The Greek real estate market, in the eleven months of 2021, coming out of a period of disruption of normalcy in economic activity, not only reduced its losses, but also showed rapid recovery, especially in uses and peak positions, according to the Interim Report on Monetary Policy 2021 of the Bank of Greece.

Characteristic of the last months is the dynamics of the market of investment commercial real estate. Especially in the housing sector, of particular interest is the tourist and investment market, which concerns both sales and leases, short-term and long-term.

After a prolonged period of sluggish construction activity, the development of new real estate and the upgrading of the existing stock are gradually coming to the fore, with investments in privileged positions recording significant growth rates and the demand for new mortgages showing some initial stimuli.

Price levels in the real estate market

In the real estate market, the trend of de-escalation of the growth rates of values recorded since the onset of the pandemic reversed in 2021. More specifically, based on the indicators and estimation data collected by the Bank of Greece, in the first nine months of 2021, the prices of apartments (in nominal terms) increased by 6.1% on an annual basis, compared to an increase of 4.9% in corresponding period of 2020.

In particular, on an annual basis, the apartment price index recorded a gradual acceleration of the growth rate for the country as a whole in the sub-quarters of 2021 (4.3%, 6.2% and 7.9% for the first, second and third quarters of 2021, respectively).

At a local level, house prices maintained heterogeneity in their changes, with significant increases in areas with strong investment interest and marginal changes in other areas.

More specifically, the high annual rates of price increase in the two major urban centers of the country, i.e. Athens (8.3%) and Thessaloniki (6.3%), contributed significantly to the increase in apartment prices for the whole country during the nine months of 2021, as in other major cities and other regions of the country the rates recorded are positive, but much milder (4.2% and 3.5% respectively).

The prices of the old apartments, in the nine months of 2021, increased at an average annual rate of 6.2%, while those of the new apartments by 6.1%.

Explosion of construction activity in Attica and Thessaloniki

At the same time, various relevant indicators reflect the positive dynamics of the residential real estate market in 2021. More specifically, the housing construction activity in the eight months of 2021 records significantly high annual growth rates of the number and volume of new building permits (48.9% and 57.7% respectively) at a national level and even higher in Attica (66.1 % and 71.0% respectively).

Foreign investments at 797.2 million euros in the first 9 months

The increased investment interest from abroad, which fueled the recovery of the high standard real estate market and income, especially in the two years 2018-2019, recovered during the nine months of 2021 (34.7%, compared to a decrease of 42.5% in the corresponding 2020), despite the limited number of Golden Visa property owners’ residence permits.

Foreign direct investment in the real estate market, according to the Bank of Greece, recorded a significant increase, during the first nine months of 2021, and amounted to 797.2 million euros, compared to 592.0 million euros, in the first nine months of 2020.

The number of transactions is increasing

Housing investment continued to strengthen in the first nine months of 2021, with a significantly higher annual rate (34.7%) compared to the corresponding period of 2020 (19.3%), but remained low as a percentage of GDP (1.4%).

Moreover, business expectations for housing construction, as reflected in the relevant index of the Economic and Industrial Research (IOBE), increased significantly in the eleven months of 2021 (47.1% compared to the corresponding eleven months of 2020).

In addition, the number of real estate transactions, despite the slowdown recorded in 2020, is estimated to record a positive rate of growth again in 2021, especially in view of the implementation of the new revised objective values from 2022 and the suspension of the obligation to submit electronic building identity until end of 2021.

According to the Hellenic Statistical Authority (ELSTAT) data from the survey of notaries’ works on the concluded notarial purchase deeds, transactions decreased in 22.6% in 2020 (74,769 transactions in 2020, compared to 96,662 in 2019).

Renewed investment interest for commercial real estate

In the commercial real estate market, based on the price indices of the Bank of Greece, during the first half of 2021, positive rates of change were recorded. Specifically, based on the provisional data, in the first half of 2021, increases were recorded in the prices of offices and shops of high standards, for the whole country, by 1.4% and 1.1% respectively, compared to the second half of 2020.

For the whole of 2020, based on the revised data, the average annual increase for high-standard offices and stores, for the whole country, amounted to 1.2% and 2.5%, respectively. It is noted that the significant interest especially for the Athens office market, during the first half of 2021, and the decline in the yields of high-standard real estate are reflected in the high average annual growth rate of the respective prices (3.9%), and the slightly lower increase of office rents (2.6%) after two consecutive semesters of decline.

The investment interest for commercial real estate appears renewed, with several new development and reconstruction projects being launched and the construction activity of the eight months of 2021, in some categories of commercial real estate, to show from the highest levels of the last decade.

More specifically, according to the Hellenic Statistical Authority (ELSTAT) data on construction activity, on an annual basis, particularly high growth rates are recorded in the number of new permits for the construction of offices (52.2%) and shops (68.3%), while correspondingly very high rates, both in terms of number of new licenses and in terms of volume, are recorded in almost all commercial real estate, which is indicative of the growing demand and the trend of renewal of the existing stock.

In the hotel sector, the construction activity maintains quite high positive rates, without, however, having regained the rates that appeared before the health crisis.

What are the trends in commercial building development projects

Most of the current high-standard commercial real estate development projects now aim at energy and environmentally sustainable solutions. Investors are looking for better returns, while, at the same time, users are looking for energy savings and a corresponding reduction in operating costs.

Properties with higher standards of bioclimatic design, ventilation, lighting, increased energy autonomy and modern technological infrastructure better meet both the current health requirements and the new energy challenges.

At the same time, new international trends in the creation of “digital nomads” lead to new needs for the development of flexible – non-permanent – workplaces, but also residential properties of high technical and technological standards, which are estimated to gradually attract an emerging market with great potential for the country.

Growth will continue – The role of the supply chain

In the coming months, given that the economy has entered a course of recovery, the Greek real estate market is expected to continue to grow, according to the BoG report.

The cumulative decline in values and limited construction activity of the last decade have showed off significant opportunities, which, combined with the gradual increase in investment, the effort to combat bureaucracy through the digital upgrade of the state, the launch and acceleration of significant infrastructure, the dynamics of tourism and the further recovery of the economy, are expected to give additional impetus to the positive dynamics of the real estate market.

It is noted, however, that there are still parameters of uncertainty, which are no longer limited to the direct effects of the pandemic, but are additionally related to the duration of the disruption of the international supply chains and the increased costs of raw materials, factors which, if left for an extended period, may slow down the pace of construction activity and limit the current capital returns of the real estate market.

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