Greek seekers

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A luxury villa in Mykonos, Greece.

With its vibrant mainland and numerable idyllic islands, Greece will always retain strong investor and second home appeal - but buyers need to be wary of economic and administrative challenges, writes Dominic Ellis.

Greece, much like Dubai, may be a tourism hotspot but just like the emirate, potential buyers looking to put down property roots need to do their homework.

The Mediterranean country's clear upsides - timeless cultural appeal, stunning mainland and island beauty and a property market which is still to get going - must be offset by high prices, higher interest rates, complicated bureaucracy and uncertainties over house building and owning.

But with the Greek government keen to increase tourism by 50% within the next five years, it's clear the lettings potential is huge.

Greece attracts more than 16 million tourists annually, meaning tourism is already one of the modern bedrocks to the ancient civilisation, accounting for about 15% of GDP and 16.5% of total employment.

Throw into the equation Greek GDP per capita, which stands at a respectable US$30,500 in 2007, then overseas property investors can have two bites of the cherry by appealing to visitors and residents.

The economy grew by 3.8% in 2007 and while it's expected to weaken in 2008, along with everywhere else, it's predicted to edge up to around 4% in 2009. One blight has been comparably higher inflation than elsewhere in Europe (3.8%), but it's nothing on a par with the Gulf.

The much-publicised debt that Greece incurred in hosting the 2004 Olympics was borne by the country as a whole, and hasn't hit real estate more than any other sector, but anywhere that saw improvements to infrastructure has reaped benefits.

Improvements

Robert Key, Senior Partner for Cluttons Greece, said the new airport and Athens new ring road not only improved the functionality of the city, but also opened up new areas for development.

"New and upgraded train lines have also improved the situation," he said. "As a result of better connections, the catchment areas increased considerably for both existing projects and those under construction."

Higher interest rates mean that less mortgages are being taken up and the real estate market has slowed down compared with last year, although demand for commercial real estate appears to be holding up for now.

Eurobank Properties Real Estate Investment Co., Greece's largest real-estate investment trust, recently stated it will add new properties to its portfolio at a slower rate over the next six months.

Shares in Greece's largest electricity utility Public Power Corp (PPC) dropped 11.1% after the company issued a profit warning for the second half of the year.

Free rein

Despite the current uncertainty, generally companies and banks are seeing good profit levels, said Key. "It is the average consumer that has taken the brunt of the adverse economic conditions thus far."

Since the Olympics, Greek developers have turned to the second homes market, building high quality residential projects in appealing locations targeting both the foreign and Greek buyer. "A number of investment companies are also investing astronomical sums in the second home and holiday residence market - a sector which was ignored until after the Olympics," said Key.

The housing sector has always played a key role in Greece's economy, accounting for approximately 7.5% of GDP. While house prices have been rising, they remain relatively low compared with its southern European neighbours.

Developers are now being given a free rein - housing can be built on up to 20% of plots - although complex planning laws mean the authorities are unlikely to ever completely open the floodgates, as they have in Spain.

One of the main reasons why buyers have been put off in the past, according to a report by Amberlamb, is the lack of a centralised land registry, making it all but impossible to determine who has the legal right to sell a parcel of land or home.

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