The Financialisation of the Housing Market The case

The Financialisation of the Housing Market The case of Athens Nikos Karadimitriou Associate Professor Bartlett School of Planning, UCL (n. karadimitriou@ucl. ac. uk) EWRC, Brussels, October 2019

Financialisation of the housing market in Athens • The financialisation of the residential real estate market in Athens has not taken the form encountered elsewhere in Europe: large institutional investors are not involved in this market. • Another form of financialisation by small-scale and mostly non-corporate investors has occurred. • This is combined with and actually depends on the demand for short-term rentals (ie touristification) and the demand for residence permits (the Golden Visa programme). • The combination of those factors has indeed pushed housing prices and rent prices up compared to their previously depressed state. This relative rebound has contributed to making renting and buying property less affordable. • However, affordability both for rental and homeownership was initially very negatively affected by the drop in incomes and the rise in unemployment, as a result of the economic crisis that the country entered in 2009 -10.

In 2011: 554 dwellings per 1000 inhabitants Almost 29% were empty (609, 000 units) 2 nd homes and depopulation of the centre Map from Maloutas T. , Spyrellis S. (2016)

Key trends • Economic crisis and its devastating effects on domestic demand from 2010 to 2016 (drop in incomes, population decline, deleveraging of households and the banking sector) • De-linking and subsequent re-linking, from 2015/16 onward, of territorially specific residential (and commercial) real estate markets to global investment flows. Domestic demand comparatively less important now. • Significant demand of non-EU citizens for access to and free movement within the EU: ‘Golden Visa’ programme is a key element of government strategy to attract foreign investment • Significant increase of tourist flows in Athens from 2014 onward. • Abolition of OEK/WHO and policy focus on housing benefit

The crisis Figure 1: Dwelling Construction in Attica 2001 -2018 70000 59396 60000 50000 38388 40000 33595 39956 37087 33219 31908 30000 22241 16898 20000 12100 10000 6589 3323 1839 1498 1325 1476 1897 2478 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Nr of dwellings Source: ELSTAT 2019 b, ELSTAT 2019 c

The crisis Figure 2: Dwelling Prices index in Athens 2001 -2018 110. 0 100. 9 100. 0 93. 2 87. 2 84. 3 80. 0 74. 4 77. 6 76. 9 67. 5 70. 0 60. 0 96. 3 94. 2 64. 0 61. 1 57. 9 56. 8 56. 2 2015 2016 2017* 54. 5 57. 6 50. 0 40. 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Index of Dwelling Prices: Annual Average Source: Bo. G, 2019 b 2012 2013 2014 2018*

The recovery Figure 3: Net foreign capital inflow for real estate purchases in Greece (2008 -2018) 1400 200 172. 1 1200 150 100 86. 5 800 57. 6 50. 2 41. 8 50 45. 3 600 13. 2 0 400 200 -24. 4 -35. 4 -36. 1 -50 -58. 2 0 -100 2008 2009 2010 2011 2012 2013 MEURO Source: Bo. G, 2019 b 2014 % change 2015 2016 2017 2018

Figure 4: Residential rents in Greece 2007 -2018 110 6 3. 9 3. 6 4 2. 4 100 2 0. 8 0 90 -2 -2. 1 -2. 6 -2. 2 -3. 2 -4 -4. 4 80 -6 -6. 8 -8 -7. 7 70 -10 2007 2008 2009 2010 2011 2012 Housing Rent Index % change 2013 2014 2015 Rent Index Annual Average 2016 2017 2018

Table 1: Average residential rents in selected neighbourhoods in Athens (Source: Re/MAX, 2013 -2018) 2012 2013 2016 euro/m 2 CENTRE Ampelokipi Exarheia Kolonaki Koukaki Lycabettus Hilton NORTH Dionysos Ekali Vrilissia Kifissia Holargos Maroussi Halandri SOUTH Glyfada P. Faliro Kallithea WEST Haidari Ag. Varvara PIRAEUS C. Piraeus Kaminia Kastella euro/m 2 % Change 2017 2018 2016/2012 euro/m 2 % Change 2018/2016 5. 75 5. 25 4. 75 8. 25 4. 75 7. 5 6. 5 7. 3 6. 5 11. 25 7 7. 5 7 6. 5 7 7. 45 7. 75 7 7. 5 N. Av 5 4 7 4 6 5. 75 6. 25 5. 5 9. 5 6 6 6 5. 5 6 7. 2 6 5. 75 N. Av 5 4 4 6. 8 4. 1 5. 7 5 6 4. 5 7 6 7 5 5. 8 5 6. 5 5. 5 4 4. 2 5. 3 3 -13. 0 -23. 8 -15. 8 -17. 6 -13. 7 -24. 0 -23. 1 -17. 8 -30. 8 -37. 8 -14. 3 -6. 7 -28. 6 -15. 4 -17. 1 -32. 9 -16. 1 -21. 4 -46. 7 N. Av 5 4 4. 1 7. 3 4. 8 5. 7 5 6. 2 4. 5 6. 8 6 7 5. 5 5. 9 5. 5 6. 7 5. 7 4. 4 4. 2 5. 5 3. 1 6 4. 5 5. 5 9 6. 5 6. 3 7. 5 6. 4 5 6. 2 6. 5 7. 3 6. 8 6 7. 5 6 4. 8 5. 3 5. 5 4 20. 0 12. 5 37. 5 32. 4 58. 5 10. 5 50. 0 6. 7 11. 1 -11. 4 8. 3 4. 3 26. 0 14. 5 17. 2 20. 0 15. 4 9. 1 20. 0 26. 2 3. 8 33. 3 6. 75 5. 5 4. 5 7. 5 6 5 4 7 5. 5 5 4. 1 6 -18. 5 -9. 1 -8. 9 -20. 0 5. 4 5 4 6. 1 5. 5 4 7 0. 0 10. 0 -2. 4 16. 7

