Galery

2

1

Victoria Mindova

Yannis Revitis has been in the real estate business in Greece for the last twenty years. His company has five offices across the country involved in consultation, sale and assessments of real estate property. The successful businessman agreed to explain the readers of GRReporter situation with real estate in Greece and to what extent has the economic crisis affected this sector.

According to data provided by the Bank of Greece real estate property market in Greece is experiencing a decline in Greece since the beginning of 2009. As a result of what did this happen?

It all started in the black October of 2008 when some banks in the U.S.A. with increased investment in real estate marked the beginning of the crisis. This crisis has grown all the way to Europe, and Greece respectively. As a result of the poor economic policy in recent years and increased credits which we accumulated as a result of this policy, created the Greek crisis. All economic sectors were affected, including the real estate market.

When the American crisis began to close down a series of banks for failure to perform their commitments to the so-called "toxic bonds, their European and Greek colleagues, also gow worried. This reduced the market liquidity, which immediately affected the commerce on the property market.

 
How did the crisis change the everyday work of the real estate agencies?

Those agencies which have been for many years on the market, which have created their reputation and have a clienteleof their own felt the crisis a lot less than the new market entrants. Companies that have entered the market in the last 5-6 years due the progress in their business in this period felt the crisis much stronger. Some did not survive the impact and closed down their businesses, others are expected to close down the business in the coming year. Older agencies have survived through other crises as well have the opportunity and experience to hold things until the crisis passes.

 
Nobody can say how it will today's economic crisis develop. We can not predict what the consequences will be or how long the recession will last nor which sectors will be able to save themselves and which will suffer most. The truth is that in the long run anyone who has invested in real estate at a logical price has not lost.

The ones who lost after the height of the crisis are the people who acquired the property on credit and now struggle to pay it. All the people who were able to buy property without a bank loan or at lower prices would profit in the long term. Of course, the crisis also provides a new opportunity to those who can benefit from it - to acquire property at lower prices.

According to your observations, where was the first place the crisis hit the real estate business? Small or large properties were hit first?

Crisis always hits the entire market, no one remains fully intact, but the greatest difference was observed in expensive properties. Those who are most difficult to sell and least demanded.

With the advent of the crisis did the prices drop or did market freeze, why?

The assessment for the entire past year 2009 is that on average the prices in the country fell by about 12%. We expect this year as well to finish with a decline of about 8%. So from the beginning of the crisis in October 2008 to October 2010 a decrease in the average real estate prices in Greece will be registered of around 20%. Certainly prices did not collapse as in the U.S. or in some other European countries. Prices dropped because of those who turned out to be with large loans and wanted a quick sale, as well as by those who have many properties and want to sell. In Greece, however, a massive wave of depreciation of real estate was not formed.

The building contractors also did not undertake price reductions. Part of the reasons are that they had a good profit from previous years, allowing them to wait. Another reason is that the prices of the land and construction materials were increased, prompting the building contractors to refrain from large price differences for sale after the beginning of the crisis. Therefore, even the prices of the construction did not drop by more than ten or fifteen per cent for new construction.

What advice would you give to someone who would like to buy real estate property today?

My advice is to wait for some time, but also make a very good market research. Unfortunately, today it is very difficult to make predictions on where prices will go. It is certain that from now on those who sell property will offer it at much more reasonable prices in comparison with those of last year and the year before that. Buyer must have in mind to what extent the property he buys can be resold or in other words, is it worth the money. A good urban property can easily be sold when it has a good exposure and it is in good condition, to have easy access to public transport and possibly to have some green plants in the neighborhood in which it is located. This is an investment that would bring a good return to the owner.

Rural properties in coastal towns today on the other hand definitely have good prices. Recreation property for vacation, particularly in the area of Attiki are not much. Such a property must certainly be close and even with a view towards the sea, because otherwise similar properties are not a priority in market demand these days. Greater interest in these properties show foreigners - like western Europeans  love Greece very much and in many cases they want to have ownership of property on the Cycladic Islands or the Isle of Crete, there the interest is greater.

