While second home buyers have flocked to the Mediterranean, they have largely ignored Greece. But with legal reforms and lower taxes, the country aims to catch up, says Alexander Garrett.
In the rush to buy property in south-east Europe over the last few years, with countries from Bulgaria to Montenegro hyped as the new Spain, the new Tuscany or the new Cote d’Azur, one country has been largely, and rather strangely, overlooked. That country is Greece and the omission is strange because it has long been a favourite with British tourists. Greece attracts 13 million visitors a year, putting it a close third behind Spain and France among British holidaymakers.
It is true Greece hasn’t been promoted by developers in the same way as certain other countries, but that fails to explain why a country with such a wealth of islands beaches and beautiful scenery seems to have missed the holiday home boom. According to one estimate by Travelex, 3,000 Greek properties were sold in 2002 to all overseas buyers, compared with 90,000 sold to UK buyers in Spain in 2004. Explanations vary: the Greeks are too laid back to rush out and market their property or Greek people don’t like selling to foreigners.
Now, though, there are signs that property in Greece may be about to assume a higher profile, even take the spotlight. A new property tax law came into force in January 2006. While some of its measures could be seen as negative – for example, the introduction of capital gains tax (CGT) and VAT on new buildings – they are largely cancelled out by positive measures. And in overall terms, the changes are being seen as providing greater transparency and opening up the market for second homes.
Resorts on the rise
Meanwhile, moves are afoot to build the first integrated resorts in Greece, incorporating leisure facilities such as golf courses and marinas, which are common in developments in Spain and Portugal. With the markets in those two countries deemed to have peaked, Greece looks ripe for development, with extremely favourable prices. And the availability of euro mortgages for UK buyers of Greek property is making it easier to buy than ever before.
It was almost impossible for overseas citizens to buy property in Greece before it joined the EU in 1990. The right for citizens of other EU countries to buy came with membership but didn’t herald the type of property boom that has been seen among more recent EU entrants. Instead, Greece has been a market where a relatively small number of foreigners have bought what until recently were mainly older properties, overcoming considerable bureaucratic and cultural barriers along the way. In Greece, ownership of older properties is often divided among several members of the same family, there is no comprehensive land registry (it is still in the process of being compiled) and the process was muddied by the use of ‘objective’ values used for tax purposes, which were much lower than the actual value.
The property law that came into being in January – accompanied by a revision of these ‘objective’ valuations to more realistic levels – has made property taxation more straightforward. Stratos Paradias, a lawyer who is president of the Hellenic Property Federation, says: ‘Concerning taxation for property acquisition, there is a positive evolution going on in Greece today.
“The general transfer tax, which was 11-13 per cent, is now down to 9-11 per cent and is gradually being replaced by a transaction duty of only 1 per cent, when purchasing land or used buildings previously transferred. Value-added tax at 19 per cent is being gradually introduced on the purchase of newly built houses, but it seems this will not affect market prices, since building companies will be able to deduct the VAT they have paid to subcontractors, which was not possible before.’
Capital gains tax is new. Starting at 25 per cent when the property is sold within five years, it goes down to 10 per cent after five years, 5 per cent after 15 years and zero after 25 years.
Nevertheless, other factors have conspired to give the property market a real boost. Developments that have received planning consent before the end of 2005 remain exempt from VAT, which has led to a flurry of activity. The legacy of the Athens 2004 Olympics was large-scale investment in infrastructure such as roads and leisure facilities, but also the formation of development companies, which are now turning their attention to the holiday home market. And the government has adopted a policy of encouraging the development of upmarket resorts.
As things stand, what you can buy in Greece consists mainly of ruins in need of renovation, village houses or villas on small development sites, typically with up to half a dozen properties. Often, you are expected to buy the plot, then get the house built. There is a huge variation in prices. Mykonos, favoured by the international jet set, is at the top end of the scale: a modest 60 sq. m. apartment in Mykonos town being offered on Brian’s Greek Property website would set you back 300.000. Rather less expensively, in the seaside town of Chrani, eastern Kalamata on the Peloponnese, you could buy a three-storey apartment block with 13 studios and a large owner’s apartment for just £229.000. As a general rule, prices are much higher in tourist areas than elsewhere and are largely in line with the popularity of the location.
The next few years will see Greece’s property market move up a gear, with the arrival of the first integrated resorts, incorporating facilities such as golf courses, tennis schools, spas, hotels and marinas alongside a wide range of apartments, townhouses and villas. According to Miltos Kambourides, managing partner of investment managers Dolphin Capital Partners, this type of development has has not happened in Greece until now for two reasons: “There was a lack of legislative framework and there was a lack of dedicated capital.”
The first of these will be resolved by impending legislation, while the launch of Dolphin Capital Investors on AIM last December has addressed the second issue. Dolphin was launched with the objective of backing resort-type developments throughout south-east Europe, including Turkey, Croatia and Cyprus as well as Greece. Since its float, which raised €104 million (£69.5 million), its market capitalisation has soared to €530 million, making it the second largest AIM-listed real estate company.
Kambourides explains the rationale: “Some 10.000 people are turning 50 every day in northern Europe, and many would like to buy a home in the sun. Until now, the obvious places to invest were Spain and Portugal, but those markets have reached maturity. South-east Europe represent much better value for money.”
Dolphin has committed money to four resort projects. The most advanced is at Kilada on the eastern Peloponnese, where architect Mark Potiriadis is planning to build 400 homes around a championship golf course, close to Porto Heli. Dolphin is also backing schemes at Lavender Hills and Scorpio Bay, both north of Athens, and is an investor in the Amanmila resort on the island of Milos in the Cyclades. This is the first European development planned by Aman Resorts, one of the world’s most exclusive operators, and will have 40 high-end villas for sale alongside a hotel. Prices will be €4.000-5.000 per sq. m., compared with €6.000-8.000 in Spain, says Kambourides.
Other similar projects are in the pipeline. For example, Ofex-listed Minoan Group is planning a golf resort at Cavo Sidero in north-east Crete with almost 1.000 homes clustered in five separate villages, five five-star hotels, two 18-hole golf courses and many other facilities.
Another factor in making Greece a more attractive location to invest is the increased availability of mortgages. Piraeus Bank, which has a London branch, recently launched a euro-denominated mortgage product aimed at UK buyers. Irini Tzortzoglou, head of retail banking, says: “We are early into the market, but there are a number of large projects that will attract the attention of buyers in the next three to five years.”
Among the olive groves
Kilada Hills, close to Porto Heli on the eastern flank of the Peloponnese, looks set to be the first of the new-style resorts to reach the market, with sales expected to begin next year.
That development was dreamt up by Mark Potiriadis, an architect who worked for many years in the UK and returned to Greece before the Athens Olympics. He started off by building a collection of 11 luxury villas in contemporary style on a hillside above the sea, and then purchased a further 240 acres of land nearby with the idea of building Greece’s first large-scale master-planned resort.
When built, Kilada Hills will have a five-star hotel, up to 500 villas and apartments, an 18-hole golf course, a thalassotherapy spa, stables, tennis courts and a beach. The development will be carefully integrated into the surrounding landscape, including vineyards, olive groves, and an organic kitchen garden and farm.
Already €55 million has been committed to the project and the initial consents have been obtained. For the sleepy fishing village of Kilada, it will mean a big change, but as Potiriadis said last year: “We want to create a development that is sustainable and will create full-time jobs, and one that will mean local children don’t have to leave and go to Athens.”