In recent months, the outflow of capital from the Greek real estate market and its transferring to markets abroad, mainly in Germany, continues at a steady pace. Nevertheless, as pointed out by market analysts, although interest and demand are definitely higher than they were in the recent past, investment transactions remain relatively small. The reason is mainly the greater reticence on the part of potential investors, the overall effect of uncertainty on the markets.
According to Konstantinos Folbah, real estate broker at ImmoConsult, there is a demand for buying property in Germany from all regions of Greece.
"These are people who want to invest in German property because it is subject to lower taxes and has greater profitability than Greek real estate. These are people who have been working for many years (they are not retired), who have accumulated some savings, and consider that the German real estate market is more secure than the Greek one", he said.
The great problem
According to Folbah however, a serious problem arises, which ultimately limits the number of realized investments. Most of the potential investors want to sell some property in Greece (usually land, house or shop) in order to finance the purchase of new property. They find out, however, that either there is no interest from potential buyers, or the proposed price is much lower than expected.
"Most investors still have funds between 250,000 and 300,000 euro and if necessary they supplement the rest of the capital needed for the investment with bank credit. Generally, they are interested in homes and shops or a combination of both (mixed-use properties). They avoid agencies and the preferred city is Berlin, as prices there are relatively low compared to other cities with high demand, such as Frankfurt" noted Folbah.
One of the advantages of the German market is also the easy financing by the German banks that generally grant loans to foreigners, covering up to 50% of the value of the investment, depending on the quality of the property. "Potential investors should be aware of course that banks in Germany are very strict regarding the origin of the capital and scrutinize the likelihood that it is the product of tax fraud or illegal activity", he stressed.
In any case it is clear that since the crisis began in mid 2010, the flow of capital towards property markets abroad has increased many times. It has been estimated that only in 2011 Greeks have invested over 130 million euro in purchases of property in London.
Traditional London
Traditionally London is the most preferred city for Greek investors both because of its prestige, but also because it is a city that most Greeks know very well. An additional incentive is the favourable taxation as well as the investment security offered by the city. Greek buyers in London represent one of the largest groups of investors - about 3% of all foreign investors.
Recently, this trend seems to be changing in favour of other destinations where the economic development is clearly better guaranteed and prices are lower. Prices in London have returned to the high levels, and a serious correction is also expected after the Olympics, mainly due to the economic slowdown that will follow. Thus many Greek investors are looking to exit the British market and invest in other developed markets such as the French, German and Swiss. Due to its proximity and low prices the Turkish market is also interesting.
The profitability of real estate in Greece – very low
The yield, expected from the exploitation of a home in the Greek market has already reached very low levels, mainly due to the substantial increase of the tax burden over the past two years. According to market analysts, the profitability of an apartment is no more than 2-3% annually, which means that no matter how low its price is, it will take several decades for the investment to pay off. Unlike Greece, the yield on the German property market have reached in 2011 an average of 6-7%, which explains the attractiveness of such an investment and the interest of most Greeks in this market. This trend is independent from the opinion which some of the potential investors have regarding the policy pursued by the German government and its responsibility for addressing the debt crisis in the eurozone. Investment is one thing, politics is another.
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