Elias - Invest in Greek residential RE

Real Estate in Greece

Elias Patsalos

Greece - Hellenic Republic Ελληνική Δημοκρατία

Capital: Athens Currency: Euro Area: 131,990 sq. km. Official Language: Greek Population Estimate: 11,305,118 Government Type: Parliamentary Democracy Memberships: Eurozone, NATO, IMF, UN, UNESCO Geographic Importance: Strategic location dominating the

Aegean Sea with approx. 1500 islands

Legal System: Based on Roman Law, judiciary divided into civil, criminal, and administrative courts

History

Greece became independent in 1830 after a victory against the Ottoman Empire.

In 1981 it was accepted in EU.

Euro replaced drachma (1832) in 2002.

In 2010 Greece defaulted on its euro-denominated debt and received about €110 billion funds from IMF.

Economic facts GDP was decreased from 1% 2008 to -2% in 2009,

-4% in 2010, and -3% in 2011.

Tourism industry counts for 15% of Greece’s total GDP.

Cost of living in central Athens is about 90% of the costs in NY.

Moody recently lowered Greece’s debt rating from B1 to Ba1.

Economic facts

For the next few years, domestic demand is expected to continue to decline due to falling wages, increased taxes, persistently high unemployment and low confidence in business. Gradual recovery in economic output is expected in 2012 due to demand from foreign markets.

Real Estate Principles

Ownership & Taxation– EU Citizens can freely buy a property in

Greece, but there are a few restrictions, such as frontier regions (also for Non-EU).

• Process takes 30 – 45 days approx.

– Non-EU Citizens must apply for permission to the Greek Ministry of Defense.

• Process takes up to 180 days approx.


Taxation

– Two main systems

• In areas within city planning: Objective Values System

– Based on location and construction of specific property

• In countryside areas: Comparative Values System

– Based on values employed in past contracts (comps)

– If the contractually agreed price is higher than the “objective” or “comparative” then it is taken into account to calculate taxes & fees.

– Greek Citizens use their AFM (tax number) to file their annual taxes, whereas foreigners need to obtain an AFM with an attorney.


Taxation

– Types of Taxes

• Assessed Tax Value: the basis for the most fees in Greece. Criteria are location, size and property characteristics.

• Value Added Tax: as of January 2006, new constructions are subject to a 19% VAT for secondary or commercial properties.

• Property Tax: applies to individuals and legal entities with a Tax Relief up to a value of € 243,600, couples up to € 487,200 and € 61,650 for each of the first two children and € 73,400 for each additional child.


Taxation

– Types of Taxes

• Municipal Tax: a 3% property transfer tax is charged by the local municipality for general public services.

• Purchase Tax: based on assessed tax value. 7% on first €15,000 and 9% for the remainder, if the area is not covered by a public fire station If it is, then rate is 11% for the remainder.

• Inheritance & Gift Tax: any gifts are considered taxable whether the property is located in or outside Greece. The rate ranges 0 – 40%, depending on the relationship between testator & heir.

• Property taxes are paid annually by submitting the E9 Form.


Deeds & Title– A public notary is the main instrument when it comes to conveyance, final

purchase of contract / title and witnessing the signatures. – Some of his / her duties are:

• Makes sure that taxes are already paid off when completing the sale.• Prepares the final purchase and is liable that purchase price is paid to

the vendor.• Identifies the parties. • Witnesses the final signing of the contract.• Makes sure the purchase tax was paid.• Registers the Property with the local Land Registry office with the new

owner and collects any pending fees.– Notary acts in the best interest of the state and not the people involved in a

sales transaction. Fee is approx. 2% of the purchase price (purchaser pays)

Real Estate Principles Insurance

– Property insurance • is done through insurance companies which are normally billed bi-

annually, though annual payments are allowed.• is obligatory only when mortgaging the property

– Title insurance• If any problem arise during title search, the deposit is fully refundable


Contracts

– Valid contract must be signed in the presence of a public notary.

– The notary checks on the needed documentation and the buyer’s tax file number (AFM) and makes sure any purchase tax fees are paid and witnesses the signing. One party can give someone a power of attorney and be absent from the transaction.

– A translator can also be used when necessary.

– Last step is registration of the property with the Greek Land Registry, which keeps the original copy of the final purchase contract and the new owner’s name.


Financing

– Financing is available for both local and foreign buyers via Greek banks and are usually based on an affordability basis than an income basis.

– LTV as high as 90%, current fixed rates are about 5.5%, repayment options between 10–40 yrs, min loan amount is €30,000, max debtor age is 70 yrs.

– Fees related to a loan are transfer fees, estate fees, stamp duty, taxes, etc.– Loans are available on an individual(s) or company purchase basis. – Total monthly spending must not exceed 35% of total monthly earnings and

you must pay all closing costs before any financing from bank is released.– Banks in Greece charge a 1 per cent arrangement fee.


