Greek real estate bounces back
Political stability and the availability of debt financing have set the scene for foreign capital to once again flow into the country, says Tassos Kitsantas.
Despite global challenges over the last few years, such as the pandemic alongside other macroeconomic and geopolitical issues, the Greek real estate market has recently been experiencing one of its best periods.
Several factors have contributed to this, leading to an overall positive change in foreign investors’ perception of country risk. This has been demonstrated by flows of foreign capital coming into the market, following several years of inactivity.
Political stability set the scene. A stable government, led by a pro-business party that has secured a second term in office, has managed to allay the concerns of the past, giving investors confidence. Most notably, Greece’s credit rating has been lifted to investment-grade status for the first time since the debt crisis more than a decade ago, which resulted in three international bailouts.
Landmark projects, particularly the multibillion-euro regeneration of the old Athens airport site, named Hellinikon, have boosted real estate activity. The Hellinikon project has an elaborate, sizeable building programme, featuring residential components, shopping centres, casinos, marinas and hotels.
The project is not only about to bring life to the large void in the urban grid left by the relocation of the airport, but it has also ignited the (re)development of the Athens coastal area and adjacent neighbourhoods, the so-called Athens Riviera.
‘Golden visa’ programmes have also contributed to a new type of activity in the residential real estate sector. Greece is one of the last remaining countries in Europe to offer these visas. These ‘residency by investment’ schemes allow wealthy foreigners to buy the right to
stay in a country long term. This is an attractive proposition for many private international investors.
Financial reform
The availability of debt financing from Greek banks has played a key role in the overall positive investment momentum of the real estate market.
In recent years, all four systemically important banks in Greece have managed to tackle their non-performing loans (NPLs), a good proportion of which have been backed by real estate collateral.
The banks have now brought NPL levels down to manageable, single-digit percentages compared with their overall loan books. This, in turn, has enabled them to focus on lending origination and credit expansion.
Hellinikon, the multibillion-euro regeneration of the old Athens airport site, features a large building programme with residential components, shopping centres, casinos, marinas and hotels
Real estate financing has been one of the growth areas for Greek banks, alongside other real asset-based financing, such as project financing for infrastructure and energy schemes.
On the real estate front, in particular, financing has not only become available, but has also been structured in a way that is comparable to those with which international investors are familiar when seeking banking debt for leveraging their transactions. Loan structures, leverage rates, key loan covenants and features are now specialised and aligned to specific real estate projects, allowing for bespoke lending solutions.
This gives international investors more confidence to deploy capital, not only in income-producing real estate assets, but in development or redevelopment opportunities as well.
Years of inactivity in the construction and real estate sectors in the country have undoubtedly led to building stock widely being outdated and in need of substantial upgrading through modest, or in several cases heavy, cap-ex programmes. Asset repositioning has thus become a popular theme for investors.
Popular travel destination
While this holds for all real estate sectors, from residential through to commercial real estate, and specifically offices, the hotels and resorts sectors have been the ones to benefit the most. Greece has become a popular travel destination, attracting record numbers of tourists with good spending capacity. This allows for healthy growth and return expectations when investing in the sector.
Reputable international investors and operators have been particularly active in this space, exploring a wide range of opportunities that involve considerable cap-ex programmes for redevelopment or refurbishment of existing buildings, or even outright green-field development.
Mixed-use schemes that include hotels and villas for sale, alongside associated infrastructure, amenities and, in some cases marinas, have been a popular theme.
It is also worth noting that previously neglected real estate sectors, such as logistics, have attracted interest from both domestic investors, such as local REITs, and international companies seeking opportunities in this space.
In short, the Greek real estate market appears currently to be offering a range of opportunities for international real estate investors seeking to allocate capital to this relatively small, yet promising, market. And debt is certainly again available to complement projects’ capital structures.
Tassos Kitsantas has been active in pan-European real estate finance, investment and development for 30 years. He is currently a senior adviser to private equity real estate investment platforms.
