Greek Real Estate: Back on Investors’ Radar

Greek Real Estate: Back on Investors’ Radar

A desolate destination for investors for years Greece is now experiencing a revival in investor interest. Both international and domestic investors are increasingly pursuing investment ventures in the country. True, the current macroeconomic environment and near outlook do not point to a strong rebound in the economy that will boost asset markets including real estate. Still though attractive investments are steadily emerging.  The opportunities are diverse. One category comprises direct and indirect knock on effects on the real estate market from large infrastructure projects and privatisations – freight ports, national rail, regional airports, resorts, marinas and several more – and major redevelopments including Hellinikon and Olympics sites.  Common practices elsewhere but not in Greece, such as sale and leaseback, are now adopted adding liquidity.  REITs proceeded in several strategic moves in the past twelve months growing their portfolios with good quality properties and tenants, a vote of confidence. Small declines in yields are evident with yields now standing at 8% for prime offices and 7% for prime retail space in Athens with further declines expected.

At the same time smaller scale projects primarily relating to tourism – such as boutique hotels – and residential, can be secured at attractive prices offering great value add opportunity. More investable stock is put on the market from banks dealing with non-performing loans and offloading assets of all types - hotels, residential, commercial, land. Investor interest in auctioned assets is evident. Auctions through electronic platforms, to overcome opposition from some political groups, will enhance activity in this market. 

How about risks? In Kappasigma we view economic risks less of an issue. Throughout the crisis the highest risk to Greece has been Eurozone membership that reached culmination in July 2015. This risk is now vanished, despite opposite views a few international economic research houses still voice – as they have done for years - which we do not share. The risk of a collapsing economy is also low. The country has lost over 25% of its GDP since the crisis began. After a blip in 2015-2016 the economy is picking up pace. Pharmaceuticals, IT, logistics are among industries which implement investment plans and form strategic alliances to expand. This trend demonstrates confidence further epitomized by decisions such as Tesla’s - to set up research operations in the country.   This is all consistent with an improved economic sentiment after a sharp dip in 2015. Conditions for a big bang – what we would characterise GDP growth of around 4% - are not present yet. The economy is moving slowly, but steadily presenting investment opportunities.

Real estate specific risks are low too. Pricing is getting tighter in some market segments but systematic risks, e.g. a general market correction, are practically absent.  Risks are highly idiosyncratic confined to the specific project or asset.

In our view, a political risk is worth monitoring though as it can derail the recovery of the economy. After the next elections the country could move into a proportional representation voting system. That can throw the country into chaos with the elected government being unable to implement plans if they lack majority. We believe though that the next administration will defuse this risk for the economy and asset markets. Nevertheless, going forward, we believe that on balance, opportunity outweighs risk in Greek real estate and alphas can receive a handsome boost. 

• Our article published in the 2018 March - April Real Estate Supplement in The New York Times International Edition - Kathimerini English Edition https://www.ekathimerini.com/

Kappasigma Partners - www.kspreal.com