After showing resilience to pandemic, Greek property headed for strong growth

The prospects for Greece’s real estate market are shaping up to be something more than positive after having shown remarkable resilience during the pandemic, as Piraeus Bank forecasts that it will grow in the coming period, supported by expansion in the broader economy.

According to an analysis from the Greek bank, despite the tough conditions last year, residential property prices not only held their ground but rose by 4.3% and commercial real estate prices gained 1.2%.

According to Elias Lekkos, chief economist of Piraeus Bank, the reasons for this "disconnection" between macroeconomic data and real estate prices are obvious. After the initial shock of the pandemic spread, the majority of interested buyers-investors realized that the Covid-19 pandemic would be temporary and economic activity would return to pre-Covid levels.

So, just as stock market analysts in equity models began to use expected gains in 2021 instead of 2020 profitability, so too did investors in the real estate market, bypassing the decline in disposable income (households) and (business) for 2020 and continued to value the real estate market as a function of the long-term prospects of the Greek economy.

This approach had three direct implications:

1. First, real estate prices continued to rise in 2020 despite the unprecedented economic downturn supported by the positive long-term outlook of the Greek economy, as well as by decisions such as the "Golden visa" and other tax incentives aimed at make the Greek real estate assets more attractive to foreign buyers.

2. In addition, the combined effect of the positive macroeconomic environment and the low starting point (given that property prices had fallen by more than 44% in the last decade) has resulted in real estate prices (residential and commercial) being able to rise in the short term by 6%. In the long run, we forecast a growth rate of about 3% in both categories of real estate, along with the nominal growth rate of the Greek economy.

3. However, the combination of declining disposable income and profitability and the upward trend in property prices means that, at least temporarily, until we return to growth, real estate valuation indices appear to be on the rise. Therefore, starting from a very low point, the Greek real estate market can continue to grow alongside a very strong economy for a number of years. If our forecasts for both the Greek economy and the real estate market turn out to be correct, the real estate market will converge with equilibrium or "fair valuation" levels by 2027.