Tourism and the short term rental boom • 5. 68 million visitors in 2018, up from 2. 62 million in 2013 (INSETE, 2019) • 30, 184 active and inactive properties listed by June 2018, of which 16, 088 were in Athens’ central sector and 3, 307 in Athens’ southern sector but only 382 were in the western sector. • In terms of active listings in Attica, these went up to 15, 860 in June 2018 from 12, 376 in January which shows a degree of seasonality (Athanassiou and Kotsi, 2018) • 126, 231 active and inactive properties on Air. Bn. B and Home. Away in Greece by June 2018, up from 96, 217 in 2017 and 57, 307 in 2016. Overall STR number higher due to additional platforms

New demand sources • Golden Visa: 41% of net capital inflows (approx. 1 bn euro) • • Often combined with short term rental investment Average investment: 312, 000 euro Nr of properties per investment: 3 -4? Total nr of golden visas in 2013: 21 worth approximately 3, 273, 000 euro per investment Total nr of golden visas by April 2019: 4, 154 of which 1399 in 2018 • • Asylum seeker/ Refugee housing: Approx. . 2500 apartments in Attica (UNHCR, May 2019) • Institutional investors have played a marginal role in the residential market, unlike in the commercial market (esp. hotels and offices): fragmented ownership, uncertainty and high transaction costs • Blueground: leasing apartments from landlords and then renovates them and introduces them in the private rental market (short, medium and long term). Their aim is to have 1000 properties in their portfolio in Athens within 2019.

Affordability (Source: Eurostat, 2018, 2019) The percentage of private market tenants with housing cost burden above 40% of household disposable income in Greece was: 36% in 2010, 42. 6% in 2011, 52. 8% in 2012, 58. 2% in 2013, 87. 4% in 2014, 86. 7% in 2015, 85. 6% in 2016 and 83. 9% in 2017 BUT: Affordability issues predate short term rental boom Short –term rentals seen as a reliable source of income from property owners

Policy measures • Short term rentals were initially required to obtain a “tourist dwelling” badge in order to adhere to minimum quality standards: separate and dedicated entrance required. The badge requirement was lifted in 2015, thus significantly reducing the barriers to entry in the short-term rental market. • Legislation was passed which clarified the tax regime of short-term rentals i. e under what conditions short-term rental constitutes a business activity etc • Independent Public Revenue Authority: short-term rental register (registration is compulsory). Dedicated resources on enforcement. • Neutral tax treatment. • Block of flat bylaws emerging as a means of regulation

Policy measures • Special measures are foreseen in the law which could curb short-term rental activity in cases where the effects are adverse: - limitation of the number of properties that each landlord can make available for shortterm rental at any one time and the number of days which each property can be rented out for during any given year. • These special measures can only be activated via Ministerial Decisions, which have not been issued yet. • In the meantime: local authority support to key civil servants (esp. in tourist destinations) and central government housing benefit • Hospitality industry key lobby group against short-term rentals

Contextual parameters • High reliance of state revenue on property taxes: 8. 1% in Greece vs 5. 7% OECD average (Assen and Bunn, 2019; Kathimerini, 2019) • Significant source of foreign investment capital. Golden Visa programme actively promoted by the government. • Short term rental a key source of income for a large proportion of the population (esp. the middle class) • Renovation and utilisation of dwelling stock • Treatment of property owners can lose (or win) elections • Current situation is a win-win for significant number of stakeholders and social strata: Tenants the clear losers

Key housing challenges • Affordability • Touristification (territorial and sectoral) • Migrants (late entrants in the housing market) are hit particularly hard. They rely much more on the private rental market and have not accumulated property in the family. • Develop a social rented sector

Key data challenges • Cadastre: make detailed land other georeferenced property ownership data widely available • Make the IAPR’s property ownership, income and rental data available in a suitably anonymised form. • Enhance the Bank of Greece’s data collection on (foreign) investment flows into RE and provide suitably anonymised data in more disaggregate and granular form • Enhance the Ministry of Finance’s property transaction register and expand it to cover rental agreements. Make suitably compiled data on property transactions and rents publicly available and easily accessible. • Suitable adjustments to census questionnaires • Support the development of the Computer Assisted Mass Appraisal system or an equivalent mechanism for enhancing market transparency and for simplifying property tax implementation

Thank you!