New austerity deal deals fresh blow to Greek real estate
A deal struck between Greece and international creditors earlier this week on austerity the country must implement to secure rescue funding will hurt the heavily battered property market, said Tassos Kotzanastassis, who chairs the Urban Land Institute, Greece and Cyprus.
After six months of negotiations, Greece has agreed with its lenders -- eurozone countries and the International Monetary Fund -- to further cut pensions and slash the tax free threshold in exchange for rescue aid and the opening of talks to restructure its public debt.
Kotzanastassis, who is also managing director of real estate firm 8G Capital Partners, pointed out the mixed results arising from the deal. He said the positive side includes the reduction of uncertainty in the economy, the prospect of Greece being included in the European Central Bank's bond buying program and Greece being provided with the possibility of some debt relief. But the property market, where prices have fallen by nearly half during the crisis, will continue to suffer.
GET MORE FROM THE GREEK GURU FOR FREE! GET ON THE MAILING LIST NOW!
"On the negative side: austerity will be with us for a few years to come. This will drag disposable income lower, with adverse repercussions on the retail and residential property sectors," he said.
Uncertainty stemming from the delayed bailout talks and previous belt tightening measures are already harming consumption and investment activity in an economy, which has lost more than a quarter of its value sine 2010. After having initially forecast a growth rate of 2.7% for 2017, Greece recently revised this estimate lower to 2.5%. Though private sector economists see the figure as being closer to 1% with some even forecasting a year of stagnation.
Among the the key elements to the new austerity package, likely to be voted in mid May, is that Greece must keep on its hated Enfia property tax for at least another two years without any major change to the levy. This tax is a key source of revenue for Greece, raising some 2.6 billion euros every year, but heavily opposed by the ruling left wing Syriza party, that has vowed to do away with it but has failed to come up alternative income measures.
Kotzanastassis said that the residential property market has bigger and deeper problems than the Enfia tax, pointing to shrinking income levels in the economy, few mortgages being provided by banks and hundreds of thousands of unsold units in the market, leaving "little hope for a short term recovery in the residential sector."