Hello,
Uncertainty in the economy is growing after the killings of senior figures in Lebanon and Iran. With the winds of war blowing, the Israeli economy is returning to stagnation (visible in the malls and restaurants), and it is hard to see how this will affect Israelis' investments overseas. At the same time, we are seeing in most of the countries where we operate that the trend of rising real estate prices continues.
This month a client of our office is starting a new project in Italy, and as those accompanying the project we decided to add Italy to the countries surveyed in this newsletter.
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, as in Romania and Bulgaria.
B. 8 reasons for the attractiveness of Greek real estate.
C. The Romanian real estate market ended the first half of the year with a positive outlook.
D. Italy - apartment prices are rising slowly, the lowest increases in the European Union in 10 years.
Wishing us all quiet and safe days, and enjoyable reading,
Ilan Leibovitch, Adv., and the office team
Greece
Housing prices in Greece are soaring amid shortage and high demand
Housing prices in Greece continue their upward trend in 2024, with the most significant increases, at 14%, recorded in the luxury segment of the market, which also affects lower-quality homes.
This trend affects rents in a similar way, making it harder to find affordable housing.
According to Bank of Greece indices, average sale prices across the country have risen by 66.4% and are now only 4.1% below the peak recorded in 2008. This development reflects the strong demand for investment properties, mainly residential, which cannot be met by the current supply.
A recent study by Piraeus Bank estimated that there is currently a shortage of 210,000 housing units. The bank's economists believe that this shortage is the main reason why the rate of price increase is 14% higher than would be justified by macroeconomic conditions and income trends.
To balance the gap between supply and demand, the government is taking a two-pronged approach. On one hand, it aims to reduce transactions by foreign investors buying property for the golden visa by raising the purchase threshold required to obtain a golden visa and banning the use of the purchased apartments for tourism purposes.
On the other hand, it has initiated actions to increase the housing stock by opening a subsidy program for renovating 10,000 vacant apartments, which will then be made available for long-term rental.
Banking sources note that these are steps in the right direction but stress that they are not enough. They argue that the key to a faster normalization of the situation lies in the collateral of non-performing loans and their rapid return to the market.
8 reasons for the attractiveness of Greek real estate
Korina Saia, CEO of Premier Realty Greece, noted in a press interview that investing in Greek real estate provides a combination of affordable prices, high yield potential and lifestyle benefits. As the economy recovers and tourism continues to grow, the Greek real estate market offers promising opportunities for both personal and investment purposes, he adds. In more detail, the eight reasons that make the real estate attractive for investment are:
1. Development potential
Tourist attraction: Greece attracts millions of visitors every year, which increases demand for rental properties in popular areas such as Athens, Mykonos, Santorini and Crete. In particular, tourist arrivals rose by 20.6% from January to May 2024 compared with the corresponding period in 2023.
Real estate market recovery: The Greek real estate market has shown a continuous rise in apartment prices, building permits and rents since 2017. In 2023 prices rose by 13.4% on an annual basis, compared with 11.9% in 2022. Prices are still around 4% below the peaks of the third quarter of 2008, according to BNP Paribas. By contrast, Eurostat data shows a price decline in at least eight European countries, including Luxembourg, Germany and Finland.
2. Competitive prices
Affordable real estate prices: Despite strong growth, Greek real estate remains competitively priced, especially compared with Western Europe. In the luxury real estate category, areas such as Vouliagmeni, Pigadakia, Elliniko, Voula, Kolonaki, Kavouri, the Cycladic islands such as Santorini, and Crete have the highest prices per sq.m. By contrast, areas such as Kastoria, Karditsa, Florina, Thessaly and Kozani have the lowest prices per sq.m.
High yield potential: Low property prices, combined with strong rental demand, can produce attractive rental yields ranging from 4% to 8.5%, depending on the location and type of property.
3. The golden visa program
Benefits: Greece's golden visa program grants residence permits to third-country citizens who invest at least 400,000 euros in real estate, based on new regulations from August 2024. For the Attica region, the regional units of Thessaloniki, Mykonos and Santorini, and islands with a population of more than 3,100 residents, the minimum value of properties at the time of purchase is 800,000 euros. The program offers access to the Schengen area and can serve as a path to EU citizenship.
