More than half of Greece's bad loans tied to real estate

Real estate Greece

More than half of the 100 billion euros of bad loans held by Greek banks are connected to real estate and restructuring these non performing loans (NPLs) will improve many idle property assets, said Tassos Kotzanastassis, who chairs the Urban Land Institute, Greece and Cyprus.

In an interview to, Kotzanastassis, who is also managing director of real estate firm 8G Capital Partners, described the NPL market in Greece as being "one of the most interesting" as many other European countries have already solved their bad loan problems. But when looking at Greece, investors are concerned about the slow progress being made in the regulatory framework, the gaping bid ask spread and the lack of immunity for bankers, he said.

"As more than 50% of NPLs are secured directly or indirectly on real estate, this will definitely have an impact on the sector. At the very least, a lot of property assets which have been undermanaged and undercapitalised will now receive the attention of professional managers and investors", he said.

After getting off to a slow start, Greek banks have started offloading bad loans left behind by the country's eight year economic downturn that wiped out more than a quarter of the economy. The Bank of Greece, the country's central bank, said in a report last week that lenders met 2016 targets to reduce NPLs as part of efforts to reduce bad loans by 40 billion euros in the next three years.

One of the steps Greece is taking to help banks meet this goal is to introduce forced property auctions over the internet. These auctions, seen starting in coming months, are seen helping reduce reduce strategic defaults, which account for about one in six loans, according to bank officials.

Some 10,000 properties are seen being sold electronically, according to some estimates, raising concerns that the real estate market will be flooded with supply, further preventing a rebound in the sector.

Kotzanastassis played down these concerns, saying that electronic auctions will be used as an option of last resort. "To use an analogy: brandishing a weapon does not necessarily mean you are trigger-happy," he said.

With the Greek economy seen expanding by a slower than anticipated rate in 2017, real estate is seen providing mixed results this year. Record high unemployment rates and low disposable income levels are expected to continue weighing on residential property, while demand for commercial assets, such as hotels, has been rising due to the country's strong tourism sector.

Investors are hovering above Greek assets, looking for bargains, though fragile confidence in the economy has been hit by delays in Greece's latest round of bailout talks with international creditors. This delay is making investors jittery and testing their patience with Greece.

"Several investors are waiting in the wings but there can be only so many false starts before trust is shattered once and for all," said Kotzanastassis.