Investment opportunities arise with high sustainable returns.
The key is managing properties cost-efficiently geographically covering the whole Greece.
The coronavirus pandemic has caused quite a stir in the real estate sector and has tipped the balance in how the sector is being managed by financial institutions in Greece. Almost a year has passed since the pandemic outbreak in Europe, and we can finally come to some useful conclusions. The most important of them being that the real estate sector has not been affected to such a degree as other economic sectors. This is an unprecedented situation for the whole world, since for the first time in history a financial crisis has been combined with a health crisis. The uncertainty and insecurity for what the next day will bring, as well as the insufficient level of preparedness by the involved stakeholders to operate under lockdown conditions inevitably affected the real estate market.
Let’s not forget that visiting properties and public services was difficult to impossible, which meant transactions in the real estate market were being postponed. At the same time, there were issues with rent payments and short-term house rentals were being cancelled. Travel restrictions stressed the market even more as the access to the Greek real estate market has been impaired. In spite of that, to a large extent, the shock was temporary, and the market has started to pick up.
There was prompt response from professionals in land development and asset management. Using modern technological tools, they brought properties to the fore for prospective buyers. Virtual tours in real time, rich audio-visual footage and instantly sharing information became the new reality for both buyers and sellers. By doing so, it was possible to contain market depression and complete sales in a way that a few months ago would have seemed inconceivable.
It will take more time for things to completely return to normal and it is possible that we will see increased pressure on certain property types. Our prediction is that retail properties, as well as touristic, will continue to be under pressure for the remainder of 2021 but we foresee growth in prices for industrial/ warehouse/ distribution properties in good locations with good accessibility/ connectivity and build quality. We will likely see touristic properties being put up for sale and/or touristic businesses merging. It is widely acknowledged that the pandemic has accelerated the transition to e-commerce and, clearly, this affects retail properties. However, whether this transition will continue at the same pace or not can only be evaluated in the coming months when reality will start returning to pre-pandemic levels.
Offices will experience comparable effects, as a lot of businesses adapted quickly to remote work and realised they could be as productive without their workers commuting to city centres. We believe the demand for smaller, technological-enabled spaces will be great and there will be increased demand for smart and sustainable buildings. Residential properties will also experience major changes for the aforementioned reasons. Taking into account that several professionals will be working from home, residential properties will need to be upgraded or remodelled. Some people will need larger spaces, designed to accommodate the conditions of a future lockdown.
Demand for buying a second home/ vacation home is expected to gradually return to pre-pandemic levels. There might even be an upward trend from domestic buyers. A far as foreign investments are concerned, their recovery
is already underway, since the Greek real estate market has always been an attractive option, offering good returns.
BANKS ARE FAR MORE READY
Following a period where economic activity was particularly slow, we have to expect an increase in non-performing loans. We estimate, though, they will not reach the great crisis levels we witnessed a few years ago. After all, banks are far more ready and experienced and we think they can manage the situation without any particularly adverse consequences, as long as they move quickly and sensibly.
There are big legacy stocks of REOs in the Greek financial market and they will most likely increase even more in the following months. Delfi Partners & Company, with €7 billion in assets under management and with underwriting and consulting services totalling €82.5 billion, is ready to assist once again so that the consequences of this crisis are overcome as quickly and painlessly as possible for everyone. We offer guidance to our clients with regard to the time and manner of property disposal, whether they are individual buyers or investors. Our goal is to assist our banks, loan servicers and institutional investors in finding an optimal strategy to cost-effectively manage and dispose their REO portfolio. We suggest solutions that among other include liquidation, repairs in distressed properties, auctions, etc. taking into account current market data and property laws.
Today’s conditions necessitate that the government delivers mechanisms that will respond effectively and support the private sector’s efforts, since rapid growth in economic productivity benefits all.
It is imperative for the relevant authorities to step up and enable the private sector in its efforts to recover the economy. When considering how important foreign investments are for every economy during this period, it is highly recommended to limit bureaucracy to the extend required by law. The current situation, coupled with the difficult task to reduce the number of non-performing loans (NPLs), calls for the government to consider sharpening the regulatory framework, so that property sales can continue apace while expediting/ removing the asset legalisation process. This becomes even more important when considering that any drastic reduction in NPLs will be determined by monetising properties linked with non-performing loans to investors. Currently, properties in the hands of management companies are subject to numerous procedures before they are put out in the market. This is not the case in countries like Cyprus or the UK, where properties can be sold with unauthorised structures, as long as the prospective buyer is notified accordingly (several property illegalities are treated differently).
Having the big picture in mind and the future of the Greek economy, it is important to allocate a part of the European recovery funds in modernising the procedures and systems of every competent authority involved with the real estate sector.
Of course, this is not just about funds, technological adoption, and optimising procedures. Primarily, it involves further modernisation in the public sector, without diminishing the way the relevant laws and regulations are being implemented.
As with every crisis, opportunities will arise. Despite all the highs and lows, the real estate sector has shown stability and has historically been the safest investment option, once again assisting in restarting and growing the economy. Greece has always been a strategic priority for foreign investors, since the high returns in comparison to the other European countries favour investments in a variety of property types and with NPLs secured by
residential and commercial real estate. We are certain this will continue in the post-pandemic world. Delfi Partners & Company is here to help make this happen.
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