garages” into living apartments for the certain payment  in 2010 (the total amount depends on the square). If apartment – “garage” was already sold by builder, that is the responsibility of a new owner. The construction companies faced to the necessity to find requested amount in the shortest time to legalize “garages” in order to have a chance to sell them as a living apartment later.

The banking loan rates have increased by this time and many construction companies met with a problem of shortage in money.  At the same time there was the fall of interest to Greek property especially from European customers (Germans, Belgians, Englishmen) because of the crisis. All these caused the first stage of decreasing prices for property in Greece.

The Greek government promised to take payments for property legalization in parts and prolonged its duration till the February and then till the June of 2011 when they understood that people just can’t be in time to prepare all the requested documents and find money for the procedure. Among other things the incidence of taxation continuously increased during 2010 and the beginning of 2011 particularly and for builders, many  tax concessions were cancelled. New rules and procedures were established which pull new additional expenses of builders (for instance, the certificate of energy efficiency and others).

At the present Greek construction companies are pressed for funds for legalization of illegal squares. Construction of new projects is stopped because builders can’t sell already build property objects. Consumer flow interested in property in Greece significantly decreased. According to experts’ estimates prices for new apartments and houses in Greece decreased on 10-30% in comparison with 2008.

Greek real estate market

That’s why now the situation is favorable for buying properties in Greece. Many builders need cash money so much that they are ready to sell their objects almost at construction costs if the customer is ready to pay 100%  at the moment of signing the preliminary contract. May we remind that it is needed to receive a permission of Ministry of Defense of Greece for buying properties at the many seacoast parts of Greece (Halkidiki, one of the most popular resorts for buying properties, responds to   this so called border territories). Receiving this permission is just a formal procedure but it takes approximately 9 months to get it. Earlier the buyers of property in Greece usually paid in parts: 40-60% at the moment of signing the preliminary contract and the rest after receiving the permission, though the customers could use their property after the 1^st payment.  In such a way the payment for property was as a rule in 2 stages: first at the moment of making deal and second after receiving the permission (in 6-12 months).

That way now it is possible to buy properties in Greece at unprecedented low prices, bargain with Greek builders and get good discounts taking advantages of situation in the construction market in Greece.  And especially it is more likely if the customer may pay all the sum at the signing the preliminary contract.

In spite of the economy difficulties (we hope, temporary) buying properties at the seacoast in Greece is a reliable investment.  Because of prohibition for high buildings and the restrictions for the sizes of buildings at the land at the seacoast there will never be oversupply of properties. It means that property in Greece will always be liquid and may bring a good income. In spite of the economy crisis Greece is waiting for significant tourists’ flow increase from Russia and others countries in 2011 and there isn’t a problem to lease apartments and houses in Greece during the tourist season.