April 24, 2012
TV appearances
The past fews days my company has made it to the TV screens multiple times. We have been on the three major channels, Antenna, MEGA and Alpha. Either me or my agents appear in the news every now and then but this time a constellation of events has led to an unusual density. The subjects were not particularly pleasant, as theyhad to do with the flight of the inhabitants of the city-centre,the real estate bought by the now behind bars former Minister Tsochatzopoulos and corruption in the city planning offices.
Mega TV on the troubles of the old city centre around Omonoia Sq.
I would much rather talk about the new prospects in the Greek Real Estate market like those discussed on the Foreign Ministry the other day but good prospects do not necessarily attract much interest nowadays. Having said that it was as always pleasant to have friends and colleagues calling to say: “we saw you on TV”. It’s part of life and everyday business, I suppose.
For those who want to see how I look like on video at present, just click on the image above to link to the TV video-site!
April 19, 2012
An afternoon after foreign investment
I was invited earlier today at the Ministry of Foreign Affairs to attend a meeting for entrepreneurs. The meeting was planned in order to inform businesspeople interested in exporting or doing business in a number of countries. In my case exporting is basically selling properties or related services to people interested in “the Glory that was Greece”. I have been in other buildings of the MFA many times for various reasons but I cannot help commenting the spectacular views of this particular piece of Real Estate. I have seen some properties used by MFA on the (in)famous list of State sale-and-lease-back buildings and I sincerely hope it was not this one.
Overall it was a good opportunity to meet people, as well as see and be seen. There were of course the inevitable drawbacks and glitches for any Greek Government organised event. I had particular interest in two countries, Turkey and China and I was not dissappointed by the diplomats heading the respective sessions.
Mrs A. Manousou, First Secretary for Economic and Commercial Affairs was a particularly pleasant person who welcomed us with warmth. I was impressed by the way by which she was collecting business cards and information. We had a long conversation concerning Greek investment in Turkey, Turkish interest in Greece but mostly on the state of affairs of the Turkish market on which she was very well informed, all in a jovial and relaxed climate.
The atmosphere was rather different on the China front where Mr D. Thomopoulos, Secretary for Economic and Commercial Affairs in Beijing was trying to manage heavy demand on information about his domain. Among the shower of questions from ship-owners and food exporters he had to excuse himself for a sip of water before he could come back to us. It has clearly been a long day for him but we thoroughly enjoyed his down-to-earth conversation and advice. I made the unwilling comparison to other diplomats who became efficient political leaders, as he certainly created the impression of statesmanship.
Overall, it was a very interesting afternoon. These two young diplomats showed me promise that despite the fact that most of the public service has become a dysfunctional behemoth, it can potentially assist Greek businesspeople in attracting foreign capital. Although I am confident that B8 Directorate could improve some aspects of these meetings at a low cost, I would like to thank them and especially Secretary D. Petropoulos for the invitation. I will be looking forward to joining similar meetings again.
There is certainly great overseas interest on “the Glory that was Greece” and with a little help from our friends from abroad and nearby, we can try to make that “was” present tense.
September 21, 2011
A dramatic fall
As the recession cuts deeper in Greece, its toll on the Real Estate industry grows ever bigger. The latest data released by the Athens Lawyers Association paints a grim picture.
First I need to clarify why the data is reliable. In Greece, because of a combination of endemic statism and great influence of the law-professions in the Parliament and Government -the largest contingent of MPs and Ministers coming from that walk of life- no contract can be signed without the presence of a lawyer taking care of the legal issues of each side – in addition to the notary, all of them having state-imposed fees. Every transaction thus corresponds to two so-called lawyer-drafts. No contract is valid unless the two drafts have been paid in advance. Inversely, one can easilydeduce that the number of transactions is half that of the total lawyer-drafts.
Based on the Association data for Athens, there has been a spectacular decline in the last few years:
- 2007, 92,200 lawyer drafts were issued and the following years the corresponding numbers:
- 2008, 85,626
- 2009, 72,364
- 2010, 63,754
- 2011 to date, 24,538
Shortly that means that we went from 46,100 transactions in 2007 to 12,269 year-to-date. Although the number will undoubtedly rise till the end of the year there is no doubt whatsoever that the number of transactions is collapsing. Although the prices in residential RE, as opposed to commercial, have not seen very dramatic drops, I have little doubt that the prices will follow the (lack of) transactions. The average scenario of 25% drop in prices, proposed a few years ago may prove optimistic if sales do not pick up soon.
