How to Make Money on Real Estate in Greece

Skyscrapers Will Transform the Skyline of Athens—New Horizons Open for Investors Purchasing Property in Greece.

Buying property is the most popular way to obtain a Greek Golden Visa. Typically, investors choose villas in resort areas or apartments in Athens. However, the capital lacks suitable real estate to attract investors and generate profit. A new district with skyscrapers is likely to alter the established landscape significantly.

Will Patriarchal Athens Become a Thing of the Past?

Athens has never been a city known for its abundance of high-rise buildings. Speaking of residential buildings, none in the Greek capital exceed 27 meters in height. The tallest structure in the city is a TV tower, modestly reaching 103 meters—hardly an impressive result compared to many modern engineering feats. But now, it seems, the city's skyline is about to change, with the addition of its very own superstructures.

Ellinikon: A Project That Will Change the Face of Athens

A new and unique development project for Athens has been planned in the Ellinikon area, roughly where the Greek capital's former international airport was located. The project is being managed by the well-known Greek company Lamda Development. The scale of the project is impressive:

• Total investment: around €8 billion;
• The area allocated for the project: is approximately 620 hectares;
• Number of skyscrapers: 5, including two residential complexes, separate buildings for a hotel, and a casino;
• Project duration: 3.5 years;
• Number of jobs created: about 80,000;
• Height of each building: at least 200 meters.

The main investor in the project is the Mohegan Gaming and Entertainment consortium, with architectural work done by Steelman Partners, a firm specializing in the design and construction of integrated resort complexes (IRCs).

Historical Traditions and Modernity: How to Find a Compromise?

The project's creators claim they drew inspiration from Greece's historical past, using architectural traditions from Ancient Greece. They stated that the skyscrapers would remind the Greeks of their ancient traditions and mythological imagery.

At the same time, these urban development plans have sparked mixed reactions within the Athenian community. Many people, including residents and professional architects, believe that such ultra-modern structures will spoil the traditional, centuries-old appearance of Athens.

Notably, the highest point in the city is the ancient historic Acropolis Hill, where the ruins of the Parthenon—an ancient Greek temple and world-famous architectural monument—still stand. A popular belief among city residents is that no building in Athens should be taller than the Acropolis and its temple (about 150 meters).

Moreover, the Ellinikon area is adjacent to the sea, and according to traditionalists, its landscape should remain relatively recognizable and untouched.

The Greek Architectural Society—a prestigious organization whose opinion matters to many educated citizens—condemned the project and expressed deep regret over its approval. The debate has become political, with left-wing parties accusing the government of ignoring the interests of Athens' residents in favor of private business interests.

Bulldozers Mark the End of the Debate

Nevertheless, opponents of the project only managed to delay its start by four years, citing the need for archaeological studies or objections from the Department of Forestry.

But in June 2020, bulldozers began working at Ellinikon, demolishing old structures and signaling the real start of Greece's most ambitious investment project. It seems that a new, extensive field of activity has opened up for investors targeting the Greek Golden Visa.

Earning Income from Property in Greece: Useful Information for Investors

This summer, the American rating agency DBRS Morningstar released a report indicating that real estate prices in Greece are primarily driven by the activity of foreign investors. China, Russia, Arab countries in the Middle East, and the UK are the main countries whose citizens are buying property in Greece.

Transactions occur both within the framework of obtaining residency (Golden Visa) and for generating income through subsequent rental of the property. Moreover, data shows that until recently, even investors who obtained the Greek Golden Visa by purchasing property often rented it out afterward.

How profitable is this type of business for landlords in Greece? What is needed to rent out your property? Where is the best place to engage in such a business? You will find answers to these and other questions in the material provided by GARANT estate.

What Income Can a Landlord in Greece Expect?

The average gross rental yield in the country is 3.97%, roughly equal to the level in Spain (4%) and lower than in Portugal (5.45%). However, average figures in such calculations can be misleading; more accurate information is provided by the yield corridor, which ranges from 3.2% to 6.5%. Yield fluctuations depend on many factors: the region where the property is rented, the size and condition of the property, the time of year, etc.

In Athens, the size of the property plays a significant role. This factor is evident everywhere, but particularly in the capital. Smaller and medium-sized apartments yield proportionally higher income compared to larger properties (per square meter).

Ah, Rent and Coastal Property!

It's no surprise that rental rates are higher in the country's regions that are popular with tourists. These include coastal areas, islands in the Aegean and Ionian Seas, and the capital and its suburbs. Recently, Thessaloniki has also been added to this list, overtaking even Athens in demand (as the flow of tourists increases, and available housing is insufficient).

