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JP Morgan: Buy luxury properties borrowing from Greek banks. The drachma is coming

17 January 2012 / 18:01:42  GRReporter
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Buy property in Greece, because the drachma is not far away, JP Morgan advises its clients. According to the investment bank, Greece’s leaving the eurozone is certain and real estate purchased with loans from local banks will bring a double profit for those who have entered the game in time. On the one hand, there is a serious collapse in the prices of expensive real estate, which is a good investment opportunity in itself. On the other hand, if foreign investors borrow from Greek banks and do not use other sources of funds, the transition to the drachma will devalue the Greek currency and facilitate the repayment of the loan. Thus, the investor will have a good property in the Mediterranean country at a price lower than the market one.

This proposal is based on the final default of Greece as a logical solution to today's debt crisis, which is only worsening rather than being solved. It will not be able to withstand the pressure of the eurozone and will return to the drachma, which will be significantly devalued compared with the euro. In this scenario, the buyers will be able to repay the loans taken from local banks by half or even less. Currently, luxury villas and summer houses are offered at significantly lower prices compared with 2008 levels. If a luxury villa was worth two million euro three years ago, today its price is 1.3 million euro. The more expensive the property, the more profitable it would be to buy it in the final period before the financial collapse, using the combination of JP Morgan, say experts.

The investment opportunity presented may seem like manna to bankers and financial experts, but it actually means that the collapse of the Greek economy is inevitable. JP Morgan's plan suggests that Greece will not get away with the default despite the help of Europe and the International Monetary Fund. As do many other large investment funds. According to Star TV, which refers to a report of a large investment fund, if the drachma returns, it will be significantly devalued compared to its values before Greece accession to the eurozone. If in 2001 one euro was exchanged for 340.75 drachmas, today it will be quoted at 1,530 drachmas.

Inside forecasts for the development of the Greek economy are not good either. The president of the Hellenic-American Chamber of Commerce Yannis Gramatidis is seriously concerned about the macroeconomic data for 2011 and notes that the lack of effective measures to restructure the public sector could be costly to the country's future. The Chamber forecasts are that the data for the end of 2011 will be worse than that officially published and Gramatidis points out that the recession will reach 6.1% of GDP instead of 5.4% as the government had announced. The deficit will be at the same level, as at the end of 2010, i.e. 10.5% of GDP, despite salary cuts and record high taxes, and unemployment for the last year will surpass 17%.

"These figures show that we have actually failed in the adoption and implementation of all measures needed to improve the condition of the country. They also demonstrate that aimless raising of taxes and the attack against salaries and pensions is a wrong policy and the state system is not in the position to reduce public spending," Gramatidis comments on the economic situation of Greece in an open address to the media. He believes that there is no place for optimism in the picture described and that the state has been caught up in its own vicious political system that will lead to its final financial collapse.

Contrary to the popular saying, "the innocent suffer with the guilty," the concerns of a collapse of the euro have had a positive impact on the Bulgarian property market. The analysis of Address Real Estate released on Monday shows that at the end of 2011, about a third more transactions were made than in the same period the previous year. At the end of the year, the company registered almost 30% sales growth with 7% average decline of property prices. "Price levels almost froze in 2011. For some properties we have registered a moderate decline, and even a slight growth for quality properties," said George Pavlov, executive director of Address Real Estate. In his opinion, concerns of a collapse of the euro led to an increasing number of transactions in Bulgaria in the last quarter of the year because people there believe that they can protect their money from devaluation or loss by investing in real estate.

Tags: EconomyCompaniesReal estateJP Morgan
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