<!– wp:paragraph –> <p>Giorgos Kormas, senior general manager, head of Piraeus Bank Group’s Real Estate Group and managing director of Piraeus Real Estate, said he expects high growth rates in the real estate market after the end of the pandemic.</p>
The assessment that after the end of the pandemic there will be high growth rates in the real estate market was expressed by George Kormas, senior general manager, head of the Real Estate Group of Piraeus Bank Group and CEO of Piraeus Real Estate.
Mr. Kormas estimates that the significant recovery rates presented by the domestic real estate market in 2019 and the first quarter of 2020, was not a temporary phenomenon, but a general trend that will continue to exist after the end of the health crisis.
The head of Piraeus Real Estate made these assessments at the recent NPL Summit 2021, where he underlined the characteristic resilience of the market, despite the waiting attitude of investors at this stage.
Regarding the relationship between non-performing loans and the real estate market, Mr. Kormas stressed that as real estate operates and will continue to operate as a guarantee of investors to creditors, the goal of Piraeus Real Estate is to have the smallest possible inflow real estate that is not easily usable by the company.
Regarding the future of the real estate market, Mr. Kormas pointed out that Piraeus Real Estate, in line with the international trends of the industry, puts the greatest weight of its activity on the digital transformation and the use of the most modern artificial intelligence tools that will make more personalized customer service, as well as the positive environmental footprint of its portfolio buildings.
Source: AMPE
In the focus of the next day after the pandemic are the developments in the real estate market in our country, a sector that has shown particular resilience during the last 12 months.
Significantly, according to Bank of Greece data, there was a 4.2% increase in property prices in 2020, following a 7.9% increase recorded in 2019.
The price increase in the fourth quarter of 2020 compared to the same quarter in 2019 was 2% for “new” apartments, up to 5 years old, and 3% for “old” apartments, over 5 years old.
For 2020, the average annual rate of price growth for “new” apartments was 4.7%, while the average annual rate of growth for “old” apartments was 3.9% in 2020.
But what are the trends in the individual sectors of the property market? In large investment properties and in urban properties that are of interest to thousands of citizens?
Increase in the stock of real estate in affected sectors
During the ten-year economic crisis, as George I. Kormas, CEO of Piraeus Real Estate, head of Group Real Estate and senior general manager of Piraeus Bank, points out to APE – MPE, the real estate market suffered a significant decline, mainly through a reduction in transactions, a drop in prices of up to 40%, as well as the lack of new developments.
“However, I will express a ‘heretical’ but optimistic view that the economic crisis has also contributed in part to the rational development of the Greek real estate sector. This has been achieved through the creation of a large stock of properties for disposal, mainly to businesses that will use them to fulfil their business objectives, but also by keeping prices at very competitive levels compared to neighbouring Mediterranean countries.”
“The effects of the pandemic on the economy are expected to bring about a new increase in the stock of real estate coming from the sectors that were significantly affected such as tourism, catering and retail. The real estate market the next day will resume the upward trend it had until March 2020, picking up where it left off. Together with tourism, the real estate market will bring impressive economic results, both for the owners who will see the value of their property increase and for the country as a whole,” the Piraeus Bank Group executive believes, based on the data available to him.
Small warehouses in demand – Bioclimatic buildings
Asked which specific sub-sectors of real estate development have the greatest growth potential, Mr. Kormas says that the pandemic will bring about significant shifts in the importance of real estate sectors.
“Warehousing is a property category that is a major beneficiary of the pandemic due to the significant increase in e-commerce, with the new element being the increase in demand for small warehouses in or near major cities that will provide a solution to the problem called the last mile, i.e. shipping products from the distribution centre to the end user. We will also see an increase in demand for bioclimatic buildings, mainly offices with integrated ventilation systems, on main roads with good access and larger residential buildings with space available for teleworking.”
In response to the question of what will be the characteristics of the properties that will be in demand, George Kormas points out that “the building stock in Greece is mostly over 30 years old, constructed with outdated building standards and not in line with the new requirements for environmentally friendly urban developments with a low energy footprint”. “The pandemic has given a picture of the future in the use, and therefore the demand, of urban real estate. Teleworking, which will remain for many reasons in the next day, at least in the logic of a hybrid working model, showed the need for larger residential properties where isolation between different household members is possible. It also showed that it is possible to live outside the big cities enjoying larger, cheaper and closer to nature residential properties while providing services in a productive way, says Mr. Kormas, noting that Piraeus Real Estate, through its experience and continuous data collection and processing, is able to provide a competitive product across the entire spectrum of real estate.
