Hello,
Although many are about to leave for their summer vacation, we are hard at work studying a new project and a new country. Over the past month I held many meetings and conversations with law firms in Italy in order to find the right firm to serve as our local partner, so that we can provide service to a client who is about to begin activity in the country. In parallel, we are learning about the regulation, practice and procedure in the new country, and from next month you will be able to read news about what is happening in Italy in our newsletter as well.
A reminder for those planning to buy real estate in Greece - whoever completes a transaction and places a deposit on the property by the end of August will enjoy the old conditions for obtaining a golden visa.
This month we would like to bring to your attention:
A. Real estate prices in Greece continue to rise.
B. Romania's investment market recorded the highest rise in activity in Central and Eastern Europe.
C. Romanians and foreigners want to buy luxury apartments or villas, especially in Bucharest or Brașov.
D. When will Hungary switch to the euro?
E. The European Union elections: who won and lost - and what happens next?
F. Barcelona has decided to ban Airbnb apartments in the city. Will other cities follow?
G. USA: the median price of existing homes climbed to a record in May.
Wishing us all quiet and safe days, and enjoyable reading,
Ilan Leibovitch, Adv., and the office team
Greece
Where Greeks are buying luxury homes
According to a study by Premier Realty, Greek buyers are interested in and buying small luxury homes starting from 60 sq.m. In the Amarousi areas, at prices starting from 3,000 euros per sq.m., for one-bedroom homes.
In Maroussi in particular, residential demand came from the large office projects developed in the area. More generally, as the survey notes, there is a rising trend in demand by Greek buyers for new homes built in the northern suburbs such as Ekali, Politia and Kifissia. This is because the area offers an upgraded lifestyle and excellent schools that attract many investors.
According to indomio, over the last two years the average price in Kifissia reached its peak in May 2024, with an average price of 3,423 euros per sq.m. The asking price was higher in the Kefalari sub-area, at 4,014 euros per sq.m. Homes with two or more bedrooms start from 5,000 euros per sq.m. In Ekali, luxury villas start from 8,000 euros per sq.m.
At the same time, demand for premium homes in central Athens is especially high, with prices also at high levels. For example, in Kolonaki luxury property prices start at 6,000 euros per sq.m. This is in fact the cost of selling several renovated neoclassical-style homes in the historic center of Athens, which has an excellent view and is located near the Acropolis.
The cost of homes in the historic center in many cases even exceeds prices on the famous islands, and as a result most buyers are from abroad.
At the same time, Greeks are currently less interested in the luxury homes of the southern suburbs. The lack of viability in buying seaside apartments is evident from the fact that recorded prices are no lower than 200-220 thousand euros, prices that match the purchasing power of foreign investors.
What characterizes the demand for luxury homes with a modern specification is the high demand for the Hellinikon project and its surroundings. In Glyfada villa prices start from 8,000 euros, while in Voula and Vouliagmeni prices start from 7,000 euros and 9,000 euros respectively.
However, demand for buying luxury homes in the Ionian Islands is high, while Crete destinations still have high demand, since there is a more favorable relationship between price and performance in luxury properties.
In these areas buyers can find two- or three-bedroom houses with a swimming pool and a beautiful view, with costs starting from 350,000 euros and even reaching 14 million euros for premium villas of over 1,000 sq.m.
According to Korina Saia, CEO of Premier Realty, “We are going through a period of selective buyers, but interest in Greek real estate exists and will continue to be strong. The requirements of luxury home buyers are now being upgraded. Luxury homes offering comfort and services such as sustainability, technological upgrades and hotel-style services are at the top of buyers' preferences.”
Real estate prices in Greece continue to rise
In particular in 2023, but also in the first months of 2024, the rise in real estate prices continued at high rates.
The housing market saw the largest price rises, with demand for investment property remaining high and the supply of quality or new apartments limited, as the Bank of Greece notes in its monetary policy report published at the end of June.
As the Bank of Greece emphasized, housing is an especially important issue for Greek households, since the continued rise in prices, fed by demand from abroad, and the rise in construction and borrowing costs are shaping price levels that are disproportionate to disposable income, which makes buying a first home harder and pushes up both apartment prices and rents.
According to the apartment price indices published by the Bank of Greece, the price-rise trend continued during the first quarter of 2024 with high annual growth rates.
