Good time to buy a house in greece
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The fact it was worth $120k is meaningless. There are very few compelling residential investments in Greece. And that is due to a very simple reason.
Greece is a country of 10 million people which translates into 3–4 million households. But there are 30 million houses/apartments registered in the country. That means there is enormous excess inventory.
Your real estate agent will tell you about the strong tourism market and that you can make money renting this property in Crete. That is just BS. The only resilient, crisis proof tourism in Greece is wealthy foreigners. These people usually consider only Mykonos and to some extent Santorini. There were some nice villas for sale in Mykonos after the 2008 crisis, but they largely disappeared.
The only high-end tourism place in Crete is Elounda and for the price point you indicated I don't think your prospective property is located there. All other parts of the island are more priced to middle class tourism and at the end of the day compete with Turkey and other cheaper destinations. My family and I have been to Elounda every year for the past 9 years. We eventually look at real estate, but haven't seen anything compelling yet. Further, she is Greek and I also speak the language.
In addition, the Greek government has been raising property taxes and other taxes to make the budget work. Taxes on rental income are high so many people try to collect part of the rent in cash, which is hard for you to do.
To summarize, you are looking to buy non-prime property in Crete that is highly susceptible to middle class tourism demand. You have never bought real estate in Greece (it is not the same as in the UK or US) which means that you will have to trust the broker that is getting a big commission to sell you the property. You are uncertain of the carrying costs because the government keeps raising taxes. Any rental income will likely be eaten up by taxes and property management fees. Then, you still have the chance that Greece will exit the Euro (debt is still unsustainable) and you will see massive devaluation of your property.
Go to Crete, rent a place/hotel, enjoy the great food and come back.
Pedro, you have a lot of knowledge of Greek property. My wife's father passed away with a home in.
Right now you can buy apartments in Greece for $20K, renovate them for $5K and generate $1K per month (through Airbnb, not to locals). Here is the answer I provided in another similar question:
Apartments in Athens are dirt cheap (you can buy apartments for up to 20k). I realized this because two months ago I've been to Athens, and I payed 400€ for an apartment (one week). I came to the balcony and the first thing I see is that the apartment right in front of the one I was in, had a "for sale" tag on the window. Called em up, and asked them the price (I usually do that in countries I visit, just to get to know the market). It was 35K. I thought it was a mistake, opened my laptop and did a brief search. So many apartments came up for less than 20K it was like unreal.
Now, if I payed 400€ for one week (I actually squeezed the price a bit), that is 1600€ a month, which means almost 20K a year. Anything that yields 10% for me is awesome. This is more like 50% or something.
Bottomline: if you can do it in Greece, you can certainly do it in other places. Just find a stop where you get visitors all year long (90% of the markets are seasonal anyways, but get a solid well paying market) and run the numbers. It does not become different just because you rent to through Airbnb.
Really interesting answer! How would manage the property in Greece if you were overseas though?
No country’s real estate market is immune from any problem that affects the economy. The Greek economy is currently in a state of chaos as investors avoid it like the plague.
With the soaring debt, foreclosures that end in losses for the lenders and a high number of people living in the streets as a result of being unable to afford the cheapest of homes, this is not the best of times to invest in the Greek real estate as there are an increasing number of vacant homes.
The high cost of living and tax increases has resulted in a general depreciation in the real value of the incomes of workers and businesses; this means more people are becoming more likely to spend their hard-earned incomes on essential things like foods and clothing rather than on housing.
Because of the current terrible condition of the economy in Greece, the chances of making good returns on new investments in its real estate market look very unrealistic in the nearest future and below are some of the reasons.
INCREASING TAXATION ESPECIALLY ON FOREIGN CITIZENS
As a result of the government trying to meet EU bailout terms and having to seek for all possible means to generate income to boost the economy and take the country out of depression, there is a consistent increase in the tax rates. And this increasing taxation has forced many companies out of business. This has led to more people being thrown out of their jobs by corporations that are moving their factories and investments out of Greece.
Due to that, the consumer purchasing power has plummeted. And foreign investors are even more badly hit as they face more tax and uncertainties concerning their funds. So buying properties with the intention of renting it out for good profits now seems to be a bad choice for an investor who values his or her funds.
CUT IN GOVERNMENT SPENDING
To break even and also meet the terms of many international lenders like the IMF, World Bank and the EU in particular, the Greek Socialist government had to reduce its recurrent expenditure in many ways. Pensions are being cut, salaries are being reduced, and spending on essential amenities like education, transport, social benefits, healthcare and most general infrastructural developments has been cut.
What does that mean?
It means less money in circulation.
As a consequence, companies that are reliant on government spending for their capital inflows are going out of business every day.
And guess what happens then? Workers and businesses can't afford to meet up with their monthly mortgage payments, meaning that more homes are going to be vacant due to the occupants' inability to pay.
HIGH LENDING RATE
The poor economic situation of Greece has made banks to impose stringent conditions on borrowers. Banks have increased almost two-fold the lending rates as well as imposing stringent conditions on borrowers.
The high loan rate means high monthly payments to the banks, and this will likely lead to your returns on the investment being wiped out by the high lending rate.
STRINGENT LAWS AGAINST CAPITAL OUTFLOW
The Greece government introduced strong laws to prevent large capital outflows that could further hurt the already failing economy.
Even if you manage to overcome all the difficulties that I mentioned above, you'd still struggle to repatriate your investments or even returns to your country. How does that sound?
Some of the laws demand the reinvestment of a certain percentage of the returns in the economy.
WHAT ABOUT THE TURISM MARKET?
And like any business, there's a very important concept called supply VS demand. At the moment, supply is higher than demand for this kind of business, so you will find a lot of competition when trying to rent your properties to tourists.
WHAT SHOULD YOU DO THEN?
It's simple. If you want to spend a great holidays and enjoy the summer, then go to Greece. But if you want to invest in real estate, avoid Greece at all cost!
As a long-term investement? Probably, but we will all be dead in the long-term…
The economic and political turmoil in Greece won’t last forever. When that happens the market will rebound, so if you wait long enough you’ll get a hefty profit.
What about the short-term? Depends on the villa’s location and condition. If you’re able to rent it for over $1000 a night (like Villa Poseidon ), it’s a no brainer, but if the expected rent will be lower than $100–200 (e.g. Villa Agrielia ), you may won’t to reconsider, as you may not be able to pay the extortionate property taxes and make no profit.
However, if you intend to stay there for a few weeks every year, it’s a no-brainer. Hotel prices are still high, especially during the high season and no hotel room feels like home.
You cannot buy the land for cash and build a small house in Crete today for $60K. The cost of land, permits, construction materials and labour will be at least 30% more. I know of this from people who live there .
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