The cooperation of all parties in the purchase and sale process is crucial – “spring effect”
Alexandros Demertzis, a real estate consultant specializing in real estate transactions in premium areas of Athens and its suburbs, points out that during the last few months there has been a particularly increased demand for urban properties in areas such as the centre around the Presidential Palace and in suburbs such as Filothei, Psychiko, Kefalari, etc. Demand also started for investment purposes shortly after the pandemic started as there was a prospect that prices would fall and in recent months it has peaked and as a result property prices in many premium areas of the capital’s wider geographic area have shot up. Demand is mainly from high-income Greeks and developers who have emerged very strongly after years, while foreign buyers who were expressing and making purchases before the pandemic are holding back as they cannot keep up with selling price levels. Alexandros Demertzis also estimates that there will be strong mobility for urban properties in the areas where redevelopments will start, such as in the area of Elliniko, both from Greek and foreign buyers.
Waiting attitude from foreigners
Mr Demertzis attributes the waiting attitude of foreigners to the fact that especially in the smaller properties that are targeted at visa buyers, they cannot travel, especially the Chinese who used to make up a large share of the market.
Some, but few in number are moving into virtual viewing purchases but certainly this market is expected to see a “spring” effect when air travel begins at a normal pace rather than the current tight restrictions. There is also a large increase in demand in the market for beachfront homes of all categories on islands in particular, as after the experience of the pandemic many are seeking safer holidays in their own homes. Here too, the ‘spring effect’ will work for the same reason as the return to normality in air travel.
More generally, he points out that there has been an upturn in property sale prices. As he points out, Exarchia tends to get Colonaki prices and Omonia prices before the pandemic. The question and the question mark is whether these prices set by sellers can be met and for how long by prospective buyers. He identifies that in about six months to a year from now the trends will have taken a clear path.
Demertzis also emphasizes the cooperation that all parties must have in the process of buying and selling a property in order for it to be completed successfully. Prospective buyers and sellers should be consulted by professional real estate consultants in order to keep price levels at reasonable levels and not be driven to excesses that are not in the best interest of either party.
Sale agreements are being implemented – differentiating recovery depending on the property
For his part, Konstantinos Georgiakos, General Manager of Intrum REO, notes that the first signs in the real estate market indicate that interest remains significant with notable sale agreements that have been initiated being implemented while remaining focused on specific types of properties and in specific areas, particularly in urban centers.
Referring to the individual sectors of real estate development, Georgiakos notes that “the impact of the pandemic on the entire real estate market is not uniform and recovery rates will vary depending on the type, location and characteristics of the properties”. He also points out, among other things, that “we see that although the pandemic has shown that many people can work from anywhere, both people and businesses still want to be close to basic infrastructure, social activities and easy access to healthcare. Interest is therefore turning to housing of modern standards in the suburbs of the big cities, Athens and Thessaloniki, which are more sparsely populated and have a higher ratio of common areas and green spaces per inhabitant.”
“There is still strong interest in smaller logistics buildings with proximity to cities to serve immediate (last mile) distribution needs. The future of quality logistics, which bring together good location, accessibility and size characteristics, is looking positive on the foreseeable horizon with AIFs having already made significant placements. Currently, annual returns for prime logistics are approaching 8.5%. Against this backdrop, we believe that rising demand combined with a limited supply of modern warehousing space will accelerate further price appreciation.”
Over time, real estate has been one of the major sources of revenue for the state budget. The real estate was the magnet of the naughty tax collection measures of the respective government during the memorandum years, because the relevant taxes are theoretically easy and collectible.
The once coveted good for the Greek has been besieged with taxes that increased 700% according to an OECD survey for the period 2009-2018, at a time when most member states recorded a reduction or stabilization in the tax imposed on real estate. In our country, taxation skyrocketed, as revenues from 0.3% of GDP in 2009, a decade later (year 2018) reached 2.1% of GDP.
Greece is now one of the most expensive countries in real estate and land tax among the OECD countries. It now ranks 5th in a row after Canada, the United Kingdom, the United States and France.
Revenues from property taxes:
In 2010 the State received € 487 million from property taxation
In 2011, property taxes reached € 1.17 billion
In 2012, property taxes amounted to € 2.75 billion
In 2013, property taxes increased further and amounted to € 2.991 billion
In 2014, property taxes broke the € 3 billion barrier
In 2015, property taxes amounted to € 3.18 billion
In 2016, property taxes amounted to € 3.53 billion
In 2017, property taxes amounted to € 3.60 billion
In 2018, property taxes amounted to € 3.217 billion
Budget 2019: From the regular real estate taxes, revenues of € 2,760 billion were expected to be collected, of which € 2,711 billion. from the single Property Tax (ENFIA)
Budget 2020: Regular real estate taxes were expected to collect € 2.829 billion in revenue, of which € 2.705 billion. from the single Property Tax (ENFIA)
Budget 2021: Regular real estate taxes are expected to collect revenues of € 2.804 billion, of which € 2.751 billion. from the single Property Tax (ENFIA)
The declared income of property owners:
In 2010, the declared income from real estate amounted to € 8.87 billion
In 2011 the declared income decreased to € 7.98 billion (1,584,059 taxpayers had real estate income)
In 2012, real estate income amounted to € 6.8 billion.
