Real Estate: Is it time to invest in Greece?
by Dimitris Rapidis and Martin Foehler
The Greek case is something really special. And with many different factors getting involved and affecting the decision of an investor. Greece presents the worst outlook with regards to NPLs, despite continuous fall in prices, that have reached 47,6% since mid-2007. Recapitalization of the banks and the stress tests have not been processed yet, a major fact that impedes -for the moment- any investment opportunity. It is quite certain that by the beginning of November we will have a clearer image on what it is up in the market.
€37 billion is the estimated total value of properties (i.e. private and professional properties; land) that are mortgaged, sharing more than 1/3 of the overall amount of NPLs (i.e. standing almost around €100 billion). Most of these properties have been mortgaged in prices that are much higher than their current value, turning the handling of NPLs a rather difficult task. There are well-grounded fears that without generous haircut or bail-in, the entire real estate market will collapse. Still, after dealing with NPLs, potential investors have a great chance to buy in low prices.
Political and Economic Stability
A friendly environment for investments cannot be built without political and economic stability. By the end of 2015 the Greek government is going to face a considerable social discontent, mainly due to excessive taxation, as well as a mounting pressure from its creditors to comply with the terms and measures agreed on the bailout deal. Nonetheless, the government will remain stable and solid, mostly because it has no other contender with convincing alternative proposals.
Economic stability is another discussion. Greece is nowhere near that, but literally speaking it never was during the last seven years. The key for the government to breath in is to convince creditors that is determined to implement spending cuts and fight against tax evasion. If it does so, it can buy out time and build on a specific plan to attract investments. For the time being, time is unfolding in favor of the government -- but it will not last for ever.
For in-depth sector analysis, contact us.
Dimitris Rapidis is Director at Bridging Europe. Martin Foehler is Policy Analyst at Bridging Europe.
October 8, 2015