4. Quality of life and a Mediterranean climate
Mediterranean climate: Greece's pleasant Mediterranean climate makes it an attractive destination for both vacations and permanent residence.
Quality of life: Greece offers a high quality of life with its beautiful landscapes, rich history, cultural heritage and pleasant lifestyle. The cost of living is relatively low compared with other European countries, and despite lower wages, the quality of life remains high.
5. Real estate market trends
Rising demand: International investors from countries such as Cyprus, the USA and Israel are increasingly interested in Greek real estate, mainly because of low prices, government reforms and potential capital gains. According to Bank of Greece data, the real estate sector absorbed over 40% of total foreign direct investment. In 2023, foreign direct investment in real estate grew by 8% year on year to 2.13 billion euros.
Infrastructure development: Ongoing infrastructure projects, including transport improvements and urban development, are raising property values. According to PwC, global infrastructure needs are expected to reach about 77 trillion dollars by 2040, with Greece ranked 37th in the world and 18th in the European Union in terms of infrastructure quality.
6. A variety of investment opportunities
Variety of options: Greece offers a wide range of investment opportunities, from luxury villas and seafront properties to urban apartments and commercial properties. In addition, Greece has significant potential in key sectors such as tourism, agriculture, shipping and renewable energy.
Sustainability opportunities: There is a growing availability of luxury properties, along with growing interest in sustainable and environmentally friendly residential developments. The Greek government has launched various initiatives to promote green real estate.
7. Tax incentives
Favorable tax regime: Greece has set tax incentives for real estate investors, including reduced property transfer taxes and potential tax benefits for renovation and development projects.
8. Strategic location
Geographic advantage: Greece is located at the crossroads of Europe, Asia and Africa and offers strategic advantages.
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, it is worth paying attention to the restrictions planned by the Greek government on short-term rentals, and the increase in the minimum requirements for obtaining a golden visa.
Romania
Report: the Romanian real estate market ended the first half of the year with a positive outlook
Large infrastructure investments, significant wage growth above inflation, stable external economic ties and the central banks' victory in the fight against inflation are helping the Romanian real estate market maintain a positive outlook, according to Colliers Romania experts in their market report for the first half of the year.
In 2024, real estate transactions in Romania were carried out in a total amount of 419 million euros, more than double the amount in the corresponding period last year. The construction sector reached historic highs, driven by massive investments from EU funds and a quite active private sector.
The logistics and industrial sector also shows promising results, as tenants migrate to destinations outside the capital. Meanwhile, the retail sector continues its rapid development.
“The economy is sending mixed signals. Delays in the EU recovery and resilience plans, geopolitical uncertainty and the uncertainty created in the wake of the US elections, together with the prospect of significant tax tightening in Romania from 2025, temper the optimism,” said Silviu Pop, Head of Research for Central and Eastern Europe and Romania at Colliers.
“However, there are reasons for a somewhat positive outlook, especially in light of the news coming from the consumer sector and considering the large investments - both private and public - being made in Romania. The local real estate market is affected by these developments, but the effect varies for each sector. The prospects remain quite solid in the region,” he added.
This year, Romania saw the best real estate investment performance compared with the five other large economies in Central and Eastern Europe (Bulgaria, the Czech Republic, Hungary, Poland and Slovakia).
The forecast for the whole year is for the market to comfortably exceed the average of the previous decade, i.e. above 600 million euros. Bucharest accounts for a little under half of the amount, and developers have about 800,000 sq.m. of modern space under construction due for delivery in 2024 and 2025.
Infrastructure work continues at an accelerated pace, opening new areas of interest for the industrial market, including manufacturing.
Rental demand for logistics and manufacturing space fell in the first half by about 29% to 342,000 sq.m. However, Colliers experts stress that this does not necessarily indicate a dramatic decline in market activity but reflects a lack of very large contracts.
On one hand, home-buying intentions, as measured by Eurostat surveys, are close to an all-time high, and at the same time purchasing power is rising again, which together with interest rate cuts by the central bank should also help demand.
