By Constantinos Kioleoglou
The development and sustainability of the real estate market are critical issues for a country’s economic prosperity and sustainability. Despite significant efforts in the past, the inadequacy of a stable fiscal and legislative framework has often weakened efforts to develop the real estate market sustainably. In the present era, where globalization and rapid technological change bring about dynamic changes, the imposition of a stable framework becomes even more important.
In recent years, the Greek real estate market has made an impressive upward trajectory, being a key factor in the development of the Greek economy and the reduction of unemployment. Direct and indirect, small and large investments in real estate create great expectations for the future. Permanent and temporary measures taken by the government such as the energy upgrade incentives, the suspension of VAT, but also the possibility of the golden visa, among others, have pushed the real estate market to positive growth rates and values to an upward trend.
The real estate market is one of the key sectors of the economy that is affected by various factors such as political stability, tax policy, property legislation, as well as trade and economic policy. Lack of stability in these areas can create uncertainty and discourage investors from developing and capitalizing on real estate markets. This can lead to instability in real estate prices and a deterioration in their value, thereby undermining the country’s economic growth and prosperity.
A stable tax framework is essential to ensure fair taxation and encourage investment in the real estate market. Transparency in tax provisions and minimization of tax burdens are important elements to be considered. A fair tax code that promotes growth while protecting the interests of all parties involved is essential to achieving long-term benefits.
In addition, the existence of a stable legislative framework protects the rights of those involved in the real estate market, encouraging confidence and investment security. A determining factor is the creation of legislative frameworks that promote the sustainable management of real estate markets, protecting natural environments and ensuring the efficient use of resources.
However, achieving a stable fiscal and legislative framework requires cooperation between the public and private sectors. Encouraging the participation of the private sector in the formation of legislative frameworks can lead to more comprehensive and effective policies that will respond to the real needs of the market.
In today’s reality and even though the real estate market is a key pillar of the development of the Greek economy, we are experiencing a strange reality where the market moves in a variable environment which in no way supports the development course of the market.
Temporary VAT suspension measures, decisions of the Council of Ministers canceling existing provisions and articles of the NOK, changes in building conditions, rumors about the abolition of energy upgrade incentives, confusing interpretations of existing legislation cause disturbances and jitters in the market.
In the last few months, rumors about a new imminent change of the New Building Regulation (NOK) and especially in the articles concerning the incentives for energy upgrades (the well-known bonuses) have already caused a nightmare for all involved. Apart from the design part which will obviously be directly affected, changes in the NOK and especially with regard to energy incentives on the one hand are troubling the competent building services which are asked to check the new applications for building permits on the other hand they do not directly and significantly affect the values of both plots and properties, new and old. Investment schemes that have invested in real estate – plots of land with given specific plot development possibilities are faced with new data every time the NOK changes. The same applies to private individuals as well as smaller manufacturers who are required to adapt each time to any changes that arise in a volatile environment full of uncertainty.
It is a given that Greece as a whole and especially the Athenian Riviera has been enjoying an impressive housing development in recent years, with beautiful high energy efficient buildings of excellent aesthetics and quality. Small as well as landmark projects of Greek and international investment schemes have attracted investments unprecedented for the Greek data. An important role in this course has been played by the existing legislative framework (NOK) with all the incentives for energy upgrading of both existing and new buildings. The temporary (expires 12/2024) suspension of the imposition of VAT on real estate is also a dominant measure to stimulate the real estate market. The temporary measures and the continuous changes in taxation and NOK affect the dynamics and possibilities of the market over time. The market is in need of permanent solutions both in the tax and legislative framework that will ensure to each involved certainty about the context in which they are obliged to act when they decide to get involved with the real estate market. The Ministry of the Interior has a duty to protect all involved Greeks and foreigners, small and large owners and investors from extreme, often regressive, voices and tendencies that try to stop the upward march of the market and turn the country’s urban development back many decades so aesthetic as well as investment.
For many decades the entire political-economic system in Greece preaches and seeks development, giving it various names (modernization, extroversion, coke investments) depending on the dominant ideological framework of the time. The names are followed by the policies of the respective governments which come to change each time based on their political beliefs the legislation, the rules and the framework in which the markets operate (and not only), often disregarding the self-evident, logical, and the need for a stable investment environment that will inspire confidence. The result of this policy is to lead to a fragile economy, with strong turbulences and economic and productive dependencies, which cannot find its pace, and experiences economic waves, more intense in the fall and less satisfactory in the rise, with uncertainty dominating forever in the markets.
At an overall level, the creation of a stable tax and legislative framework (combined with serious infrastructure projects) is the basis for the development of a dynamic and sustainable real estate market. Only by implementing coherent policies and maintaining stability can we ensure the development of the sector and protect it from potential risks and uncertainties that threaten economic growth and sustainability. Obviously, legislation must follow developments and adapt to the requirements of each era. Any change should be made taking into account the effects on both the real estate market and the economy as well as the environment. The Greek market today more than ever needs a stable investment environment, at least in terms of domestic parameters and to the extent that they can be controlled so that it can overcome all the issues arising from the international situation of recent years.
* Kioleoglou Konstantinos REV, Managing Partner Avakon, Civil Engineer, E.M.P., MEng in Structural Engineering, NTUA, MSc in Real Estate Investment and Finance, Heriot Watt University, Recognized Expert Property Valuer & European Valuer, Tegova