Hello,
More than 6 months have passed since October 7, and there are still more than 130 hostages who have not returned to their homes and families, and our hearts are unbearably heavy.
The Passover holiday, which we will celebrate later this month, is a time of renewal, growth and new opportunities. We wish you and your family a happy holiday, full of joy, health and business success.
This month we would like to draw your attention to:
A. Greece has raised the investment threshold for a Golden Visa.
B. Romania and Bulgaria have joined the Schengen area.
C. Bucharest is among the cheapest residential markets in Europe.
D. Real estate prices in Budapest continue to rise.
E. A record in housing loans in Bulgaria since the start of the year.
F. The International Monetary Fund forecasts a slowdown in Ukraine's economy in 2024.
Wishing quiet and safe days to us all, and enjoy the read,
Adv. Ilan Leibovitch and the office team
Greece
Greece raises the bar for obtaining a “Golden Visa”
From 1.4.24 Greece is raising the bar for obtaining a “Golden Visa”, about 6 months after it raised the bar in the summer of 2023.
Greece's “Golden Visa” program became especially popular worldwide in 2023, and demand for the visas was beyond expectations - 10,214 applications were submitted and 5,701 permits were granted during the past year (4,231 were investors and 1,470 were visa renewals). The visa gives the investor and his family members the option of staying and working in Greece for 5 years, with an option to extend as long as the property is still in his ownership..
From 31.3.2024, in greater Athens and Thessaloniki, in Mykonos, Santorini and on islands with more than 3,100 residents, buyers will have to invest at least 800 thousand euros in a single property in order to receive a “Golden Visa”. In the rest of Greece, the minimum will be 400 thousand euros. In all cases, the total amount must be for a single property with an area of at least 120 sqm.
In addition, Greece will prohibit Golden Visa holders from renting out, on short-term rental (Airbnb), the apartments that form the basis for receiving the visa.
According to the Greek finance minister, these moves are part of the Greek government's steps to cool the real estate market and ease the housing distress of locals. By contrast, Christos Bletas, CEO of New Deal Real Estate Group, maintains that the steps will not cool the market apart from a gradual cancellation of the “Golden Visa”, given the shortage of tourist accommodation in a country where the number of tourists rises every year, and the relatively low share (only 7%) of all real estate transactions that qualify for a “Golden Visa”. According to him, the government's steps “are not expected to bring substantive solutions, but only to reduce public revenues and foreign investment that may flow to other markets”.
Economist and real estate appraiser Giannis Revythis noted in an interview with the Greek media that the steps will cause a decline in state revenues from real estate taxation, since the foreign investor market totaled about 10 billion euros in 2023
From the writer's desk:
The decision is causing concern among many investors about its effect on the Greek real estate market.
Possible effects:
- Decline in demand for real estate: Raising the bar may lead to a decline in demand for Greek real estate from foreign investors, since the required investment amount has grown significantly. “An increase in the minimum investment amount required to obtain a ‘Golden Visa’ may lead to a significant decline in demand for real estate from foreign investors.” (Athens University of Economics and Business)
- Decline in real estate prices: A decline in demand may lead to a decline in real estate prices, especially in areas where demand from foreign investors was high.
- “A decline in demand for real estate may lead to a decline in real estate prices, especially in areas where demand from foreign investors was high.” (Research Center of the Bank of Greece).
- Diversion of investment to other areas: Investors may redirect their investments to other countries offering more attractive ‘Golden Visa’ programs.
Romania
Romania and Bulgaria have officially joined the Schengen area
The Schengen Agreement, known as “Europe without borders”, abolishes border checks between the member states and introduces a policy of free movement of citizens and a uniform visa, which has long been in force in the Union's countries. The Schengen Agreement now has 29 member states: 25 European Union states (except Ireland and Cyprus, which are not part of the Schengen area) as well as 4 European states that are not members of the European Union: Switzerland, Norway, Iceland and Liechtenstein.
Under the decision of the Council of Europe of December 31, 2023, approved by the European Union Commission, from 1.4.2024 citizens of Bulgaria and Romania too can cross the borders of all Schengen countries without restrictions and without checks.
2024 - an election year in Romania
Romanians will be called to the polls three times this year, to elect the president, parliament, Romania's representatives to the European Parliament, and mayors.
The first elections are scheduled for June 9, when Romanians will vote for their representatives in the European Parliament and elect mayors in the local elections, on the same day.