In the first quarter of 2024 the nominal prices of apartments rose at an annual rate of 10.4%, while over the whole of 2023 prices rose at an average annual rate of 13.8%, although from quarter to quarter, despite strong annual growth rates, there has been a slowdown in the last four quarters.
Apartment prices are only 4.1% below the all-time high recorded before the financial crisis (Q3 of 2008), while compared with the lowest price recorded in the third quarter of 2017, prices have risen by 66.4%.
As noted in the Bank of Greece's monetary policy report, with expectations for the Greek real estate market remaining positive and with tourism, improved infrastructure and the gradual renewal of the building stock as driving forces, it is estimated that the upward price trend will continue.
However, broader geopolitical instability, rising inflation and high construction costs, combined with the deterioration in household purchasing power and limited bank lending, are significant sources of uncertainty.
It is also estimated that ongoing changes in legislation and taxation adversely affect investment and construction activity, at a time when demand is not met by supply.
The recent interventions aimed at limiting investment demand for residential property in first-home areas (short-term leases, golden visa) are considered a move in the right direction, but further steps are considered necessary to ease and strengthen the supply of affordable housing.
According to ELSTAT data, the rise in building material prices continued in May, with an increase of 5.5% recorded. Price rises were recorded in: bricks (13.5%), copper pipes (9.9%), plastic pipes (8.3%), safety glass panels (8.1%), heating boilers (7.2%), solar water heaters (7%), electrical panels (6.8%), switches (6.7%), parquet (6.4%), tiles in general - floor, wall (6.2%), cement (6.1%), aluminum frames (6%), mortar reinforcements and ready-mixed concrete (5.5%), marble tiles (5.1%), plastic, acrylic, water (4.9%), ready-mixed concrete (4%)
As announced by ELSTAT, the general building materials price index for new residential buildings showed a rise of 5.5% in May 2024 compared with the corresponding index of May 2023, versus a rise of 7.8% noted in the comparison between the corresponding indices in 2023 and 2022.
Regarding the rise in construction costs of residential real estate and buildings in general, the president of the Hellenic Federation of Building Contractors' Associations, Dimitris Kapsimalis, notes that the increases are in fact much higher than the latest ELSTAT figures (for building materials).
In particular, as Mr. Dimitris Kapsimalis reports, construction costs today are twice as high as in 2020. The heavy demand for real estate after a long period of economic crisis and the rise in land prices in Attica pushed construction prices, and subsequently real estate prices, to high levels for ordinary people and the average household. At the same time, the enormous shortage of manpower, mainly in small residential construction projects, has also raised construction costs.
According to Alpha Bank analysts, real estate prices in Greece rose even during the COVID pandemic, despite its negative effect on economic activity, while the rates of increase accelerated in the last two years. In their view, the resilience of the Greek housing market - in contrast to the eurozone, where residential and commercial property prices fell in the past year - is rooted in:
First, the fact that real estate prices in Greece have not fully recovered compared with the levels recorded before the financial crisis. In particular, apartment prices remain 4% below the peak reached in the third quarter of 2008, while office and shop prices are 10% and 3.5% respectively below their highest prices in the first half of 2010.
In addition, while real estate prices rose in the eurozone during the four-year period of 2014-2017, in Greece they continued on a downward path, in parallel with a decline in demand and economic activity in the country.
Second, the positive economic growth rates in Greece from 2018 onward, which over the last three years were significantly higher than the European average.
According to existing forecasts, Greece's GDP is expected to keep growing at a rate higher than that of the European Union over the next two years. Real GDP grew by 2.1% year on year in Greece in the first quarter of 2024, compared with 0.5% on average in the European Union.
Alongside the rise in output, labor market conditions are also improving, with employment strengthening significantly and the seasonally adjusted unemployment rate gradually falling to 10.8% in April 2024, from 20.1% in the same month of 2018.
Third, tourism performance and the development of the sharing economy. Tourist arrivals and receipts recorded historically high levels in both 2019 and 2023, as reflected, among other things, in the astonishing rise in nights of accommodation available on digital platforms through the sharing economy. The figure in question stood, based on Eurostat's experimental statistics, at 36.4 million in 2023, compared with 20.3 million in 2018.
