Has Greece just killed its Golden Visa Programme?
The government of Greece has just announced that new thresholds will be applicable from the 31st of March 2024. There will be three thresholds:
2. €400,000 will be applicable for all other areas.
3. €250,000 will only apply to redevelopments of listed buildings and commercial or industrial uses.
Additionally, properties for categories 1& 2 above will have to have a minimum area of 120 sqm. All properties bought under the Golden Visa Programme will be forbidden to be rented out on a short-term basis (i.e. on platforms such as Airbnb, Booking.com etc.).
The effects of these changes
The threshold of €800,000 means that very few applicants will opt for this kind of property.
The threshold of €400,000 also means that very few applicants will be able find and invest in such properties since:
a. They will be in areas little known to the international market where current supply is low.
b. Such areas are not as easily accessible and offer low yields for housing properties thus making such investments undesirable.
c. The requirement that they have an area of at least 120 sqm means that the prices of older properties will be inflated by current owners to the €400,000 threshold. This will impact negatively on yields since they will need to be rented out to a limited local market which has largely low disposable incomes and is used to paying low rentals.
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d. The supply of new €400,000 properties to be sold at €3,300/sqm (€400,000/120sqm) will be low, if any since high development costs will make such developments unprofitable and hence unfeasible. The fact that these areas are unknown to the global market will also mean high marketing costs, something which will add to the already high development costs.
The threshold of €250,000 is the only attractive one but is largely theoretical at this stage. Redeveloping listed buildings is a major hustle because the progress of the works is slow, there are shifting and usually costly demands by the appropriate authorities during redevelopment, and there are high costs in making these buildings compliant to energy saving requirements and anti-earthquake standards.
The redevelopment of industrial uses is a much more realistic option, but it too is fraught with uncertainty for both the developers and the investors. Such redevelopments will obviously be in industrial areas around cities. If we take Athens for example, it means that these will, as a rule, be based either just west of the Acropolis or in the western part of Athens.
Industrial uses relatively close to the Acropolis will come with the danger of works being stopped because there is a high risk that ancient monuments will be found on site. Developers avoid such areas since the discovery of ancient monuments has been known to lead to extremely high costs and bankruptcies.
Redevelopment of industrial uses in areas further out from the Centre mean that the investors will need to be convinced that such areas will be upcoming and will gradually build higher yields over time. This is not easy: the redevelopment must be located in an easily accessible area, offer an attractive housing environment and be an attractive proposition to the local market for long-term rental. That will prove to be a difficult mix to achieve.
The redevelopment of commercial uses may prove an easier task. The cost of acquisition of the property to be redeveloped will play a major role here. The resulting properties will be sold at around €250,000 which means that given
the redevelopment cost, the land cost element cannot be higher than €700/ saleable sqm. This figure may be hard to achieve for commercial property.
What should prospective applicants do?
The first two options are largely theoretical ones: few will pay €800,000 unless they primarily want to buy such a property and get a Golden Visa as an added bonus, and those who will look for €400,000 properties will discover that such properties are very few and unattractive as an investment. The only attractive option is the €250,000 one but supply and variety will, at least initially, be very limited.
Potential applicants must therefore take advantage of the timeframe to the 30th of September 2024 to find suitable property and apply under the current rules and thresholds. It must be noted that demand surged in anticipation of these changes and, as a result, suitable property is increasingly in short and dwindling supply.
It is probable that the Golden Visa Programme will enter a period of low activity as current supply dries up and new supply takes a long time to materialize. Therefore, it can be said that the government did not kill Greece’s Golden Visa Programme but it may have put it in a deep freeze over several months.