Afterwards, on September 15, the first round of the presidential elections will be held, and if necessary a second round will be held on September 29.
How will the election campaigns affect real estate in Bucharest, and in Romania in particular, this year?
As is known, in recent years there has been difficulty in obtaining building permits in Bucharest as a result of the policy of the incumbent mayor, Nicușor Dan, and his election to a second term may affect the local real estate market.
In any case, some authorities are entering the local election campaign these days, and as a result planning and construction procedures too are entering a period of “waiting” for the election results and for the new-old mayors, which may affect supply in the future and as a result also apartment prices.
The elections to the Romanian parliament will be held on December 8.
Bucharest is among the cheapest residential markets in Europe
Bucharest is among the main cities in Europe with the lowest housing prices and the highest affordability ratios, according to data from the real estate consultancy Cushman & Wakefield Echinox.
Based on data on average housing prices in Europe, Bucharest's level of affordability is among the highest both nationally and across the continent, with only 96.2 average monthly net salaries required to buy a 70 sqm apartment. Higher levels of affordability are recorded only in Brussels and Sofia, with 84.2 and 94.3 average net salaries respectively, the real estate company said.
On the other hand, London, Munich, Paris and Zurich have some of the highest average asking prices. They can exceed 10,000 euros (Paris) or 16,000 euros (Zurich) per sqm, and more than 200 average monthly net salaries are generally required in those cities to buy a 70 sqm apartment, a level more than double that of Bucharest.
According to Cushman & Wakefield, Romania's capital also offers favorable residential prices at the level of Central and Eastern European countries. Lower levels of affordability are recorded in Prague (average prices exceed 4,700 euros per sqm and 196.7 average net salaries are needed), Bratislava (171.5 salaries), Warsaw (165.3), Belgrade (161), Cluj-Napoca (158.2), and Budapest (150).
“Residential property prices in Romania saw significant rises in 2023 in the cities of Cluj-Napoca, Brașov, Oradea, Iași or Craiova, with double-digit rises in most of the cities mentioned. We are seeing a clear recovery in the residential market in the second half of 2023 and in the first months of 2024, after the number of transactions fell significantly during the first half of 2023 because of the high interest rates on housing loans,” said Vlad Săftoiu, head of research at Cushman & Wakefield.
The average asking price for an apartment in Bucharest was 1,663 euros per sqm in February, according to Imobiliare.ro. The figure corresponds to a rise of 6.6% compared with February 2023 and a rise of 7.5% compared with the corresponding month in 2022, which represent some of the lowest price rises during the periods analyzed in the country, said Cushman & Wakefield.
Bucharest ranks third in average residential prices in Romania after Cluj-Napoca (2,666 euros per sqm, +10.4% compared with February 2023) and Brașov (1,815 euros per sqm, +14.9% compared with February 2023).
2023 summaries of the Romanian real estate market
From the writer's desk:
1. The real estate market in Bucharest is expected to continue growing in the coming years, as a result of the elections, Romania's joining the Schengen area and positive economic trends. We expect rising demand for real estate, rising prices and significant infrastructure development.
2. Specific effects on Bucharest of entering the Schengen area:
- Growing demand: Demand for real estate in Bucharest is expected to rise from foreign investors and local buyers, both for housing and for investment.
- Rising prices: Apartment prices in Bucharest are expected to rise, especially in central areas and tourist areas.
- Infrastructure development: Government plans to invest in infrastructure development in Bucharest, such as expanding the metro system, are expected to lead to a rise in demand for real estate in the surrounding areas.
2. A senior analyst at JLL: “We expect a strong real estate market in Bucharest in the coming years, with a significant rise in apartment prices”.
Hungary
Real estate prices in Budapest continue to rise
In the first two months of 2024, real estate prices in Budapest crossed the psychological barrier of 1 million forints/sqm (2,516 euros/sqm).
The Hungarian real estate agency Duna House emphasized that prices rose despite the low demand and number of transactions in 2023, in both the second-hand apartment market and the new apartment market. According to their data, the most affordable district of Budapest in January-February was the 19th, considering the price (1,403 euros/sqm). The most expensive (3,270 euros/sqm) was the first district (where Buda Castle and many other popular tourist attractions are located).
