Greek Tax Changes to Have Big Effect on the Market

As some of you will know there have been some pretty sweeping changes to the Greek taxation system in relation to property purchases and sale. Usually when a government does things like this it is easy to pick out their motive, but this time it is unclear whether they are trying to revive foreign sales, increase tax payable for commercial transactions, both or something else entirely.

Firstly and perhaps most importantly for the market, the annual levy on properties held by foreign companies and funds was increased from 3% to 15%. This will almost certainly be reduce investment in Greek property by international real estate investment trusts (REITs) and other commercial funds.

On the flip side, the 1% property transaction duty and capital gains tax on property were both zeroed, and transfer tax reduced from 11% to 10%. This should be good news for many foreign buyers.

Not all buyers will benefit however, because VAT on new build homes was increased by up to 2%, which will cancel out some of the benefits to new build buyers.

The changes won’t drastically reduce demand from foreigners buying privately, if correct advice is given, says Peter Mihalos, president of Southeast Real Estate Group.

“A ‘normal’ foreign buyer will actually see a small discount in the transactional tax due,” he told Overseas Property Professional.

“Furthermore European Union citizens are also eligible for various tax breaks, especially if they are residents here.”

The changes could bring about a 20% reduction in Greek property prices as investors give the country a wide birth, says RICS Hellas spokesman George Litsas.

“I believe that this will turn off foreign investors buying any kind of real estate in Greece, local demand for property will slump and eventually, from the second semester of 2010 the property prices will decrease,” he said.

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EU Property Investment Up 15% in the First Quarter

13.4 billion euros worth of property investment deals took place in the EU in the first quarter of this year. This represents a 15 per cent increase over the first three months of 2009, according to research from PropertyEU released yesterday.

This shows unequivocally that faith is returning in the international property arena. Sure, this report is on commercial real estate, but growth in the residential sector will almost certainly follow in the areas where these purchases and expansions are taking place.

Malls need staff, malls need shops, new ventures open up and they need staff, not to mention staff to manage the malls. It is a fact that many of these staff will already be in place, but I do not know one mall investor who will not want to have some sort of presence in the higher levels of their new investment’s staff.

Also, the malls and offices wouldn’t be worth investing in if growth and expansion were unlikely in the market. This means expansion of stores and business, which cannot happen without more staff.

Speaking of which, according to the report, the retail sector was by far the best performing, over the office and industrial sectors.

The retail sector, which saw a 5.2 billion euro growth, was boosted, by the 1.3 billion euro purchase of a portfolio of operational shopping centres and shopping centre developments by Dutch investment trust Corio,  from developer-owner Multi Corporation.

Both companies agreed that Corio would acquire four active retail centres in Germany, Spain and Portugal and another retail centre under construction, again, in Germany.

The second most lucrative deal in the first quarter, was the purchase of  Simon Ivanhoe's portfolio of shopping centres in France and Poland, worth about 715 million euro, in February, by Unibail-Rodamco.

According to the website of PropertyEU, the site was established in 2006 to provide insight on financing and investment in the latest important deals in Europe, investors from North America, the UK and elsewhere.

The research follows investment deals exceeding 20 million euro in value, for which the financial details are known.

Italian Property Market on the Turnaround

The Italian property market looks to have turned the same corner that many established markets did in the second half of last year, the corner onto the road leading to recovery.

Un the final quarter of 2009, property transactions declined by just 0.4% year on year, according to the latest housing market review from the Agenzia del Toro (Italian Land Registry). This is compared to a year on year drop of 18.6% in the first quarter. In the second half of 2009, Italian property prices were just 0.2% lower than in the first half, and just 0.7% lower than the second half of 2008.

This is hardly surprising. The trend in 2009 was buyers going for safety and stability. This made property markets where prices had held up well against the downturn much more popular than those that hadn’t.

Italian property prices fell by among the smallest amount in Europe throughout the entire course of the crisis. In fact, in Knight Frank’s index in Q2 of last year, Italy was the 10th best performing market in Europe (16th in the world), with prices down just 3.5% on Q2 of 2008. The same index in Q3 showed prices were still down only 3.5% year on year, by which time the market was clearly already on the turn.

Italy is a strange one though. The other markets that have seen prices holding have tended to fit certain criteria:

In economies that have not endured a severe recession, and, in some of these places, an economic stimulus has been far more than was needed, creating a liquidity surge.

Italy has endured a severe recession, and its stimulus has tended to be very measured. For this reason, when Italian property prices do start to grow now, going forward there will be no need for anyone to fear that a bubble is forming.

In terms of foreign demand, Italy may well suffer in the short term, as buyers look for bargains in the markets where prices have been slashed. Whether it does or not, Italy has now proven that the management of its property market is capable of preventing speculative bubbles, and this makes it a stable long-term growth market. This will do it more good than harm over the long term.

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