Fourth, strong foreign direct investment (FDI) related to real estate in Greece, which reached 2 billion euros in the two years 2022-2023, compared with 0.4 billion euros on average in the previous decade.
The implementation of the golden visa program, which gave incentives to citizens of third countries to buy real estate in the European Union, gave a significant boost to real estate FDI. However, the strong interest of foreign investors may be moderated by the increased restrictions of the said program from August 2023 onward.
From the writer's desk:
The real estate market in Greece is on a continuing upward trend, with high demand expected to support prices in the near term as well. Demand for real estate is expected to remain high owing to factors such as tourism, improved infrastructure and the renewal of the housing stock. However, potential investors should be aware of factors that could lead to a slowdown in price rises or even a decline, as we reported here in the past regarding the restrictions planned by the Greek government on short-term rentals, and the increase in the minimum requirements for obtaining a golden visa.
Romania
Romanians and foreigners want to buy luxury apartments or villas, especially in Bucharest or Brașov
The Romanian website Business Review reports that the real estate market in Romania continues to develop steadily, with more and more Romanians and foreigners aiming to buy apartments, houses or villas, especially luxury properties, in Brașov or in Bucharest and its surroundings. Against the background of this great interest in housing, the real estate consulting field is growing spectacularly.
“From the standpoint of the high interest in buying housing and the growing number of requests to furnish new apartments or houses, the real estate field in Romania continues its growth pace. Buyers are particularly interested in luxury properties, usually new and spacious, which they want arranged in a harmonious and functional way. The most sought-after property types are apartments or houses in central locations in green areas, close to nature, and mainly luxury homes, for an exclusive lifestyle. In this context, the real estate consulting component has grown considerably, 2x in the past year compared with the previous period, given that most buyers want a special property that fulfills a range of functions, and a personal layout of the spaces in the desired homes,” says Sorana Leru, co-founder and interior architect at MiSo Architects.
Both Romanians and foreigners want to buy homes in the capital, in large cities or in cities with scenery such as Brașov, either to rent them out later or to settle in the country for investment purposes. Among the most sought-after types of housing are apartments in the central areas of the cities and villas near Bucharest and Brașov, which offer important advantages such as larger green areas, spectacular views, quiet and much more generous space.
In Bucharest, the most valued areas are the north, the Floreasca and Aviatiei area, and localities in Ilfov County north of the city (Corbeanca, Balotești). In Brașov, by contrast, homes with a spectacular view of Tâmpa, surrounded by nature or in historic areas such as the Șchei district, are valued more.
“Buyers are looking for apartments with usable areas of at least 90-100 sq.m. or houses and villas over 200 sq.m. Recently more and more spacious, airy homes incorporating state-of-the-art technologies are being purchased, and there is great interest in smart homes. More than 30% of those we work with and design interior spaces for are foreigners, from countries such as Italy, Germany and the USA, or Romanians who returned to the country for investment purposes. They look for spaces in central areas of the city or, conversely, secluded in nature,” says Mihaela Tampiza, co-founder and interior architect at MiSo Architects.
Romanians and foreigners want homes that are as functional as possible; as a new trend in the interior design market, they choose a combination of new elements that offer a state of well-being, serenity and calm in all the property's spaces. There is therefore great interest in homes that allow a harmonious arrangement but also the automation of several functions inside: gates, security and video monitoring systems, shading systems or controls for shutters/curtains and drapes, cleaning devices, ventilation, heating.
“Buyers also want less common automations, such as special sensors and lighting, ovens hidden in the countertop, special range hoods, innovative sanitary systems and more. It is integrated into more and more interior design projects, which are in growing demand. Budgets invested in interior design start at 600 euros per sq.m. and eventually exceed 1,700-2,000 euros per sq.m., which means that an apartment of 90 usable sq.m. will be furnished with a total budget of at least 54,000 euros, and a house of 250 usable sq.m. can reach an investment of 500,000 euros, depending on the furniture, equipment and decorative elements chosen,” says Sorana Leru, co-founder and interior architect at MiSo Architects.
Report: the Romanian real estate investment market recorded the highest rise in transaction activity in CEE
The first quarter of 2024 ended with real estate investments in Romania totaling 202 million euros, a rise of 69% compared with the corresponding quarter in 2023, with transactions in the retail sector accounting for about two thirds of the volume, according to the “CEE Investment Scene Q1 2024” report by the real estate consultancy Colliers.