Financing

– In order to get a mortgage from a bank in Greece you need the following:

• Passport or ID

• AFM

• A Greek Bank Account

• Permission from Local Authorities (frontier areas)

• Permit to Purchase by Ministry of National Defense (Non-EU)

Government Zoning & Planning

– Land in Greece is not very accurate when it comes to actual definition and survey.

– EU influenced the Greek legislation which has improved with several laws for spatial/urban planning and new zoning regulations.

– The planning process in Greece is rather slow because it involves a large number of government stakeholders.

– Urban land readjustment can take about 8-15 years and it will cost a lot of money.

– The regulation of planning and zoning in Greece is regulated by the Greek Regional Development Plan which supervises the 13 regions of Greece.

Government Leases & Eviction Process

– Residential rentals have a minimum legal duration of 3 years unless negotiated otherwise,.

– The tenant can’t transfer his tenancy right to anybody else except in case of death and his immediate family can continue or breach the contract.

– Breaching the contract for no reason constitute grounds for eviction. – An eviction in Greece can take up to 2 ½ months. The owner sends a notice

to the tenant asking for payment of all due rent. If there is no full payment within a month, a request is submitted to the judge to order the eviction of the tenant. There is no court procedure. The judge’s order is executed after 20 days.

– If a particular property interferes with the city’s plans for a public purpose the two parties decide on some type of agreement which could be for a trade of a piece of land in a different location.

Agents & Brokers

Property and Agent disclosure requirements– Real estate agents in Greece can have an oral but a written disclosure

requirement is recommended. A real estate agent can represent a buyer or a seller and in addition he can also be a dual agent in the same transaction.

Real Estate Process– The Land Registry system in Greece is nothing close to an MLS. Estate

agents usually create their own MLS system and they market their properties by sharing availability lists with each other. If you need to look for a property you still need to go the Land Registry and search for it.

Agents & Brokers

Licensing requirements– Persons who wish to perform RE in Greece need to have a valid license. – Agents can choose to be a member of the Hellenic Association of Realtors

or even an international organization like the European Confederation of Estate Agents (CEI).

– Athens Vocational Chamber is responsible to issue real estate license which keeps a registration list of all the agents. If you want to become an agent you need to submit an application with the admission requirements of the Presidential Decree. There is no mutual recognition of licenses with other EU countries as of today.

Agents & Brokers

Responsibilities

– Real estate agents are defined as natural or legal persons who facilitate the assumption of real estate purchase, exchange or lease contracts. Using an agency contract the agent gets committed to assist the principal and get paid with a commission.

– The commission is only paid when the contract is final as a result of the agent’s assistance unless agreed otherwise.

– Commission can vary and is estimated around 4-6% of the agreed price usually shared by both parties. There are no government controls on agents’ fees in Greece.

– When agents in other EU countries work together with local agents they usually share the standard commission.

Foreclosures

– Greek foreclosures are broken in two phases: the temporary and the permanent one.

– Article 715 of the Greek civil code mentions that it is forbidden to dispose or relinquish property rights in any way under temporary foreclosure status.

– A property will be auctioned for public sale when the foreclosure becomes permanent according to article 722.

New Construction– Most common restrictions are because of nature, monuments, and

archaeological assets. It is recommended to get a written permit.

– Pieces of land bordering the seashore should have a building with minimal distance from the beach around 120 feet.

– One of the Greek Building Associations law is the separation of land inside a city planning and outside that area.

– You are allowed to construct a building outside the city planning with a minimum surface of 4000 square meters.

– Properties within the city planning should have access to a public street and the ability to connect electricity, water and telephone.

REITs

– The first REIT in Greece, or REICS as they are known locally (“Real Estate Investment Companies”), was called Piraeus REIC (now TRASTOR). It obtained approval from the Capital Markets Commission on March of 2003 and applied to be listed on Athens Stock Exchange, with the listing taking place on June of 2005.

– There are presently 4 REICS listed on the Greek Stock Exchange TRASTOR, EUROBANK PROPERTIES, MIG REAL ESTATE , ETHNIKI PANGAIA

– Most of the investor base of those REICs is predominantly made up of Greece-resident companies and individuals.

– During this economic crisis of Greece many believe that it will help the REIC market to grow even more. Properties can be purchased in deep discounted prices and REICS are well positioned to further improve their portfolio.

Final Outcome

Greece & many EU countries are going through tough times. After Greece’s meltdown in 2010 RE prices were reduced significantly. No one has a “crystal ball” to be able to tell where the bottom of the

market is. However, when prices have been reduced to such an extend, there is opportunity and you should invest!

Greece is a beautiful country with a vast of attractive properties to purchase. If you think you want to purchase a Greek property, be ready to adapt to the local business practices.

My advice is to keep your eyes open and find yourself a qualified, local lawyer, accountant and realtor, as you will definitely need their help when doing business in a place you are not familiar with.

Elias - Invest in Greek residential RE

Real Estate

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