In 2013, declared income decreased to € 6.22 billion
In 2014, the declared income was reduced to € 6.08 billion
In 2015, declared income fell to € 6.05 billion.
In 2016 the declared income from was € 6.107 billion.
In 2017, the declared income was € 6.19 billion
The tax burdens imposed on real estate within 5 years:
Solidarity contribution rates increased with the maximum rate increasing from 2.8% to 10%. Rental income is subject to a solidarity contribution.
Rental rates for rental income have increased. The rate for income up to € 12,000 increased from 11% to € 15%, for income from € 12,000 to € 35,000 increased from 33% to € 35% and for income over € 35,000 increased from 33% to 45%.
Short-term housing leases (eg Airbnb) were taxed.
The rates of the supplementary ENFIA increased from 0.1 to 1% to up to 1.15%, but the tax began to be imposed from a lower value as the tax-free amount was reduced from 300,000 to € 200,000. In 2018, the tax-free amount increased to € 250,000.
The rates for the calculation of ENFIA in the plots were increased.
In 2016, the additional ENFIA for legal entities increased from 5 thousand to 5.5 thousand. While for the defined NPDD and NPID µ Non-profit, as well as the Real Estate Investment Societes Anonymes the same rate increased from 2.5 ‰ to 3.5 ‰.
Increase in the objective values of real estate in about 4,000 areas of the country leading ENFIA to higher levels with the aim of expanding the tax base as many areas outside the plan are located in expensive places.
Foreign direct investment in the real estate market in the pre-covid-19 era:
The year 2019 was the fourth consecutive year of increase in net foreign direct investment in our country, after the annual increase of 9.0% from 2017 to 2018, by 23.5% from 2016 to 2017 and by 118.5% from in 2015 to 2016. Therefore, based on the balance of payments data in 2019, the real estate market sector was responsible for 35% of foreign direct investment made last year in the Greek economy, which amounted to 4.2 billion . euro.
According to the Bank of Greece, real estate purchases by foreigners have skyrocketed in recent years, as they have increased 6.5 times compared to 2016. It is characteristic that in 2016, the relevant amount had not exceeded 222.4 million . €, before reaching € 414.7 million in 2017, € 1.128 billion in 2018 and € 1.45 billion in 2019.
In the first quarter of 2019, the inflows of foreign capital aimed at the acquisition of real estate amounted to € 419.3 million, down 9.6% compared to the corresponding quarter of 2018, when they had reached € 464.1 million.
This decline was recorded due to the wait-and-see attitude of many interested investors in view of the measures to stimulate the real estate market announced by the government.
The Greek real estate market before the coronavirus pandemic had changed its page after about 10 years of continuous recession, recording an increase in sales prices throughout the country. Even in the midst of a pandemic, sales prices in 2020, according to a recent BoG report, increased by 4.2% compared to an increase of 7.2% in 2019.
The real estate market is a key pillar of development of the Greek economy
The real estate market is a key pillar of the development of the Greek economy, a realistic tax reform is now required and a national and long-term plan for the approach of investment funds.
A plan that will adapt to international challenges at any given time. There are examples, such as Portugal, which in the midst of a pandemic had losses of only 5% in 2020 in the golden visa program, when our country counts losses of 95% compared to 2019.
The correct recording of objective values is a development measure for both the real estate market and the Greek economy. It is a constant demand of the real estate market to create an information system that will follow the trends in the real estate market, which according to recent statements of the government’s financial staff is part of the second reform effort that will be replaced by modernizing the system of objective determination of property value. the term objective value with commercial.
The simplification – the automation of the required procedures for the transfer of real estate is a key factor for our country to join the mature markets and to attract investments.
In 2020, according to the latest annual report of the World Bank for the ease of doing business, Greece is in 156th place among 190 countries, as it is still required to collect 11 different documents and certificates for the purchase and sale of a property. In the corresponding report of the World Bank for 2019, our country was in 153rd place.
According to the above, additional fiscal space will be created to further reduce real estate taxation. The real estate market can make a decisive contribution to the sustainable development of our country, while it is directly connected with more than 3,000 professions.