Athens’ real estate prospects seen tumbling in 2016, according to this year’s Emerging Trends in Real Estate “Europe 2016 Beyond the capital”, a publication from PwC and the Urban Land Institute that records fundamental changes at the business end of the real estate industry.
The survey reveals an industry trying to come to terms with the needs of occupiers and the disruptive forces of technology, demographics, social change and rapid urbanisation.
These ground-level disruptions are permeating through the entire real estate value chain. Investors seem focused on cities and assets rather than countries.
They also favour alternative, more operational assets for accessing outperformance, with 41 percent of respondents against 28 percent last year considering taking the plunge into alternatives. Healthcare, hotels, student accommodation and data centres are all expected to shine as sectors benefiting from urbanisation and longterm demographic trends.
Outperformance in 2016
Development is seen as another way to achieve outperformance in 2016, with 78 percent agreeing it is an attractive way to acquire prime assets. Low interest rates and the sheer weight of capital bearing down on European real estate mean that most remain bullish about the industry’s business prospects in 2016. However, concerns over geopolitical issues like immigration and terrorism, Britain’s potential exit from the European Union, economic decline in China and uncertainty over Europe’s economic recovery, have led to a strong undercurrent of caution, most obviously highlighted by lower levels of confidence in the outlook post 2016.
According to Emerging Trends Europe, the five leading cities for investment prospects in 2016 are Berlin at Number 1, followed by Hamburg, Dublin, Madrid and Copenhagen.
However, the optimism that saw Athens surge to Number 5 in 2015 has evaporated entirely after a year of political and economic chaos in which an exit from the euro was only prevented by frantic last-minute negotiations.
The survey also notes the following about Athens:
An international investor says: “In this survey last year we were surprised by the number of people saying that Greece is the hot place to go and look. We didn’t think that then and we don’t think that now.” The Greek capital’s new ranking at Number 27 and its “very poor” rating for development prospects reflect the gravity of the country’s economic predicament.
Bargains for foreign investors
Many interviewees fear that the crisis is far from over: “Greece would still be hitting the headlines if it wasn’t for immigration and Syria and everything else,” says one. There is also more pain ahead for the Greek economy. The austerity programme that Greece agreed with its creditors will shrink the economy at the same time as taxes are increasing in an attempt to balance the books. Consumer spending will suffer. Business confidence is at rock bottom. Foreign property investors might find bargains, and “there is still a handful of investors looking at Greece although not with the same intensity as 12 months ago”. “By the end of 2016, Greece could become interesting,” says one fund manager.
However, only forced sellers are likely to dispose of assets in a market in which values have fallen by 60-85 percent depending on asset type since 2007, according to one local. Meanwhile, the imposition of capital controls means that investors will find it difficult to get their money out of the country. “What is happening here is extreme,” says a Greek interviewee. “The collapse is so big and has lasted so long that it has totally disorganised the property sector.”
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