Bulgaria
A record in housing loans in Bulgaria since the start of the year
Bulgaria experienced an amazing jump in apartment loans at the start of the year, with household loans for buying homes and apartments reaching a record of 20.52 billion BGN by the end of February, according to Bulgarian National Bank data. This is amazing growth of more than 22% compared with the previous year, marking an unprecedented expansion in housing loans.
The significant rise in mortgages can be attributed to several factors. First, there is growing demand among people to upgrade to larger or more desirable homes. In addition, many people want to invest their savings in real estate but lack the funds needed to make a purchase and need a loan to complete the required amount. As a result they turn to bank loans to finance their property investments. The low interest rate on apartment loans serves as an additional incentive for potential apartment buyers, encouraging further growth in the housing market.
Consumer loans also grew significantly, growing by more than 13% year on year and reaching 17.2 billion BGN by the end of February. A considerable part of these loans is directed to home renovation, as well as to buying furniture and household appliances. Presumably, the desire to improve living conditions remains the driving force behind the jump in bank loans.
An interesting figure indicates that households in Bulgaria borrow much more than businesses, with household loans growing by 17.1% over the year and reaching 39.4 billion BGN. By contrast, business loans recorded a more moderate rise of 8% and totaled 44.8 billion BGN by the end of February.
From the writer's desk:
The real estate market in Bulgaria is experiencing significant expansion, thanks to growing demand, low interest rates and favorable economic conditions. This trend is expected to continue in the coming years as well, with an increasing focus on real estate investment..
- A study conducted by PwC found that demand for real estate in Bulgaria is expected to continue to grow in the coming years, from both local and foreign investors.
- According to the World Bank report the low interest rate in Bulgaria contributes to growth in the housing market, but it also raises concern about the creation of a real estate bubble
Ukraine
The International Monetary Fund forecasts a slowdown in Ukraine's economy in 2024
According to the IMF, in a negative scenario, the war will end by the end of 2025. In parallel, “the shock will begin in the second quarter of 2024” because of the intensification of the war. “This will lead to a sharp decline in real output of 4% in 2024 (compared with growth of 3-4% in the baseline scenario) and to zero growth in 2025,” the Fund's report published at the end of March states.
In the pessimistic scenario, an escalation of the war will affect household sentiment and the pace of migrants' return and cause further damage to infrastructure from Russian strikes.
According to the International Monetary Fund, this year the growth rate of the Ukrainian economy will decline to 3-4% compared with 5% last year. The IMF's baseline scenario has not changed significantly and predicts lower inflation for this year (to 8.5% from 9.5%) and real wage growth of 9.8% from 8.5%.
However, the unemployment estimate worsened to 14.5% from 13.9%. As for the budget, the IMF slightly lowered its deficit estimate (excluding grants) from 20.4% to 20.2% of GDP.
Mortgages are choking Americans and home foreclosures rose by 8%
According to data from the research firm ATTOM, in February 2024, 32,938 foreclosure filings were submitted in the US against residential properties, an increase of 8% compared with February last year, even though the number of properties whose foreclosure process was completed fell. During the whole of 2023, foreclosure filings were submitted against about 357 thousand properties, an increase of 10% compared with 2022, and the article links the trend to the end of COVID-era foreclosure bans and to high interest rates - about 6.75% on average for a 30-year mortgage according to Freddie Mac. It is also reported that the National Association of Realtors (NAR) reached a settlement in an antitrust lawsuit over brokerage commissions, which includes a payment of 418 million dollars and the cancellation of the commission rules, subject to court approval.
Source: Calcalist, Lital Samet, 17.3.24
The Israel Tax Authority launched an operation to locate assets in the popular investment destination
According to the article, the Israel Tax Authority launched an operation to locate assets, income and companies of Israelis in Cyprus that it claims are liable to tax in Israel, among other things by examining flights, entries and exits from the country and information on offshore companies received in information exchanges with other countries. The Authority is examining whether companies registered in Cyprus are actually managed and controlled from Israel, and notes that in the absence of a tax treaty between the countries it has little information on the activity of Israelis on the island. It also states that Israelis who hold or trade in real estate in Cyprus and have not severed their residency may be considered as conducting a business abroad, in which case the tax rate may reach 50%.
Source: Globes, Ella Levy-Weinrib, 18.3.24
Accurate as of the issue date. Laws, tax rates and procedures change; check the current position before any decision.
Translated from the Hebrew original. עברית