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The Financialisation of the Housing Market The case of Athens

This article explores the financialisation of the residential real estate market in Athens. It examines the role of small-scale investors, the demand for short-term rentals, and the Golden Visa program. The article also discusses the impact on housing prices and affordability.

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The Financialisation of the Housing Market The case of Athens

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  1. The Financialisation of the Housing MarketThe case of Athens Nikos Karadimitriou Associate Professor Bartlett School of Planning, UCL (n.karadimitriou@ucl.ac.uk) EWRC, Brussels, October 2019

  2. Financialisation of the housing market in Athens • The financialisation of the residential real estate market in Athens has not taken the form encountered elsewhere in Europe: large institutional investors are not involved in this market. • Another form of financialisation by small-scale and mostly non-corporate investors has occurred. • This is combined with and actually depends on the demand for short-term rentals (ietouristification) and the demand for residence permits (the Golden Visa programme). • The combination of those factors has indeed pushed housing prices and rent prices up compared to their previously depressed state. This relative rebound has contributed to making renting and buying property less affordable. • However, affordability both for rental and homeownership was initially very negatively affected by the drop in incomes and the rise in unemployment, as a result of the economic crisis that the country entered in 2009-10.

  3. In 2011:554 dwellings per 1000 inhabitantsAlmost 29% were empty (609,000 units)2nd homes and depopulation of the centre Map from Maloutas T., Spyrellis S. (2016)

  4. Key trends • Economic crisis and its devastating effects on domestic demand from 2010 to 2016 (drop in incomes, population decline, deleveraging of households and the banking sector) • De-linking and subsequent re-linking, from 2015/16 onward, of territorially specific residential (and commercial) real estate markets to global investment flows. Domestic demand comparatively less important now. • Significant demand of non-EU citizens for access to and free movement within the EU: ‘Golden Visa’ programme is a key element of government strategy to attract foreign investment • Significant increase of tourist flows in Athens from 2014 onward. • Abolition of OEK/WHO and policy focus on housing benefit

  5. The crisisFigure 1: Dwelling Construction in Attica 2001-2018 Source: ELSTAT 2019b, ELSTAT 2019c

  6. The crisisFigure 2: Dwelling Prices index in Athens 2001-2018 Source: BoG, 2019b

  7. The recoveryFigure 3: Net foreign capital inflow for real estate purchases in Greece (2008-2018) Source: BoG, 2019b

  8. Figure 4: Residential rents in Greece 2007-2018

  9. Table 1: Average residential rents in selected neighbourhoods in Athens (Source: Re/MAX, 2013-2018)

  10. Tourism and the short term rental boom • 5.68 million visitors in 2018, up from 2.62 million in 2013 (INSETE, 2019) • 30,184 active and inactive properties listed by June 2018, of which 16,088 were in Athens’ central sector and 3,307 in Athens’ southern sector but only 382 were in the western sector. • In terms of active listings in Attica, these went up to 15,860 in June 2018 from 12,376 in January which shows a degree of seasonality (Athanassiou and Kotsi, 2018) • 126,231 active and inactive properties on AirBnB and HomeAway in Greece by June 2018, up from 96,217 in 2017 and 57,307 in 2016. Overall STR number higher due to additional platforms

  11. New demand sources • Golden Visa: 41% of net capital inflows (approx. 1bn euro) • Often combined with short term rental investment • Average investment: 312,000 euro • Nr of properties per investment: 3-4? • Total nr of golden visas in 2013: 21 worth approximately 3,273,000 euro per investment • Total nr of golden visas by April 2019: 4,154 of which 1399 in 2018 • Asylum seeker/ Refugee housing: Approx.. 2500 apartments in Attica (UNHCR, May 2019) • Institutional investors have played a marginal role in the residential market, unlike in the commercial market (esp. hotels and offices): fragmented ownership, uncertainty and high transaction costs • Blueground: leasing apartments from landlords and then renovates them and introduces them in the private rental market (short, medium and long term). Their aim is to have 1000 properties in their portfolio in Athens within 2019.

  12. Affordability (Source: Eurostat, 2018,2019) The percentage of private market tenants with housing cost burden above 40% of household disposable income in Greece was: 36% in 2010, 42.6% in 2011, 52.8% in 2012, 58.2% in 2013, 87.4% in 2014, 86.7% in 2015, 85.6% in 2016 and 83.9% in 2017 BUT: Affordability issues predate short term rental boom Short –term rentals seen as a reliable source of income from property owners

  13. Policy measures • Short term rentals were initially required to obtain a “tourist dwelling” badge in order to adhere to minimum quality standards: separate and dedicated entrance required. The badge requirement was lifted in 2015, thus significantly reducing the barriers to entry in the short-term rental market. • Legislation was passed which clarified the tax regime of short-term rentals i.e under what conditions short-term rental constitutes a business activity etc • Independent Public Revenue Authority: short-term rental register (registration is compulsory). Dedicated resources on enforcement. • Neutral tax treatment. • Block of flat bylaws emerging as a means of regulation

  14. Policy measures • Special measures are foreseen in the law which could curb short-term rental activity in cases where the effects are adverse: • limitation of the number of properties that each landlord can make available for short-term rental at any one time and • the number of days which each property can be rented out for during any given year. • These special measures can only be activated via Ministerial Decisions, which have not been issued yet. • In the meantime: local authority support to key civil servants (esp. in tourist destinations) and central government housing benefit • Hospitality industry key lobby group against short-term rentals

  15. Contextual parameters • High reliance of state revenue on property taxes: 8.1% in Greece vs 5.7% OECD average (Assen and Bunn, 2019; Kathimerini, 2019) • Significant source of foreign investment capital. Golden Visa programme actively promoted by the government. • Short term rental a key source of income for a large proportion of the population (esp. the middle class) • Renovation and utilisation of dwelling stock • Treatment of property owners can lose (or win) elections • Current situation is a win-win for significant number of stakeholders and social strata: Tenants the clear losers

  16. Key housing challenges • Affordability • Touristification (territorial and sectoral) • Migrants (late entrants in the housing market) are hit particularly hard. They rely much more on the private rental market and have not accumulated property in the family. • Develop a social rented sector

  17. Key data challenges • Cadastre: make detailed land and other georeferenced property ownership data widely available • Make the IAPR’s property ownership, income and rental data available in a suitably anonymised form. • Enhance the Bank of Greece’s data collection on (foreign) investment flows into RE and provide suitably anonymised data in more disaggregate and granular form • Enhance the Ministry of Finance’s property transaction register and expand it to cover rental agreements. Make suitably compiled data on property transactions and rents publicly available and easily accessible. • Suitable adjustments to census questionnaires • Support the development of the Computer Assisted Mass Appraisal system or an equivalent mechanism for enhancing market transparency and for simplifying property tax implementation

  18. Thank you!

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