It has now started to show signs of “maturing”. real estate market of the country, in terms of the investment prospects it offers to foreign investors. First, as noted by industry executives, securing investment grade acts as a significant advantage, being an important element that was absent from the beginning of the financial crisis.
This development will attract more mature investors, who have a long-term approach to each market, where they place their capital. This is a significant contrast compared to previous years, especially when the economic crisis was looming. At that time, the Greek real estate market was on the “list” of much more speculative investors, with a clearly shorter time horizon. Their main objective was to buy properties at low prices and resell them 1-2 years later when the market recovered.
Today, as mentioned in a recent analysis by NBG Securitiesthe market picture has changed. First of all, the phenomenon of the convergence of the yields of the Greek market with the corresponding ones in the rest of Europe is observed. This phenomenon is particularly rare for the Greek data, as the Greek market has always been among those that involved greater risk (even in the period before the financial crisis) and, as a rule, offered much higher returns. This has started to change during the last two years, as sales prices and values of income properties in Greece, due to the large increase in the development of modern buildings and especially “green” infrastructure, have increased significantly. The same certainly applies to rents. Thus, yields are compressed, although as NBG Securities points out, they are still higher than the rest of Europe.
Nevertheless, now the “scissors” have been narrowed. In particular, the average deviation (depending on the property category) ranges from 50 to 190 basis points (0.5%-1.9%), with logistics still offering higher returns, compared to the corresponding properties abroad.
At the same time, the vertical increase in interest rates has started to put pressure on income property values, driving up yields. But at the same time, the risk is also increased, due to the ongoing shift of many businesses to more affordable housing solutions, but also to smaller surfaces, due to the prevalence of the hybrid work model. On the contrary, in the Greek market, although there is also an increased shift towards hybrid work, there is also a very high demand for modern bioclimatic office spaces. Accordingly, the demand for modern logistics premises is also very high, with the result that the Greek market offers a vacancy rate of only 6%, making the placement in this particular property category particularly safe and profitable.
As NBG Securities points out in its analysis, “the Greek real estate market maintains a comparative advantage in relation to the major markets of Europe, offering more attractive spreads, in relation to government bond yields. We believe that this comparison is justified, taking into account the characteristics of real estate of modern specifications, which have characteristics similar to a bond, i.e. they offer relative security in relation to the amount and duration of payments, as well as a lower level of investment risk, compared to other forms investment”. Based on the latest available data, Greek real estate yields are higher against government bonds, compared to other markets in Europe. According to NBG Securities, this divergence will narrow in the future, but will still remain higher than other developed markets.
Concluding its analysis, NBG Securities believes that the “defensive” investment nature of the real estate sector, combined with the willingness of investors to reduce their risk, given that the uncertainty and high interest rate environment remains, makes the investment in real estate particularly attractive.
At the same time, the imbalance between the supply and demand of high-end income properties further strengthens the degree of attractiveness of Greek properties, which now acquire the character of an “investment haven”, but also a sector with high prospects for further development. Possible risks are assessed as a new increase in construction costs, in the event of a new rise in energy costs and raw materials, any geopolitical risks that will worsen the investment climate and the maintenance of strict monetary policy by central banks internationally.
