demand for property on the slide
Plus, 30 October 2009
The downturn in the Greek property market over the last 18 months has
been partly due to a fall in foreign demand. The latest data on capital
inflows from abroad for property investment show a drop to 67 million
euros in the first half of the year, against 110 million in the same
period last year. For their part, developers and realty agents in tourist
destinations estimate the fall at 45-55 percent up to the end of September.
In the years prior to the outbreak of the economic crisis, foreign
property investors financed their buys mainly through bank borrowing.
This year, however, European banks in general have been especially
tight-fisted in approving mortgages. Credit expansion in general in
the eurozone has been negative.
One important factor that has influenced demand is the highly competitive
environment internationally. In this respect, one characteristic example
is Spain, where prices have declined considerably, while construction
companies have put together "special offer packages" that include financing.
Analysts also point to the institutional problems affecting the Greek
market, particularly relative to its competitors. For instance, the
restrictions applying to border areas for non-EU citizens has been
deterring a significant number of middle-income Russians, who might
otherwise be willing to buy property in these areas, many of which
are already popular with foreign visitors. Developers have been offering
solutions to bypass the restrictions but very few individual investors
seem to be accepting them.
At the same time, the construction model of holiday homes with lofts
and basements - the aim of which are to increase space - is not what
the vast majority of Western Europeans are looking to buy in Greece,
so many turn to old houses which they renovate.
Additionally, the promotion campaign for Greek holiday homes has been
much weaker this year, especially in the traditional source markets
of the UK and Germany, where Greek developers do not have extensive
Meanwhile, many entrepreneurs in various tourist destinations say the
drop in construction is having a direct adverse impact on their local