Newsblog \ Greece & Real Estate \ Greek real estate boom defies market doldrums

Friday, 26 June 2009

Greek real estate boom defies market doldrums

By Niki Kitsantonis

ATHENS — Increasing numbers of affluent Europeans are buying or building luxury properties on the Greek islands, even as the market for top-end holiday homes in other European destinations like Spain and Bulgaria remains stalled, Greek real estate agents say.

Industry experts explain that the range of available properties - from extravagant new villas to bargain plots - has been attracting foreign buyers, some of whom say their investments have doubled or even tripled in value in just a few years.

"The islands have something for everyone, and they are close to home for Europeans, so foreign interest is strong," said Yannis Perrotis, head of CB Richard Ellis-Atria real estate consultants in Athens.

There are about 70,000 foreign owners with property in Greece and, while there are no official records of house purchases by foreign nationals, there is a lot of anecdotal evidence that the numbers are continuing to grow.

The British and the Germans make most purchases, according to agents, who agree that the slump in the British housing market and a weak pound have had little impact on top-end property sales. Next are the French, Italians and Scandinavians. There have been fewer U.S. buyers since the dollar fell against the euro, but fast-growing interest from newly wealthy Russians is absorbing the slack.

Agents say most of these customers pay €4,000 to €10,000 per square meter, or $590 to $1,470 per square foot, for new top-end properties, depending on the cachet of the location. These prices, up by about 20 percent since a 2005 real estate boom, are three times as high as those for similar structures in the fledgling second-home markets of Turkey, Bulgaria and Croatia and significantly higher than those for equivalent properties in Spain, where prices have plummeted in the past year.

Also, they note that the price of land on the islands and subsequent construction costs are a fraction of the expense of buying something new from a developer.

For many prospective buyers, however, completing a sale on one of the several hundred Greek islands can be a Herculean task. "Many are turned off by the endless procedures," Perrotis acknowledged.

He and other agents complain that inadequate national laws governing real estate purchases and an incomplete national land register causes complications and delays, complaints that also are heard from developers trying to build luxury vacation complexes.

By early next year, a new national zoning law is expected to clarify where construction is allowed and where it is forbidden, although the minimum plot size required for building, now 4,000 square meters, or nearly an acre, is not expected to change.

Any prospective buyer must hire a lawyer who can navigate the land register and deal with forestry and archaeological authorities. For older buildings, a civil engineer should be enlisted to check the structures' resistance to earthquakes, which are common in Greece.

Just as the islands have different characters - some tranquil, others lively; some with strong Venetian or Turkish influences, others distinctively Cycladic, with white-washed villas - they also have different rules. "Some islands require more paperwork, others are stricter about issuing building licenses, so it is best to talk to an agent first," said Giorgos Zappas of Re/Max Properties in Athens.

Generally, EU citizens face the same requirements as Greeks, and all buyers must pay taxes of 19 percent on new construction or about 10 percent for older properties. "There is some extra paperwork for non-EU citizens, like Americans and Russians, but we help with that," Zappas said.

Prices for new luxury homes vary. On the popular Aegean islands of Paros, Naxos, Rhodes and Crete, they range from €3,000 to €7,000 per square meter. More tranquil spots, like Antiparos, Patmos and Tinos, have a similar price range.

On the more cosmopolitan Mykonos and Santorini, the sky is the limit for property costs. Foreign interest in Santorini is more or less restricted to areas around the caldera, the large central lagoon that was created by a massive eruption 3,600 years ago. Most villas with caldera views cost €3 million to €4 million.

Prices are similar on Mykonos, where a well-positioned new home costs €7,000 to €15,000 per square meter. A magnet for jet-setters since the 1960s, the island is divided into two zones - blue, where building is allowed, and brown, where it is not.

But there are a lot of "unofficial" rules too.

Roy Elsbury, a 52-year-old British property developer, said his first attempt to buy on Mykonos was aborted when the seller asked for payment under the table. "Coming from an environment where everything is done by the book, it was a shock," he said.

Elsbury's second attempt was successful. In 2005 he bought two 100-square-meter villas on a cliff overlooking Mykonos's famed Elia Beach. Now the renovated 20-year-old properties have doubled in value and are worth €1 million each, he said.

For Keith Miller, 59, an NBC-TV correspondent, building in Greece was surprisingly trouble-free.

With a good lawyer and "a great deal of homework," Miller built two villas on the Ionian island of Corfu. He paid €60,000 for the land, which is in the island's coveted northeast region - called Kensington-on-the-Sea because of its growing population of wealthy Londoners. And he spent €500,000 to build the villas.

The larger property - a 500-square-meter villa built in 2005 - has tripled in value to €1.8 million, according to Aylesford International, a London-based agency. He rents it out for €7,000 a week in the summer, which covers the maintenance cost on both properties.

Corfu has one of the largest expatriate communities of all the islands, accommodating 20,000 Britons alone.

The Ashcrofts, a British-Corfiot couple, recently finished renovating a 400-year-old mansion, a relic of the island's Venetian occupation. "It was a real challenge to do it in the original style but we got there in the end," Alex Ashcroft said.

He and David Ashcroft, both 65, bought the property 14 years ago for the equivalent of £56,000, or $112,000, and said they had spent "about double that" on renovations. Now, they say, their home has been valued at €1 million.

On postcard-pretty Hydra, between the Argolic and Saronic Gulfs, near Athens, a few wealthy Europeans have renovated neoclassical buildings, albeit with difficulty. Cars are banned, so donkeys are used to transport materials, said Alex Calothis, who runs an agency for foreigners scouting Hydra and the southern Peloponnese. Calothis said many Britons had inquired about old houses for renovation but then ended up buying new. "The lure of a no-hassle, key-in-hand villa usually outweighs the romantic dream," he said.

The Peloponnese - a peninsula connected to the mainland by a narrow strip of land - is attracting buyers, particularly Germans, despite the damage caused by severe fires last summer.

The Peloponnese, Crete and Paros have been besieged by developers building luxury complexes with golf courses and "clusters" of high-end villas. Last year, about 400 villas were built just on Paros, an island that totals only 200 square kilometers, or 75 square miles, with a full-time population of about 13,000.

The authorities say the recent increase in property sales is just the beginning. "Demand for luxury homes within complexes is constantly rising," said Giorgos Souflias, the country's public works minister, who insists that Greece will not overdevelop its coastland as Spain has done.

But Dimitris Bailas, prefect of the Cyclades island group, including Mykonos, wants the islands' character preserved. "Authorities should offer incentives for the renovation of original buildings, not allow construction on every hill and beach," Bailas said.


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