Greece: Real estate recovery

Author: | Published: 9 Dec 2014
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Panagiotis Drakopoulos
Far from the saturated marketplace of Europe, the economies of south-east Europe (SEE) have managed to secure a relatively stable growth potential through targeted financial policy reforms. The years before the financial crisis saw a large investment boom in the region by means of capital inflows, inevitably fuelling market bubbles, such as the one that popped six years ago in the Romanian real estate market.

Despite the fact that the financial and liquidity crisis may have bucked the upward trend in the real-estate sector, SEE remains a top European destination for short-term and long-term investment opportunities, multiplying its regional growth dynamics. Regionwise, SEE countries seem to border the rest of Europe both in terms of distance and mentality, as opposed to Asian and African countries.

Over recent years, multinational companies have viewed SEE countries as an agglomerated market, despite diversity in their jurisdictions and politico-economic structure, with economies varying from mature (Greece) to emerging (Romania) and pre-emerging (Albania).

Greece has paved the way for becoming the only mature economy in this agglomerated market, by linking its geographical embeddedness with its role as a strategic transport node. In this way, it has secured a strong comparative advantage towards its neighbouring countries. The recent unfavourable economic conditions and its testing political climate, as well as the lack of institution-level stability, have only temporarily affected the country's investment activities, as its real estate market remains a focal point for foreign investors.

Following a dark period of economic stagnation and fading volatility, foreign investors are now showing renewed interest in Greek real estate, mostly related to yield investments, rather than construction projects and green field development.

Continuous preference in real estate yield investments, and especially in quality real estate with prime tenants, follows attempts to reduce exposure to a fickle administrative and regulatory framework. This may lead to increasing levels of confusion and uncertainty for foreign investors, who seek high-yield results aimed at investment returns much higher than expected from a country like Greece (as a mature economy, and old EU member).

Overcoming foreign investors' concerns and securing cash-flow positive investments would be straightforward if certain investment protection mechanisms were effectively implemented. Such mechanisms include institutional stability, administrative efficiency and high professionalism on the part of Greek consultants, providing investors with comfort and security with respect to the development of large-scale projects.

As a result of lessons learned during the crisis, the proposed protection schemes and investment mechanisms are well underway. Such efforts hope to attract long-term foreign direct investment and restore the trust of investors in the value and potential of Greek real estate, which represents a sure thing, rather than a cause for concern.

Panagiotis Drakopoulos