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food / travel

Hunting For Holiday Home Bargains In Crisis-Riddled Greece

For some northern Europeans, Greece’s economic crisis may be just the opportunity to finally have a sun-soaked Mediterranean vacation home. Property prices are down, with some sea view plots going for as little as 30,000 euros. Still, would-be buyers shou

Your pick of paradise at bargain prices (grosz3city)
Your pick of paradise at bargain prices (grosz3city)
Richard Haimann

RHODES--The evening breeze caresses Mount Attavyros, riffling through the leaves of the hibiscus bushes that cover its slopes. The highest mountain (1,215 m or 3,987 feet) on the island of Rhodes played an important role in Greek mythology.

It was here that the hero Althaimenes prayed to Zeus to change the gruesome fate that had been predicted for him. People on Rhodes are praying today, too – to be spared the fate of so many in the present crisis: unemployment, poverty, loss of standing.

And their prayers are apparently being heard: despite striking airline crews and taxi drivers, 30% more tourists visited the island last year than in 2009, the Association of Greek Tourism Enterprises (SETE) reported. That keeps a lot of jobs going.

But a lot of the visitors aren't there only for rest and relaxation. They see the crisis in Greece as an opportunity. Many are looking to snatch up holiday real estate cheaply, says Georg Petras, an agent for the German firm Engel & Völkers on Rhodos. "Already last year the number of enquiries was three times what it normally is."

And this year, the number will probably be even higher. Since the beginning of the crisis, prices of villas and apartments on the island have fallen by as much as 30%. "You can buy houses with 100 m2 of living space, in good locations, for 130,000 euros," Petras says. Villas in the most desirable areas on the east coast have been known to go for as little as 1,700 euros per square meter.

On the mainland and on other islands, real estate prices have fallen even more dramatically. Some houses have been put on the market at 50% of their value before the crisis. But even at those prices there are often no buyers.

Rich Greeks prefer to invest their money in German and Swiss real estate, because they believe it's a way for their capital to escape the long arm of Greek tax authorities. If they're not rich, Greeks simply don't have the money to buy property. According to a study by the country's national bank, there were 60% fewer real estate sales last year than in 2008.

Foreign buyers still have reasons to hesitate

For Germans, Austrians and Swiss who dream of owning a sunny Mediterranean home, the collapse in prices makes Greek real estate a very attractive option – although many are skeptical about whether Greece will manage to shake itself out of recession and stay in the euro zone.

"Some potential buyers fear that if they buy in euros now, they might be looking at drachmas if they sell somewhere down the road," says one mainland real estate agent. Another dampener for potential buyers: the massive anti-reform protests in Greece. "And all the strikes, particularly by airlines, make them wonder if they're going to have trouble getting to their home when they want to use it," he adds.

But there's another reason not to rush into buying a holiday home in Greece: there still isn't a functioning cadastral system, so any purchase involves convoluted research into property rights.

The Greek government, however, is on to this problem and wants to work with cadastre experts from other E.U. countries to solve it. Minister of the Economy Anna Diamantopoulou says the plan is to have all property registered by 2020.

The government also wants to introduce a new digital permissions procedure so that decisions on new constructions can be made within a few weeks. Underlying this move is the hope that foreign investors will build new vacation real estate – on government-owned land that Athens wants to sell to fill empty state coffers.

The Hellenic Republic Asset Development Fund (HRADF) presently manages 50 billion euros of state assets in company shares, licensing, and mainly real estate. Deutsche Bank estimates the value of the land and real estate holdings alone at 35 billion euros.

The available land includes both plots on the islands and coastal plots on the mainland. If Athens can sell them to project developers it could be a boon for the Greek construction industry and help lower unemployment figures.

Spain, a model not to follow

Specialists like the German G.I.S. Global Immobilien Service, which has been building holiday real estate in Greece for 14 years, are delighted with the plans. "The speed at which new second homes and homes for folks who want to retire to a sunny climate will be approved will be unmatched in Europe," says Christian Seyrer, the firm's general manager.

Greece presently offers the cheapest building land by far in the E.U. Mediterranean area. "You can get plots with a sea view for 30,000," says Seyrer. Furthermore, salaries in the construction sector are low. "An 80-m2 holiday home with a terrace can be built to German quality standards and sold for 95,000 euros," the general manager says. "The markets in France and Italy for second homes and retirement homes can't compete with that."

But will there really be a building boom in Greece? Greek banks don't have the capital to finance it, and it remains to be seen if interested German, Austrian and British interests won't settle instead Spain.

Real estate prices collapsed there too after the gigantic speculation bubble burst in 2008. Development on the Iberian Peninsula shows how dangerous it is for the economy of a country to depend too heavily on the construction and real estate industries.

When the euro was introduced, the interest rates on building loans went down significantly in Spain, so ever increasing numbers of Spaniards bought their own first and second homes. Developers kept building, and the banks were happy to make money available. Everyone believed in a happy ever after success story – until the bubble burst in 2008 and brought the whole country down. The price of real estate fell by 55%.

Read the original article in German

Photo - grosz3city

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