The Greek property market is evolving into the promised land for aspiring holiday home buyers from around the world. This is thanks to a series of targeted interventions by the government in addition to the existing instruments for the attraction of investors/buyers, and to the country’s inherent advantages.
In the last 12 months the government has introduced the suspension of the 24% value-added tax on new houses that paved the way for foreign buyers to acquired newly built holiday homes – which also means they are built to higher quality standards. Through that measure that will last for three years, up to the end of 2022, buyers of a secondary home in Greece will not be taxed the 24% VAT but only the 3% transfer tax.
Even more important is the regulation concerning the transfer of pensioners’ tax residence from countries with which Greece has bilateral agreements for double taxation avoidance. This is included in the Finance Ministry bill to be voted into law, providing for any foreign retiree choosing to take his tax residence to Greece to pay income tax of just 7%. This flat rate will apply for an entire decade.
Besides the existence of a double taxation avoidance agreement, there is a condition for the pensioner to spend at least 183 days per year in Greece. Eligible retirees should have also not been Greek tax residents for five of the last six years.
These measures are also combined with the Golden Visa residence permit program that concerns potential investors in Greek real estate hailing from outside the European Union. This makes Greece a prime destination for buying a holiday home, complete with tax and investment incentives for citizens from the EU and from third countries such as China, Russia, Turkey, the Middle East and the US.
Besides those incentives, there also exist other major advantages, such as the affordable acquisition cost of holiday homes in most areas, the capital gains that can be reaped, and the undisputed unspoilt natural beauty of the Greek landscape.
Prime Minister Kyriakos Mitsotakis and Lamda Development CEO Odisseas Athanasiou on Friday attended a ceremony to mark the beginning of construction work on a major investment project at Elliniko area, the former site of the Athens airport on the capital’s southern coast, nine years after the country launched its first tender for the sale and long-term lease of the vast plot. Lamda Development plans to turn the site into a complex of luxury residences, hotels, a yachting marina and casino at a total cost of about 8 billion euros. Mitsotakis hailed the launch of ‘the country’s most emblematic investment’ project despite the difficult economic climate.
The Finance Ministry is finalizing measures to ease the burden on property owners too, saying the tax discount will not be the same for all landlords affected by the rent discounts, while offering some details about how the Golden Visa program may resume.
Addressing a teleconference on the property market organized by Prodexpo Real Estate on Tuesday, Deputy Minister Thodoros Skylakakis said the government is not considering increasing the 40 percent rent discount which currently applies to workers and companies hurt by the coronavirus measures.
He also explained that the Single Property Tax (ENFIA) “discount for property owners will not be horizontal – i.e. for everyone. On the contrary, it will concern those hurt and will be proportionate to the degree of each landlord’s losses.”
The ministry also approved the 40 percent reduction on the rent that university students pay in cities away from their family homes, provided they are the dependent children of employees at enterprises harmed by the crisis to the extent they had to stop working.
Skylakakis also said on Tuesday that, if not today, then in the next few days the government will announce that foreign investors will be able to apply for a residence permit, known as a Golden Visa, through proxies too. This means their physical presence at the various agencies of the Migration Policy Ministry will not be necessary. This is one of several measures the government will be introduce in the coming weeks so as to get the economy restarted from early May.
“We intend for all activities, services and operations required to get going so as to make it possible to implement investments in Greece from abroad. To accelerate the course of growth in the coming months, we will seek to lift the bureaucratic obstacles that currently exist in the property market,” said Skylakakis.
The main objective is to attract as many foreign investments as possible, at an even faster pace than before the coronavirus outbreak. “We will also seek out special protocols so as to accept people from abroad wishing to invest in the realty market,” he added.
The new bankruptcy code will provide for the main residences of bankrupt borrowers considered financially vulnerable to be transferred to a state entity and leased back to the original owners. This will replace the existing framework for the protection of debtors’ main residence from repossession.
The government is therefore examining the creation of a corporation that will take ownership of the borrowers’ homes and lease the property back to them, with the possibility of a buyback option under certain conditions. This proposal appears to enjoy the support of banks, which are keen to find a way to stop bad mortgages from soaring due to the financial crisis resulting from the coronavirus pandemic.
This idea was discussed extensively at a teleconference late on Wednesday with the participation of government and credit sector officials and will form part of the new bankruptcy legislation to replace the existing protection system that expires on April 30.
Borrowers will be eligible for this scheme after the liquidation of all their assets, as long as their monthly disposable household income does not exceed the standard living costs as determined by the Hellenic Statistical Authority (ELSTAT), and the officially determined value (“objective value”) of the main residence does not exceed 120,000 euros for a single borrower, rising by 40,000 euros for a married debtor and another 20,000 euros per child (up to three children).
The transfer of a debtor’s main residence to that entity will be at a price equal to the commercial value of the property. The borrower will be able to stay in the property paying a monthly rent for 12 years. Three years after the start of the lease, the debtor will obtain the right to transform the rental agreement into a 20-year contract with a buyback option.
The blueprint, which is still being discussed between the government and the banks, will provide that the rent will be set based on the average floating mortgage rate adjusted to the European Central Bank interest rate. If the debtor pays all rental tranches for the duration of the contract, they will regain ownership of the home or be able to transfer it to their legal heirs. However, the agreement will be terminated if the borrower fails to pay three monthly rents.