Compared with the five other large economies (Bulgaria, the Czech Republic, Hungary, Poland and Slovakia) in Central and Eastern Europe (CEE), Romania had the best performance.
The Czech Republic became the new leader of the region, with investment volumes accounting for 46% of the total of the 6 large CEE countries, overtaking Poland, which has a cumulative share of 30% of the volumes traded in the first quarter of the year. However, performance varied significantly across the region, from a 94% drop in activity in Slovakia to a 69% rise in Romania.
Colliers advisors believe that the outlook for the real estate market in the region remains quite strong, with environmental, social and governance (ESG) criteria becoming increasingly relevant in the decision-making process of real estate investors, banks and tenants.
In total, the overall investment volume in the six CEE countries fell by 15% compared with the first quarter of 2023, to about 1.2 billion euros, in line with the dynamics in other regions of Europe and in many other parts of the world.
Romania's performance is quite encouraging, especially compared with other developed markets such as Poland or the Czech Republic, considering the period before the pandemic. In the first quarter of the year, Romania accounted for 16% of the region's total investment volume, compared with 5-7% in the years before the COVID pandemic.
“There is a gap between the price expectations of buyers and sellers. Various factors affect yields and liquidity, including interest rates, loan terms and ESG compliance, among others. However, the main challenge remains the cost of financing, currently ranging between 5% and 5.75% on total loans, affected by persistently high interest rates. Compared with Western European markets such as Germany, the CEE region has not undergone significant price corrections in the last 12-18 months. This may contribute to a slowdown in transaction activity in 2024,” said Laurențiu Lazăr, Managing Partner and Head of Investment at Colliers Romania.
The retail sector dominated the Romanian real estate market in the first quarter of 2024, representing about 66% of total commercial real estate investments. It was followed by the hospitality sector, accounting for about 21% of the total volume.
On a broader scale, at the CEE level, retail emerged as the main leader, taking 43% of transaction volumes in the first quarter of 2024. Hotels followed with a 20% share, while industry and logistics accounted for 15% of the total volume.
However, the volume of office investments experienced a continued decline in the first three months of the year, contributing only 13% of CEE's total investment volume.
Bucharest stands out with one of the highest investment yields in the region for the industrial, office and retail sectors, boasting yields of 7.5% for prime industrial and office properties and 7.25% for retail properties.
Hungary
When will Hungary switch to the euro?
The European Commission and the European Central Bank published their latest convergence report, which is published every two years at the request of countries seeking to switch to the euro, assessing the progress of the EU countries outside the eurozone. The report assesses each country's readiness to adopt the euro, and highlights its progress and challenges in meeting the criteria for eurozone membership. According to the latest convergence report, the conditions for adopting the euro are not currently met in Hungary.
The report focused on Bulgaria, the Czech Republic, Hungary, Poland, Romania and Sweden. The results are mixed, but perhaps not too surprising for most people.
According to the latest report, of the six countries mentioned above, Bulgaria meets most of the criteria. However, the Czech Republic and Sweden are also progressing reasonably well. In Hungary's case, according to the authors of the report, it cannot be said that progress is evident.
According to the report, Hungarian inflation remains a significant barrier to joining the eurozone, with an expected threshold of 3.3% compared with an annual average of 8.4% in May 2024. In addition, Hungary's deficit stands at 6.7%, well above the expected 3 percent, marking the highest deficit among the countries assessed. Romania follows closely, with a deficit lower by only 0.1 percentage point, and has been under an excessive deficit procedure since 2020. The criteria for adopting the euro also include the long-term interest rate, expected to be 5.5%, which only three of the six countries meet. Hungary is especially far off, at 6.8%. Another critical criterion is the quality of governance, an aspect that is challenging to put into numbers. Only Sweden meets this expectation, while Bulgaria and Hungary face problems owing to perceptions of high corruption, which causes unwillingness among other countries to support their accession.