“Considering that today's investments support tomorrow's economic growth, Romania's medium- and long-term prospects in real estate are promising. Even if there may be less positive news in the immediate future, the overall outlook remains bright,” concludes Silviu Pop.
The rise in real estate prices in Romania continues
According to the index of the website imobiliare.ro, July saw a further average rise in housing prices in Romania of 0.5% (11.9% compared with July 2023 prices), with the average price per sq.m. at 1,611 euros.
Bulgaria
Apartment prices in Bulgaria are rising
Housing in Bulgaria remains more affordable compared with its Western European counterparts, a fact that contributes to the high rate of home ownership in the country. According to real estate agents' data, about 92.5% of Bulgarians live in their own homes. This high home ownership rate is supported by a favorable ratio between the average wage and property prices in the large cities, which makes it economically worthwhile for many to buy rather than rent.
The low mortgage interest rates also play a significant role in this trend. Many Bulgarians prefer to pay mortgage interest for owning an apartment rather than paying rent. In addition, Bulgarians tend to stay in their cities and neighborhoods for longer periods compared with residents of other European countries, which reduces the need for frequent relocation.
There is also internal migration to Sofia in search of better employment opportunities, which leads to strong demand for both purchase and rental of properties in the capital. At first, those moving to Sofia may choose rental housing while getting to know the real estate market and searching for a permanent home.
Bulgaria's rental market is also thriving. This growth stems partly from an increase in foreign tourists and a rise in short-term rental options through various online platforms. In the large cities and popular resort sites, tourists prefer to rent apartments for short stays, because these often offer more space and amenities, such as a kitchen, at better value compared with hotel rooms.
According to recent data from the National Statistical Institute (NSI), residential real estate prices in Bulgaria jumped by 16% in the first quarter of 2024 compared with the corresponding period last year, marking the highest growth rate since 2022. This rise is markedly higher than the 10% rise seen in 2023. The data also reveals that the average monthly salary in Bulgaria rose by 16.8% year on year.
The highest price rises were recorded in Varna, with a rise of 23.5%, followed by Sofia at 18.2% and Burgas at 12.3%. The jump in prices is especially notable for new construction. This rise in property values has caused more activity in the real estate market, with an increase in the number of transactions. In Sofia, the first quarter of 2024 saw the strongest buying and selling activity since 2008. Varna and Burgas also reported increases in transactions of 12.8% and 9.7% respectively, while Plovdiv saw an increase of almost 4%.
Mortgages remain a significant factor driving the housing market, with interest rates in Bulgaria among the lowest in the European Union. The limited supply of properties for sale has pushed market prices up further, creating a favorable environment for sellers. However, despite the strong demand in the market, many property owners find it hard to sell their homes at the prices they want or within their preferred timeframes.
Recent trends highlight a significant shift toward new construction. The latest data indicates that Bulgaria ranks second out of 56 countries surveyed by the consulting firm Knight Frank in price rises. This price rise is consistent with a high pace of construction in the large cities.
A notable trend in recent years is the growing preference among buyers for newly built properties.
The older buildings, first built in the late 1950s and more prominently in the 1960s, are now 60 to 70 years old, which leads many residents to look for newer alternatives. This change is evident in neighborhoods such as Ovcha Kupel, Mladost and Lyulin, where old buildings are mostly prevalent.
Demand for new properties remains strong in established neighborhoods, while developing areas and the periphery offer more affordable options. In Sofia, buyers increasingly prefer homes near metro lines and locations with accessible services, including kindergartens, schools and health facilities. Parking problems are usually handled by buying additional parking spaces or garages.
According to Eurostat, Bulgaria experienced the highest growth in housing prices among European Union countries, with a rise of 7.1% compared with the last quarter of 2023. This is the most significant rise in housing prices in Bulgaria since the last quarter of 2007.
In the first quarter of 2024, home prices in the eurozone fell by 0.4%, while they rose by 1.3% in the European Union compared with the corresponding quarter last year.
When comparing the first quarter of 2024 with the fourth quarter of 2023, home prices fell by 0.1% in the eurozone and rose by 0.4% in the European Union.