The suspension of the operations and payments of major international tour operators such as Tui AG and the FTI Group due to the coronavirus epidemic are creating a cash drought for Greek tourism and threatening to devastate the season’s prospects.
Tourism Minister Haris Theocharis has told Kathimerini that it is hard to make clear estimates right now: “If the management of the [coronavirus] issue takes more than three months, then there may be the risk” of missing the season, he noted.
The minister explained there are two scenarios being examined: “One scenario foresees the management of the crisis within three months, with the main part of the summer tourism season still ahead; there is also the negative one that would see the problem take at least six months to resolve.” He added that he hoped the first scenario would prevail.
Unless the situation reverts to normal by July, the second half will also be missed, leading many tourism-related companies to bankruptcy.
Greece has secured its first credit rating upgrade for the new year after Fitch announced late on Friday that it has raised Greece’s rating from “BB-” to “BB” and its outlook from “stable” to “positive.”
The move has put Greece two notches below investment grade, making Fitch the first major rating agency to bring the country so close to the coveted level. Standard & Poor’s and DBRS Morningstar have Greece three notches below investment grade, while Moody’s has it four notches inside “junk” territory.
Fitch said in its report that the sustainability of Greek debt continues to improve, supported by a stable political framework, a sustainable increase in gross domestic product and a history of fiscal overperformance in relation to the targets set.
Its positive outlook, Fitch added, reflects the improved prospects of political stability and implementation of policies after the elections of last July, which brought center-right New Democracy to power, and increased certainty the debt will continue to decline.
The next rating reports for Greece, by both Standard & Poor’s and DBRS Morningstar, are scheduled for April 24.
Greece has the fifth fastest growing property market in the European Union, according to July-September 2019 data published yesterday by Eurostat, as only four EU member-states beat the country’s 9.1 percent annual price rise recorded by the Bank of Greece.
This is a diametrically opposite picture to that of previous years, when Greece was one of the very few countries where property rates were in decline.
Greek price growth accelerated over the course of 2019: Based on the revised data from the BoG, property rates expanded 5.3 percent year-on-year in the first quarter of the year, with the annual rise climbing to 7.7 percent in Q2. Property prices across Greece posted yearly growth of 7.4 percent over the January-September period, though in Athens the rise amounted to 10.3 percent. In 2018 the nationwide average growth rate only came to 1.8 percent.
Property market professionals say that a key factor for this growth – which started in early 2018 but soared last year – has been the inflow of funds from abroad for the acquisition of properties, mainly for utilization in the short-term rental sector.
In 2018 inflows jumped 172.1 percent to 1.12 billion euros from 414.7 million in the previous year. This trend continued in the first half of 2019, which the latest data concern, with 94.6 percent yearly growth to 736.6 million euros from 378.5 million a year earlier. This is thanks to the continued improvement of the tourism sector’s figures, the improving economic sentiment in Greece and investor expectations of a further increase in their returns from the highly popular short-term rental sector, according to an analysis by Alpha Bank. It also points to the significance of the program for the concession of five-year residence permits (known as Golden Visas) to non-EU citizens who invest at least 250,000 euros in Greek properties.
Alpha’s analysts stress the significance of rising property prices, which translate into an increase in the value of loan collateral, thereby improving the banks’ net position while increasing the wealth of households.
The income of all taxpayers (salaried workers, pensioners, farmers and self-employed professionals) is due for a boost as of January 1, when reduced tax rates come into effect. For the first time in over a decade individuals and corporations alike will see a reduction to their income tax burden, with a further cut being possible when the government announces its decision on the gradual abolition of the solidarity levy in mid-2020. The tax breaks are greater for taxpayers on low incomes, families with children and freelance professionals, while they will be more limited for middle-range earners, as Prime Minister Kyriakos Mitsotakis admitted recently. On a monthly basis, the tax cuts for unmarried or married salaried workers without children will reach up to 13 euros, dropping to 11 euros for salaried workers with one child. The monthly easing comes to 14 euros for taxpayers with two children, and in the cases of workers with three children, their monthly savings will come to 23 euros. For example, a salaried worker earning 10,000 euros a year currently pays 300 euros in tax. From January the annual tax will drop to 123 euro, down by 177 euro per year. Notably, this concerns incomes up to 20,000 euro per year, as for the income brackets between 20,000 and 50,000 euro the tax breaks are significantly smaller. This is due to the changes implemented to the way the new tax discount (the tax-free ceiling) is calculated. Among the big winners of the new tax law are freelancers: When their 2020 incomes are examined after the submission of their tax declarations in mid-2021, they will see a reduction to their tax burden which in some cases will exceed 1,300 euros per year. This will be thanks to the slashing of the introductory tax rate from 22 percent to just 9 percent. Therefore, those who declare yearly incomes up to 10,000 euro will see their tax shrink by 60 percent or 1,300 euro, dropping from 2,200 to just 900 euro. It is reminded that self-employed professionals who do not have a labor contract are taxed from the first euro of their net income declared to the tax authorities, as they do not enjoy the privilege of a tax-free ceiling that salaried workers and pensioners have.