While the troubled euro has prompted an array of European real estate markets to falter, many people believe that the Greece debacle was an accident waiting to happen. For many years there has been intrigue, rumour and speculation regarding the foundation of Greek government tax numbers with suspicion that many individuals and companies may not have paid their full quota of tax liabilities. This was something very much in the background when Greece became a full member of the European Union and adopted the euro.
Many people are now looking back on the ongoing Greek debacle, where property prices have fallen by 50% since the 2008 mortgage crisis in the US, suggesting it has always been an accident waiting to happen. Is this a fair analysis?
Economy of Greece
To give you an example of the problems facing Greece at the moment, it was confirmed recently that the economy contracted by 3.7% last year which was less than the 4% forecast. To put this in perspective, this was the Greek economy’s best performance since 2010 amid signs that the collapse in the Greece economy may well be slowing. If this is the best that we can hope for in the short to medium term, why would you even contemplate looking towards the Greek real estate market?
Quote from PropertyForum.com : “Despite the fact there have been numerous attempts to refloat the Greece economy there is no doubt that the real estate market in Greece is still under enormous pressure.”
The economy itself as fallen by more than 25% since 2008, unemployment is now 28% and austerity measures introduced by the Greek government, at the behest of the European Union, have yet to hit home. The situation in the short to medium term is dire, the long-term future is unclear at this moment in time and while there is intermittent interest from foreign investors, Greek real estate is showing no signs of a significant recovery.
The last few years have been very difficult for the Greek government because the economy, and more importantly the tax regime, has come under incredible scrutiny. It has been noted that there are billions upon billions of euros outstanding in tax payments, there seems to be a two track economy with a price for “tax included” and another for “cash in hand”. This is something which has been the subject of much speculation over the last 20 years or so but in many ways it has been swept under the carpet to ensure the Greek government was able to join the euro and the European Union as a full member.
While fellow European Union members are now being forced to fund enormous bailout funds for the Greek economy, while billions upon billions of tax income remains unpaid, the fact is that the Greek government has lost control and the European Union is now pulling the strings. You may argue that this should be beneficial in the long term for the Greek real estate market, but the European Union has so many problems with larger more influential economies that Greece is probably well down the list of things to do.
Those who have researched and looked at the Greek economic and fiscal setup over the last 20 or 30 years will be well aware of the issues which have arisen since the 2008 worldwide recession. This is a perfect example of why you should do your own research as opposed to following the market at every opportunity. Concerns regarding the strength of the Greek economy, the ability to collect taxes and the massive dependence upon public sector services are nothing new.