Golden visa investment thresholds: how will the rise impact values?

The Golden Visa Programme has been a major driver of demand since its introduction in 2013. It begun by taking distressed property off the market, and, eventually, fuelled a spectacular rise in prices from 2019 to this day (see table below). Demand from foreign homebuyers currently amounts to 80-85% of the total transactions, with investments totalling about €2 billion in 2022. The country’s strong economic performance has also been fuelling local demand for housing, thereby adding to the upward pressure on prices.

The main beneficiary of this foreign investment and rise in economic activity is Athens with Thessaloniki trailing second.

Main parameters which determine demand

A brief study of the local property market shows that the main drivers of demand are:

1. The flow of foreign investment based on the Golden Visa Programme. Also important is the areas in which this demand is directed.
2. Economic development and local disposable incomes
3. The level of interest rates for housing loans and for deposits
4. The availability of accommodation to let and the rentals payable
5. Inflation especially in relation to property prices and disposable income

One would expect that foreign demand for property from Golden Visa seekers will continue unabated since applicants can still apply with a €250,000 investment. This demand will also be fuelled by the problematic future of Portugal’s GV Programme, and the fact that under the Hungarian Programme, investors cannot rent out their property and must pay exorbitant government fees.

Local disposable incomes follow the country’s economic development and are expected to keep rising, thereby fuelling demand. On the other hand, interest rates are expected to peak soon and then follow a downward trend, as inflation de-escalates. Indeed, Greece has been a good performer on this front, with inflation declining to 2.7% in June 2023. A drop in the interest rates for housing loans will fuel demand further especially as disposable incomes rise due to economic development and falling inflation.

Rentals have been following an upward trend over the past few years. This is so since many owners opt to rent out their properties on a short-term basis thus earning much higher yields than long-term ones. This practice has reduced the supply of housing available to let and has led to high rentals. As a result, there is now discussion whether to limit the number of days a private owner can rent out his/her property on platforms such as Airbnb. If implemented, this will could increase the supply of long-term rented accommodation thereby easing the upward pressure on long-term rentals.

It looks like that private owners will have the option to rent out their properties to companies who operate housing to let on a short-term basis, thereby keeping the supply for long-term rentals lower and the level of rentals high.

A high level of rentals leads to a higher demand for purchase, especially if the level of the rental compares favourably to a loan instalment of a housing loan. Hence, the level of interest rates come into play.

We would expect that properties capable of being rented out on a short-term basis or, even, on a longer term one, which give net returns at about 4% pa and over, and which are situated in the lower threshold area will attract considerable demand. This will be especially true if the above yields are real and not just a dress-up which will not be either sustainable or viable.

We would also expect that properties in the €500,000 municipalities will be negatively affected as demand for them declines. We would not expect the average applicant to double his budget for a Golden Visa, thereby opting to buy a €500,000 property, unless this property will be for own use. Such cases are rare though.

So, in conclusion, we would expect the following developments:

1. It is likely that demand will be directed towards the municipalities still eligible for a €250,000 investment. Central Athens and the municipalities where one must invest at least €500,000 will be negatively affected with prices being stabilised or even decline, especially in cases where prices diverge with intrinsic values as has already been the case with older properties.
2. Demand in the municipalities where one can still invest €250,000 only will rise, but it remains to be seen whether there will be enough supply to match it. We would expect that municipalities which are fairly attractive, have easy access to the centre, and are sought after for short-term rentals will be the ones to benefit most.
3. Applicants for the Golden Visa seeking to invest under the €250,000 threshold, should be very careful and apply the criteria mentioned in our article on Investing in real estate in Greece-criteria for selection.

Investing in the €250,000 municipalities can be tricky especially since these are wildly different from each other. While opting for properties in the centre of Athens was a no-brainer for most, selecting a municipality to invest one’s €250,000 requires a deeper understanding of the market and an intimate knowledge of the dynamics in the various municipalities and the localities or neighbourhoods within each.