The tax policy of the Government does very little in the direction of helping the situation, as the RE has been the easy target for an ever increasing number of taxes. Given, however, the fact that Greeks are overinvested in RE, this policy mix risks a generalised collapse in the market and a massive “poverty effect” (as opposed to the “wealth effect” created by rising prices) in consumption and the general economy. Additionally, it will increase the burden to already problematic bank portfolios.
If no alternative course is charted soon, the accumulating risks and clouds will leave practically no business, individual or organisation in the country unaffected.
August 3, 2011
Resilient but vulnerable
Several new reports are expressing a level of surprise on the resilience of Greek Real Estate prices, especially on the residential sector. Given that there is hardly any funding from the banks and that all other economic indicators like GDP and unemployment create a negative environment, this only-slight downward movement is all the more remarkable. Compared to the Athens Stock Exchange which has lost about 80% from its top, the ca 10%-15% movement of the home indices seems almost like a rally.
Evidence from the field however indicates that the housing troubles do not stop anywhere near here. Our own daily experience shows that southward departures from the average become all the more often. The number of people in need to sell is increasing steadily, albeit not so far massively.
So called “investment opportunities”, both on distressed properties and the general market become multiply week by week. Sectors like second homes and commercial property are showing substantial increase in supply and subsequent plummeting of prices. Things in residential are more quite but a tough winter of high unemployment and continuing recession is expected to have an impact.
In any case, real estate has proven once more the least vulnerable of asset classes Greeks are investing in, bar the factor of multiple and high taxation. If the Government decides to slow down a little on taxation we might experience a revival of the famous Greek passion for bricks and mortar.
If not, however, the toughest times clearly lie ahead.
February 14, 2011
A massive privatisation plan
Greeks found out rather abruptly from a joint statement of the so called “troica”, that is the triplet of international organisations that came to the rescue last year (IMF, ECB, EC), that a massive privatisation plan of up to 50 billion Euros in on the way. There was massive outcry focusing on the form of the statement that reminded dictation by powers well beyond the position of the creditors of last resort. But as the dust of the protests settles down, it becomes absolutely obvious that the privatisation plan is inevitable.
In fact, the opposition-leader seems to have described a plan of similar dimensions last year, so it seems that sooner or later the major political parties will embark on selling assets under state control on an unprecedented scale. As mentioned in the press, only former communist states have had restructuring of similar scope.
The privatisation will inevitably include ceding land to private interests whether by leasing or by selling. Some of the projects announced have already sparked some controversy like the Afantou golf-course. Given the serious lack of funds that the State is suffering from, as well as outside pressure however, it seems all but certain that many of them will materialise.
I have for some time been an advocate of developping second homes for Northern Europeans who would like to live or retire on our shores. Indeed, I suspect that if such a plan were implemented a few years ago, we may have had never to face the risk of sovereign default. But given the extraordinary circumastances the country faces, I cannot help hoping that this development will happen in an orderly manner with respect to the local architectural tradition and natural resources.
In the end of the day it is nobody’s interest for Greece to become a massively cemented replica of Costa Brava.
February 8, 2011
Fitch sees further decline by 15%
Good news are hard to come by in the Greek Real Estate market and today was no exception. Fitch published a report that sees a further 15% decline for the Greek housing market. This comes as no surprise as the country lives its longest and hardest recession in decades. It is in fact consistent with my view of an average scenario of 25% drop peak to trough and better days from 2013. There is of course a best case scenario and an “Armageddon” scenario but with current data the average scenario remains more plausible.
As always, central indeces do not necessarily reflect local variations. This is most cleary reflected by the collapse in prices in traditionally middle and upper-middle class parts of Central Athens where local Greeks sell and move while non-European immigrants move in. In contrast areas where former Atheneans move to have experienced a smaller decline or even relative nominal stability (not acounting for inflation).
Unless the liquidity situation changes rapidly, one can only expect furrther declines, sometimes dramatic, which create, however, glaring opportuities both for low and high liquidity players. With the middle class under continuous pressure as incomes decline and taxes are raised, there is little doubt that more of those will appear.
December 16, 2009
A flight to security?
As the country enters one of itw most turbulent periods financially, the Real Estate market seems frozen. The fiscal crisis and the new measures proposed by the newly elected Government seemto impose a heavy burden on an sector already in crisis. Some of the scenarios seem truly catastrophic including exit from the euro, with devaluation and subsequent inflation.