In Athens, the gross rental yield never falls below 4.3%. In elite areas of the capital (Kolonaki, Lycabettus), it usually exceeds 6.3%, sometimes reaching 7%. Yields of 6% can also be achieved in certain suburbs of the capital (e.g., Glyfada).

For reference: Gross rental yield is the income from renting out property before taxes and maintenance expenses.

Resort regions are also not far behind the capital. More than 6% gross yield is obtained by landlords of properties on the resort islands of Crete, Rhodes, Corfu, and Mykonos. However, seasonality and the length of the rental period play an important role here, which we will discuss further.

Why Short-Term Rentals Are Winning

The country's warm climate ensures that there is always demand for housing, and finding clients is usually not a big problem for landlords. This is especially true for the capital and Thessaloniki. On the coast and islands, however, there is a distinct low winter season when the influx of vacationers slightly decreases. In the high season, there is a sharp increase in demand for elite villas and cottages.

In recent years, there has been a steady and noticeable rise in property prices in Greece. For example, in Athens, since 2015, prices have increased by 25% to 50%. This, in turn, has led to higher property maintenance costs. Landlords have responded by raising rental rates. However, given the challenging economic situation in Greece and the high unemployment rate, long-term rentals have become unaffordable for many residents.

Property owners increasingly began turning to short-term rentals, targeting foreign tourists. To find clients, they widely use online platforms such as Airbnb and Booking. It turns out that short-term rentals generate 1.5% to 2% more profit than long-term rentals, often reaching 7% annually.

Interesting fact: In Greece, unlike many more developed EU countries, about 80% of residents own their own homes. It is customary here to keep "spare" apartments for underage children. In the current situation, they are often used for short-term rentals. This trend is reinforced by foreign investors, who frequently buy Greek real estate for profit. This is facilitated by a law passed in December 2019, which exempts foreigners from reporting their income earned outside the country to local tax authorities and only requires them to pay a fixed tax.

The Mechanism of Renting Out Property

So, we have already touched on two features of the Greek rental market:

• A sharp increase in the number of short-term rental agreements;
• The widespread use of online platforms to find clients.

Both factors are new and were not previously typical for Greece, and here is why. Traditionally, property owners used the services of independent agents or real estate companies to rent out their properties. Their work was usually valued at around 10% of the annual rent. Alternatively, a fee equal to one to one and a half months' rent was charged.

If the company handled short-term rentals and took care of all the current tasks of finding clients and maintaining the property, its commission would increase two to three times (in line with the increased efforts required).

To protect the rights of both the tenant and the landlord, it was customary to draw up a legal contract. The term of such a contract for residential premises was usually three years. At the end of this period, the contract would either be renewed or automatically terminated.

Now, with the spread of short-term rentals through online platforms, the legal situation is changing. In particular, property owners have two options:

• Register their property in the Short-Term Rental Registry;
• Obtain a tourist license for the apartment or house.

In the first case, the owner is issued an individual number in the Registry, which they are required to publish in their advertisements on online platforms. In the future, when finding clients, they must report the rental to the tax authorities. If the tax authorities discover an undeclared rental, the property owner pays a fine of €5,000.

In the second case, registration in the Registry is not required, and the license number must be included in advertisements. It should be noted that obtaining a license takes about two months and can cost the landlord between €3,000 and €5,000.

A Few Words About Taxes on Rental Income

In Greece, rental income is taxed progressively. The tax rate, therefore, can vary widely, from 7% to 45%.

Important: When calculating tax, the landlord's expenses and depreciation are immediately deducted from gross income. To avoid detailed and lengthy calculations, a simplified scheme is often in place: 40% of gross income is expenses (utility bills are attached) and 10% is the amount of depreciation. In other words, under this scheme, taxes are assessed on half of the gross income.

The amount of rent, as well as the terms of its payment, are not regulated by law and are freely agreed upon by the two parties. However, the agreement itself is necessarily supported by a contract, for which standard forms are almost always used. Only those contracts that are registered with the tax office are legally binding.

The Greek government is currently considering a temporary reduction in the tax rate on rental income, especially if the gross income does not exceed 12 thousand euros per year. The aim of this is not only to compensate for the losses of landlords but also to help tenants overcome the effects of the pandemic, especially those from the local community.

In this regard, Minister of Economic Development Adonis Georgiadis stated that landlords lost about 40% of their income in 2020. Because of these losses, the Federation of Greek Property Owners is proposing to introduce a 25% rebate on year-end taxes.

If this happens, landlords in Greece will emerge from the current pandemic crisis with relatively little financial loss. And this fact will once again confirm: to rent housing in this country is always profitable!

The material is based on data from the Greek Reporter.