The Hungarian cities with the largest real estate price rises
According to a study by the website money.hu, real estate market trends over the last 5 years show that property prices did not rise fastest in the most developed and expensive areas, but rather in developing areas. Property prices in the ten most expensive authorities rose five- to six-fold. The trends may even be interesting from an investor's point of view, as the rise in property values in some developing rural municipalities may benefit considerably those who have a good appreciation of the development of the property market in the area. And local property owners may find themselves in a positive position, seeing their wealth grow significantly through the homes they own.
Positive developments in the local labor market, for example owing to new investments, relative wage growth and population growth, affect apartment prices in a given area. These factors should be taken into account when considering where to consider buying a home as an investment. “It would not be surprising if in five years the authorities of Hajdú-Bihar, Csongrád-Csanád and Zala - and even Borsod-Abaúj-Zemplén - are among the most valued areas in terms of real estate. It is quite certain that the significant investments announced in recent months will encourage property purchases and may also raise property values in the municipalities concerned,” said László Balogh, chief analyst at ingatlan.com. Of course, the prices of individual apartments can also be affected by a number of different things such as the quality of the property, the number of rooms and bathrooms, the distance to schools and kindergartens, access to shopping centers and public transport, and the characteristics of the local area. The money.hu experts also stressed that a developing area or municipality may already be on the banks' radar. A rise in property prices provides credit institutions with more collateral, which makes them more willing to lend and eases the preset conditions. “There are clear signs of improving developments in the housing market since the end of 2023: historically high employment, a rise in real wages and consumer confidence, and a more favorable interest environment. In the real estate market, there is usually a strong correlation between interest rates and apartment prices. When market interest rates are more favorable, the housing market experiences higher demand, which usually pushes up apartment prices. This is supported by the latest apartment price index for May from ingatlan.com, which shows that the pace of apartment price rises has become more dynamic, but there can be significant differences between regions according to the price index, which shows price trends up to date,” said Levente Korponai, head of the money.hu department.
European Union
The 2024 European Union elections: who won and lost - and what happens next?
At the beginning of June, the elections to the European Parliament were held. These are the largest democratic elections in the world - more than 350 million eligible voters.
The elections are held once every five years, and the Parliament cannot be dissolved. Over the years the Parliament has gained more and more powers in various fields, including education, immigration, trade security and the economy.
Each country chose its own electoral system and when to hold the elections during the weekend allotted for this. In each country, parties that sit in the local parliament competed, and each country is represented according to its relative size on the continent. Thus, for example, Germany, the largest of the Union's member states, receives the largest number of representatives (96), while the smallest states - Cyprus, Estonia, Luxembourg and Malta - receive the smallest representation. In total, 720 members of parliament are elected.
An analysis of the election results shows that:
- Right-wing parties strengthened in the 2024 European Parliament elections, although less than forecast.
- Despite the significant wins and losses, no single bloc emerged with an overall majority in the European Parliament.
- Centrist parties are working to form a coalition that would support a second term for Ursula von der Leyen.
Barcelona has decided to ban Airbnb apartments in the city. Will Europe follow?
The mayor of Barcelona, Jaume Collboni, announced his intention to enact a law under which licenses for short-term rental of apartments to tourists will not be renewed, so that from November 2028 these apartments are due to leave tourist use and return to the residential market. According to the article, the move is intended to address the high housing prices in the city, where rent per sq.m. rose by 14% in the 12 months ending in April, against the background of the phenomenon of “overtourism”. The article surveys similar restrictions in other cities, including Berlin, which in 2016 banned short-term rental of entire apartments and canceled the ban in 2018, and also cites the opposition of Barcelona's tourist apartments association to the move. It also mentions an attempt at similar legislation in Israel in 2021, which was not carried out.
Source: Globes, Stav Livne, 25.6.24
USA: the median price of existing homes sold climbed to a record in May
According to data from the National Association of Realtors (NAR) in the USA, reported by Bloomberg, existing home sales fell in May for the third consecutive month, while the median sale price rose by 5.8% compared with the previous year to a record of 419,300 dollars. The supply of homes on the market grew by 18.5% compared with the corresponding month last year to 1.28 million, but is still far below the pre-COVID level. According to the data, about 30% of homes sold above the asking price, and properties stayed on the market an average of 24 days. The association's chief economist noted that the record prices are widening the gap between homeowners and those seeking to buy a first home.
Source: Calcalist, 21.6.24
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