In the past ten years, many Greeks became owners of real estate property in Bulgaria and other Balkan countries with respect to the high return on investment. Do you think this is a problem for the local market?

Those who entered early on the real estate market and sold five or six years ago the properties won a lot of money. Mark ups proved to be very high. Companies and individuals who invested at that time, got very high returns on the investment, but also had a successful business in Greece. Ultimately, such an investment was a very good move that in no way can be reported as an error. All who have acquired and kept their property in Bulgaria will soon have the opportunity (if they wish) to enter the market and gain high profits.

Share your experience on the Bulgarian real estate market.

We opened our office in Sofia shortly before the outbreak of the last major crisis when property prices had already reached some pretty high levels, and demand started to shrink. I missed the moment seven or eight years ago when people first advised me to open a branch in Bulgaria and is now I am waiting for better times to come in order to continue my work there.

Board of Directors of the IMF Dominique Strauss-Kahn, and also the government policy today is to restore the competitiveness of Greece at an international level through a general reduction in prices of goods and services offered. How can this be applied in the real estate market and will it have the required result according to you?

Real estate property prices are regulated by the basic economic logic that demand determines the supply. Surely reducing salaries, pensions and the overall decline in standard of living of the average Greek will inevitably lead to a more drastic contraction in the market. For example, if the total decrease of income for the Greeks ranges at about ten percent, then the property market will also register a ten percent decline. The market is self regulated, in accordance with the current economic conditions.

How do apartment prices vary in different neighborhoods? /Around the sea, the northern suburbs, downtown, west of Athens/ Which areas are more popular in the capital?

Greek families choose the place they will live in first in regards to the area in which they work and second according to the funds they have available. Prices on the other hand range from 10-20 thousand euro to 3-4 million, depending on the socioeconomic status of the buyer. For about ten to twenty thousand euro are most often sold ground floor and semi-basements, which are mostly used by students, or immigrants, or just very poor people. The acquisition of a shelter of your own, however, is rooted deep in Greek culture, so regardless of price, real estate purchase is a dream come true.

What risks are hidden in the new economic reforms of PASOK for the real estate market, what consequences do you predict?

From now on all citizens should be very well aware of the taxes they owe to the state. Property with a tax assessment jof under 250,000 euro are not subject to high taxes. Where taxes are significantly severe is for the expensive properties and for the owners of many properties. With the introduction of new tax reform, property owners will need to show sources of income, using which they bought the property. Offshore property owners have to transfer the property to local companies, because the new property tax for the Greek companies is 0.6 percent, and for the offshore companies it is 15%.

Another problem is the highly inflated tax when acquiring property. While in most countries in Europe it varies between 3% -4% in Greece it is already 11 percent. This definitely creates an obstacle in the decision to buy a property in the country. In the dialogue we had with the committee responsible for drafting the new tax law, a proposal was given for this indicator to be reduced, but due to the requirements of the International Monetary Fund this was not adopted. An argument for the refusal was the need of the state to collect as much revenue into the Treasury from tax collection as it can. But I think that was the wrong move which will not have the desired result. When we have such a high taxation and economic recession in full swing, the sales decrease and so the tax revenues will be significantly smaller, and the turnover of funds in the market extremely low.

What causes the big difference between tax assessment and real market prices of real estate properties?

Perhaps we are the only country which does not provide true real estate prices. This paradox results from the fact that taxes here are too high, so people are looking for various loopholes to avoid tax burdens. To end this, the government should significantly reduce the direct and indirect taxes, so the the Greek buyers stops to present false assessments of the property values. Even banks have found a legal way to support these practices, by granting loans higher than the tax value on the pretext that the client (purchaser of property) must make repairs to the new housing, while in fact the money goes to cover its market value.

What according to you should be done in the worst case, to rehabilitate the Greek economy?

To return to the drachma. In the worst case, it is better to return to the drachma instead of taking the pressure from Europe and the International Monetary Fund, which will bring us nothing else but a long term recession, reduction of our income, increase of the interest on our bonds and the daily impoverishment of the Greeks. I believe that if we go back to the drachma our home economy will improve, we will recover faster and we will not have to take the hits of Europe.