1. Greek Economy Overview
The end of the long fiscal adjustment marked by the completion of the third program in August 2018 could inaugurate a return to economic normality in Greece. In the aftermath of the global financial crisis of 2008 during which Greece sank into recession recording negative GDP growth for eight consecutive years (2009 – 2016), the economy seems to be stabilising and bouncing back towards a more sustainable trajectory, assuming that the actions agreed in the third review will be implemented and the Greek government will bring about the reforms that are susceptible to attract foreign investment. Market appetite has been tested with the issue of a 5 Year Government Fixed Income Security earlier this year. The 3.45% coupon issue was oversubscribed, and Greece drew approximately 2.5 billion euros, while there are plans for issuing a new 10-year benchmark bond later this year.
The government’s plan to revive the construction sector culminated into schemes designed to attract foreign investments. The years of 2016 and 2017 marked a new era for the real estate market in Greece. Strong macroeconomic performance resulted in renewed confidence and trust for the country as an investment destination. In 2017, the first signs of economic recovery were noted with an increase of 1.5% in the Gross Domestic Product (GDP), an upward trend that continued during 2018 and increased by the end of the year to 2.2%. Inflation remains in the neighborhood of 0.8% and the European Commission expects it to reach 1.3% in 2020.
1.1 GDP growth is expected to be 2.4% by YE2019 (IMF)
According to the International Monetary Fund, GDP growth is projected to rise to 2.4% in 2019 and to 2.2% in 2020. The main driver of growth is attributed to exports, taking advantage of rising external demand and improved competitiveness. Investment and private consumption are expected to recover as confidence rebuilds, following improved fiscal credibility. The maintained high excess capacity will limit downward price and wage pressures.
Source: IMF, edited by Delfi Real Estate.
1.2 Greece broke its new record in tourist arrivals during 2018 reaching 33million arrivals
According to the Bank of Greece, travel receipts totalled €15.8bn, up 9.7% relative to the same period of 2017. Specifically, visitor flows through airports increased by 13.6%, while visitor flows through road border-crossing points increased by 5.8%. In addition, the number of visitors from Germany increased by 18.4% to 4,343 thousand, as did the number of visitors from France, by 7.0% to 1,511 thousand. According to data from Athens International Airport, in 2018, 24.14 million passengers travelled through the airport, an increase of 2.4 million compared to 2017.
1.3 In August 2018, Greece successfully concludes its European Stability Mechanism (ESM) program (European Commission)
Greece exited its three-year ESM financial assistance programme successfully in August 2018. This follows the disbursement of €61.9 billion by the ESM over three years in support of macroeconomic adjustment and bank recapitalisation.
1.4 Foreign Direct Investment Inflows reached EUR3.5bn in 2018, an increase of 9% YoY
1.4.1 Golden Visa Scheme
In 2013, the Greek government launched the Golden Visa program whereby investors buying property valued at minimum €250,000 are eligible for a residence permit. Since the launch of the program and up to the end of 2018, more than 3,620 residence permits have been granted to investors/property owners. More than 9,756 residence permits have been granted to investors/property owners and their families for total investments in excess of €1.5bn in Real Estate.
Source: Enterprise Greece, edited by Delfi Real Estate.
1.5. Capital controls were lifted in September 2018 following three years of economic recovery
Greece raised the monthly limit of cash that can be withdrawn from bank accounts to €5,000 from €2,300 euros as part of measures to ease capital controls imposed in 2015. Athens first imposed capital controls in the summer of 2015 aiming to restrain excess withdrawals from the banking system during the debt crisis that led to its third financial bailout since 2010. The country’s rapid return to international financial markets marked a significant positive step towards restoring confidence and credibility.
2. Real Estate Market Overview
The real estate market is positively affected by strong signs of stabilisation in the Greek economy as well as anticipated return to growth in the coming years. Following nine years of declining real estate prices, the cycle is now exhibiting strong signs of a turnaround. There has been strong demand for prime, income producing assets from international investors. Real Estate Investment Companies (“REIC”) have been very active in Greece with 8 REICs currently registered with the Hellenic Capital Market Commission while more are in the pipeline. As part of further expansion, Eurobank Ergasias announced a merger with Grivalia Properties. This merger enables the bank to achieve the highest total capital ratio in Greece and accelerate the reduction of its problematic exposures (NPEs). Growing demand in the “Golden Visa” scheme also positively contributes to the real estate market.
With regards to its portfolio, Grivalia’s Office segment generated 34% of the total rental income in the fiscal year of 2018, ranking roughly 3% above the second largest segment, retail.
Source: Delfi Real Estate.