LOOKING AHEAD-2018. A hung start

Tassos Kotzanastassis

Urban Land Institute Greece and Cyprus chair

Managing Director of 8G Capital Partners

The restart of the Greek property market has been eagerly awaited by local and foreign investors alike. Indeed, the prime segment of the market has witnessed a number of landmark transactions, focusing on the hotel sector as well as on the prime end of the commercial market. Market participants are now hoping that the rest of the market will spool up. There is an abundance of international capital in search of fairly or under-priced markets and the Greek market, after an eight-year trough, certainly feels much more attractive than others.

The recent string of positive news has given rise to a euphoric feeling that Greece may be about to get out of the woods, to the extent that even some of the more hard-line naysayers now think that investing in Greek property is not such a ridiculous proposition. This is all great news but there remain serious issues which may prevent the market as a whole from accelerating.

Parts of the market will thrive but for the majority, things will remain very challenging.

Economic growth has at last turned positive but is, and will remain, slow owing to a large extent to the lack of bank credit due to the massive non-performing loan overhang. A heavy, unpredictable and unfair tax system is further stymieing recovery. The whole picture is a far cry from the recovery observed in other countries which had gone through an IMF-led bailout.

My predictions for 2018: I expect the current dichotomy to intensify. Parts of the market will thrive but for the majority, things will remain very challenging. I expect increased interest for the (little) prime stock from private equity and the local REICS. If the golden visa scheme proves to function smoothly, I expect increased demand for that part of the property market that can satisfy the regulatory requirements but at the same time will deliver a reasonable return to investors as well. Other than that, it will be a tussle against subdued local demand, heavy property taxation and the Damoclean sword of NPL property auctions dangling over the market.

A hung start, in case you are wondering, is when a jet engine starts normally but fails to reach the proper speed. It’s usually the sign of a weak starter and too little fuel into the engine. For property, that’s occupational demand and the availability of bank finance. Unless these are in place, we won’t see a proper restart.