Is Greek property starting to look interesting?

We thought it would be interesting to take a general look at the Greek property market in light of the recent financial troubles and the ongoing spat with the European Union. This is an issue which has dragged on for at least five years and while there was some relief earlier this week when a “new bailout” was agreed, it is unlikely this is the end of the troubles.

Investors only need to take a look at the sudden jump in the euro, in light of the new bailout agreement yet to be ratified by the Greek Parliament, which led to profit-taking from some investors. Is there more pain to come for the EU and Greece or are we over the worst?

Economy

Aside from the fact that the Greek economy was struggling in light of the 2008 worldwide recession the challenges of the last two weeks have only made matters worse. Confidence in the Greek economy is now at rock bottom and with the government demanding a short-term €50 billion bailout there will certainly be more pain to come. Even an optimistic report from the IMF suggests that Greek debt will not peak until 2017 at a “challenging” 200% of GDP!

The banking sector is in turmoil, the population cannot even get their hands on their own funds and investment is non-existent at the moment. We may see a return to relative calm over the next few weeks as the banks receive financial support, assuming the Greek Parliament waves through the latest EU bailout plan, but what of the long term outlook?

Finances

As and when the terms of the short-term bailout are approved we will see a long-term growth plan put together by creditors and the Greek authorities. It may well be that the economy returns to positive growth over the next few years but even in a best case scenario this would be relatively modest growth. Indeed some experts believe that the economy will remain technically in recession for some time to come which will ultimately place more pressure on tax income.

It is now common knowledge that Greek creditors are demanding the privatisation of up to €50 billion of government-held assets which will be transferred to creditors under the terms of the bailout. We will also see an increase in basic rate tax and VAT as well as reforms to the pension industry and yet more austerity. These actions may well bolster the Greek balance sheet in the longer term but many experts believe the country will struggle to keep to the rumoured creditor’s repayment plan.

Conclusion

While there has been talk of “bottom fishing” in the Greek property market there is still much confusion and concern about the short, medium and long-term outlook for the country. It may well be that some properties have fallen too far, it may well be that long-term investors will begin to drip feed funds into the country or they may remain on the sidelines to see exactly how the latest bailout proposition pans out.

What would you do in this situation?