Holiday home market has no choice but to cut prices

By Nikos Roussanoglou
There are some real bargains out there for people thinking of buying a holiday home in Greece, as a third consecutive slump year with little interest on the part of local or foreign potential buyers has compelled owners, as well as construction companies, to introduce generous discounts.

It is estimated that over the past two years, prices for newly constructed holiday homes have dipped on average by 30 percent, with the greatest drop noted last year, when it became apparent to sellers that demand was going to remain low after seeing sales drop to even lower levels than in 2009.
So far this year the market has seen a further decrease in prices by up to 15 percent, a figure that is estimated to even out to an average of 10 percent by the end of 2011. Taken together with the decrease in prices from previous years, the overall average cost of a holiday home in Greece has dropped by nearly 40 percent in comparison to the summer of 2008.
Nevertheless, according to experts, sales remain at low levels due to the economic crisis, which has made buyers skeptical of investing in what they consider luxuries. With Greek buyers appearing to have turned their backs on the holiday home market, it seems however that buyers from overseas aren’t likely to make up the difference given that over the past decade no more than 3,000-4,000 holiday homes have been sold to foreigners. While potential buyers from abroad have increased in number over the past couple of years (especially this one), they don’t seem quite ready to invest as the Greek market does not offer the abundance of choices they are looking for. Even in special cases like the popular islands of Myconos and Corfu, where there are luxury villas going for up to 45 percent less this year than in 2009, there is little buying interest from abroad. The reason for this, according to experts, is competition from similar markets in southern European destinations such as Spain and Portugal, as well as Turkey.
The former two have been suffering the effects of the crisis for longer than Greece, meaning that their holiday home markets have been discounting prices for longer, and they also offer an overall higher-quality product.
For the Greek holiday home market to begin experiencing any benefits from the crisis, it will have to drop the prices even further so that they are competitive vis-a-vis the three major destinations mentioned above.
According to Savvas Savvaidis, director of the firm Savvaidis & Associates and former president of the Hellenic Association of Realtors, Greece discovered the holiday home market at a time when it was already old news for the rest of the world. Nevertheless, says Savvaidis, “it is estimated that over the 2003-07 period, some 12,000 holiday homes were sold to foreigners at a total cost of 3 billion euros. If one compares this to the 45,000 holiday homes sold annually in Spain and the approximately 8,000 sold in Cyprus, it seems that Greece has the relative capacity to sell around 15,000 holiday homes a year.”
Savvaidis is not optimistic about the future: “The window of opportunity that had presented itself at the time is now closed because of the crisis and it looks like it will remain closed for an indefinite period of time.”
Another factor that has contributed to the slump, according to market experts, is the negative publicity Greece has received in the international press over the past couple of years, which inevitably takes a toll on the real estate market overall. Meanwhile, the riskier a buyer deems an investment in a financially weak country, the greater the bargains he or she expects to see.
This means that the only way out of the predicament for construction companies that have failed to sell property built during the past two or three years is through significant discounts. Increased tourism this summer is a valuable ally that should not be allowed to go to waste.
The window of opportunity for offloading these surplus properties is meanwhile getting even smaller given a change in legislation allowing the sale of residences within luxury hotel complexes and resorts, which, until recently, could only be rented.