Positive real estate current runs beneath troubled Greek waters

The year started so well for Greece. ULI’s and PwC’s Emerging Trends survey placed Athens among Europe’s top five cities for investment in 2015, rising 23 places to join Berlin, Hamburg, Dublin and Madrid.

After several barren years, 2014 had seen the NBG Pangaea REIC deal and big disposals by the Hellenic Republic Asset Development Fund. Tentative optimism was returning to the battered Greek economy and to the real estate industry. With interest in Ireland and Spain having an impact on values, the risk/return offered in Greece finally started to make sense.

Then came January’s election, Syriza and Yanis Varoufakis became household names outside Greece, and everything stopped.

So what’s happening now? I had an opportunity to take the temperature on the ground in Athens as a speaker at a one-day event at the end of MIPIM week, hosted by the Bank of Greece and the European Real Estate Society. Despite renewed extreme macro uncertainty, 300 delegates attended, including familiar UK industry faces and central bankers from Germany and elsewhere.

Yannis Stournaras, governor of the Bank of Greece and a former Greek finance minister, gave the opening address. Other speakers were officials from the European Central Bank and Bank for International Settlements, and an economic adviser to the new Greek government. A strong event programme was matched by interesting networking.

The focus was two important and challenging topics: CRE indices and data (in Greece and internationally); and, with reference to NAMA’s and SAREB’s experience, how to deal with the Greek banking system’s large stock of distressed property – the Bank of Greece puts the rate of all non-performing loans in Greece’s banking system at 34.2%. It is putting the presentations, all in English, on its website, but here are some impressions from the event.

Firstly, concerns about the Greek government’s agenda are justified – its signals are mixed. Stournaras’s comments were firmly pro-business; he stressed Greece’s need to build stability, credibility and transparency to attract investment, and the urgent need for public infrastructure and real estate to be exploited or sold.

But according to Greek media, one Syriza MP condemned him for his part in recent austerity economics and called for his resignation.

Government adviser Kerasina Raftopoulou had little to say about the government’s plans for dealing with non-performing loans or promoting investment. Instead, she repeated the Syriza party line about the evils of austerity and Greece’s humanitarian crisis.

Secondly, market participants in Greece agree about what is needed to drive deals and attract international investors. There was strong support for political and legislative stability and sensible taxes, much interest in NAMA’s and SAREB’s experiences, and agreement about the importance of transparency in a market forced to rely on model-based valuations in recent years.

There was also broad support for abolishing the Greek real estate market concept of “objective values”, which are not “objective” at all, but are set by the government for tax purposes, obfuscating and distorting market information in the process.

Finally, real opportunities do exist in Greece if country risk can be addressed. Despite near despair at the way 2014’s positive dynamic has evaporated, I discerned a current of underlying optimism. Tourism is booming again in this country of fantastic natural beauty, cultural wealth and underdeveloped infrastructure. There is great development potential, if the government can let go a little and attract private investment into the traditionally rather closed economy.

The Greek real estate finance industry struck me as a small and friendly world. I am accustomed to the gregarious nature of the UK and European industry and it was a pleasure to find a similarly welcoming community in Athens. I hope it won’t be long before things look up and the international industry comes calling again.