The rise in housing prices in Bulgaria can be attributed to several factors. Economic stability and growth have increased consumer confidence, leading to increased demand for properties.
Italy
Apartment prices are rising slowly, the lowest increases in the European Union in 10 years
Apartment prices in Italy have risen in recent years, but compared with inflation, and especially compared with those of other European countries, the rise in property values was extremely limited (increases of 8.6% versus the European average of +49%). According to Eurostat data, properties in Italy are those whose price rose the least in Europe after homes in Finland.
The comparison is with 2015: since then and through the first quarter of 2024, apartment prices grew by 8.6%, versus cumulative inflation of 19.1%, while in the European Union on average apartment prices rose by 49.1%. Real increases are recorded in some Eastern European countries. In Hungary the price rise over 9 years was as much as 188%, while in Lithuania it rose by 127.7% and in the Czech Republic by 114.3%. Growth in Portugal was also very significant, +112.5%, while in Spain it was 53.2%, slightly above the European Union average. Properties in Germany recorded rises of 43.8%, in France of 26%.
The current trend in the residential real estate market - small apartments
According to the Italian news site Sky, Italians are saying... small. No more large apartments, farewell to villas and cottages, with even less attention on country houses. In a real estate market that is in sharp decline, last year most sales were of studio apartments or two-room apartments under 50 sq.m. The trend is especially prominent in Milan: only 14.7% of the apartments sold, according to 2023 data, have a floor area greater than 115 sq.m., whereas the Italian average is 32.6% and in the provincial areas of the northeast it is 41.3%. A picture set to strengthen after the green light from the environment committee for living in mini-homes. In fact, the minimum floor-area limit for habitable apartments is being lowered (it will now start from 20 sq.m., whereas previously it was 28 sq.m.), as is the ceiling height (which drops from 2.70 meters currently to 2.40 meters).
Total transactions fell by 9.7% in 2023, but for apartments of between 115 and 145 sq.m. the drop was 11.4% and for apartments over 145 sq.m. it was 11%. By contrast, studio apartments or two-room apartments of less than 50 sq.m. saw a decline of only 4.8%. In Sicily and Sardinia there was a rise of 0.3%. In the center, and especially in the provincial capitals, there was the largest drop for apartments with large areas over 145 sq.m. (-17.8%), with a record of -20.3% in Rome. The decline was also strong in Genoa, -19.7%, and in Florence, -14.5%.
“When money and a vengeful streak meet, things come to light”
The article deals with the taxation of Israelis who buy apartments abroad and rent them out, and notes that many of them are unaware of the obligation to report rental income in Israel even after they have paid tax in the country where the property is located, and others choose not to report. According to the article, tax treaties, such as those between Israel and Romania and Greece, allow offsetting the tax paid abroad, and in Israel there are two routes for taxing rental income from abroad: tax by brackets on the profit with a credit for the foreign tax, or a 15% tax with no deduction of expenses (other than depreciation) and no offset of the foreign tax. Sources quoted in the article explain that the Israel Tax Authority can locate unreported properties and income, among other means through information from the banks and information that comes from people in the person's surroundings, that failure to report is a criminal offense, and that a new procedure for voluntary disclosure is expected to be published. It also mentions the estate tax applied in the USA and in some European countries, and the obligation to file a report with the Tax Authority on assets abroad worth over 1.9 million shekels.
Source: TheMarker, Shlomit Tzur, 2.8.24
In the middle of reserve duty, Leah bought a house in Budapest: the Israelis who buy property abroad “so there will be somewhere to run to”
The article describes Israelis who bought apartments abroad after October 7, not only as an investment but also as a possible refuge for themselves and their families, and presents the stories of buyers who bought apartments in Budapest, Barcelona and Larnaca. The interviewees explain their decision by a sense of insecurity, dissatisfaction with the political situation in Israel, the tax burden and the cost of living. According to people at real estate companies working with Israeli clients in Spain, Cyprus and Hungary, demand from Israelis began to rise during the protest over the judicial reform and the rise in interest rates, and grew significantly after the outbreak of the war.
Source: N12, Avivit Misnikov, 11.7.24
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