Despite the disruptive forces of Covid-19, Athens is maintaining investor interest on both the real estate investment and development side. We present a real estate activity overview.
Happy New Year to all. Being a residential investment company, we care a lot about the investment flows in the sector as they point to us the market sentiment levels; we care al lot about the fundamentals as they show us how real and sustainable the sentiment is; and we care a lot about pricing trends as they are the manifestation, to a large degree, of sentiment and fundamentals. We have been investing in value add residential properties in Athens over the past three years and we continue to see the recovery unfolding.
Please find a market snapshot below:
Investments in real estate are on the up again, with net foreign direct investments in the sector growing and reaching €1 billion on a 4Q trailing basis in Q3 2021, 75% of the 2019 peak. Investment volumes supported apartment prices particularly in Athens where according to Bank of Greece data, values grew by 9.8% on a 4Q trailing basis in Q3 2021.
Source: Bank of Greece
The recovery in investment activity and prices, has also lead to the first signs of revival of real estate development activity, a sector that had been virtually non-existent for a good part of the last decade, due to the economic crisis and its aftermath. The latest monthly data, as at September 2021, indicate new permits totalling 5.6 million square meters over the previous twelve months, corresponding to a 37% increase compared to September 2020. We think it will be interesting to see how the increase in material prices due to inflation pressures affects this sector.
Source: Hellenic Statistical Authority
Economic Backdrop: Greece delivered a y-o-y GDP growth of 13.4% or a 2.7% on a q-o-q basis for Q3 2021 driven by tourism, investments and private consumption. This beat estimates for the quarter, while the Bank of Greece increased 2021 GDP forecasts to 8.0% from 7.2% and Fitch Ratings upgraded the economic outlook to “Positive” from “Stable”. The unemployment rate remains high, albeit improving and was 13.3% in October 2021, compared to 16.4% a year before. In line with most developed markets, inflation is currently running high with the consumer price index increasing by 5.1% on a y-o-y basis in December, mainly due to price increases in rents, utilities and transport.
Structural systemic issues, such as high government debt and bank NPL ratios remain, although they continue to improve and have been characterised as largely sustainable by large international institutions. In addition, business friendly reforms on the tax (corporate tax, VAT reductions), income (second minimum wage increase), investment (e.g. Ellinikon project), as well as infrastructure areas (e.g. energy, digitisation) continue to provide promising signs for the continuing recovery of the economy and the real estate market.
Wishing you all the best for 2022.
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