The latter, some argue, be a solution to the Real Estate problems. During inflationary times indeed RE is the safest haven for inflationary currency that sooner or later becomes worthless. We have seen that for decades uder the drachma and some wish to see ti again. Personally, I completely disagree. I think it may be much better to suffer rationalisation of prices, rather than risk the financial future of the country, outside the Euro zone.
Sooner or later, the fiscal crisis will end, one way or another. The sooner we leave State finances problems behind, the sooner the worse times for Real Estate will be over.
November 1, 2009
A tax storm in the making
Central Government finances are in tatters and the dire fiscal position of the country requires urgent measures. Unfortunately, it looks like the usual suspects are going to pay again. Real Estate is in the front line, as today’s first pages indicate. Sunday’s pro-government “To Vima” (opens new window with tables in Greek), makes clear. The threat of increasing taxes 5-fold, as the front-page states may be somewhat exaggerated and may just prove to be a case of front-running bad news in order to prepare a milder real version. Nonetheless, there is no doubt that real estate will be again heavily taxed.
In the midst of the most serious post-war crisis, this may prove a big mistake. If the country has serious development aspirations, less, not more taxes should be in the agenda. Heavier taxation will discourage foreign investment and may put some pressure to off-load properties in a market that already has serious oversupply problems.
October 21, 2009
A difficult year
A year after Lehman Brothers went belly up, 2009 unfolds as one of the most difficult years in living real estae memory for Greece. The crisis however has not affected all aspects of the market activity equally. The prices have suffered little change with the Bank of Greece data showing only a modest fall of about 6.3% year on year for the Athens metropolitan area. Although unprecedented since the relevant BoG records begun (1997), this looks just like a minor correction compared to the massive falls of other markets.
The number of transactions on the other hand has been severely affected. Despite the fact that 2008 was a bad year with only about 130.000 nation-wide (compared to over 215.000 at their peak in 2005), this year’s anecdotal evidence points to an even lower number. So is it all doom and gloom? No, there is definitely some silver lining. First, there is significant movement in the market from bargain hunters, something that accelerated after the October 4 elections returned a strong parliamentary majority. Second the measures adopted by the previous Government on supporting the market, including a a State guarantee that leads to of up to 100% mortgages are expected to bear fruit within 2010 before they expire on its end.
Most of all, the appetite of the Greeks for real estate seems undented. A recent Kappa Research poll, 69.8% replied that they would prefer buying real estate to any other form of investment if they had 300.000 Eu cash. Accordingly, another survey has found that 98% of market professionals polled think that prices will remain almost stable the next quarter with an overall slightly positive outlook for 2010 (60% thought the prices would drop in the Q1).
Overall, although some areas may need further correction to present good value, it seems that both market professionals and the general public do not anticipate further major corrections while implying that we might be in a period favorable for positioning in Real Estate. It remains to be seen, however, how the major fiscal problems faced by the State and rising unemployment will affect things on the ground in the coming quarters.
In short, there seems to be an air of optimism for a sideways movement for 2010 before the better days hoped for in 2011, an optimistic scenario that remains to be confirmed. I have published elsewhere a scenario for an overall 25% correction in the market with local variations. This will involve however, a major recession for the local economy and will see major wealth loss for the Greeks who are overinvested in Real Estate. It is my wish that this scenario or the even worse “Armageddon” scenario will not materialise.
May 30, 2009
Greek household net real estate worth
The Bank of Greece just released data on the total worth of the Greek households. It turns out that it is about 1.7 Trillion Euros. Not bad for a formerly poor nation. There is a small glitch however, in that Greek households are overly invested in Real Estate that is thought to account for over 80% of their investment.
So we are talking about a market exceeding 1.3 Trillion Euros. How will a possible drop on realty value affect Greek spending patterns? Well, we have to see that drop being realised first. For the time being despite a big drop in transaction number the prices have all but remained stable. A small drop of 1.6% was noted by the Bank of Greece survey just in the first quarter of the year. Most other indicators suggest that only a small correction has taken place in a large proportion of the areas surveyed, with some still going strong. Having said that, some areas that have experienced flight of the native Greeks in significant numbers have also experienced accelerated drop in prices.
So overall the phenomenon is pretty complex and interesting but the crisis does not seem to have resulted in high price drops. At least not yet.
