Due to its exceptional value for money, especially compared to the oversaturated Spanish market and high prices in other Mediterranean countries, Greece is becoming more and more attractive for investors.
In recent years, German buyers have become a leading group of foreign real estate investors in Greece. They are actively purchasing coastal properties on Crete, the Ionian Islands, and in Athens. This trend can be attributed not only to the increased availability of real estate listings, but also to the recovery of Greece from the financial crisis.
An additional boost to the market was provided by government incentives for foreign investors, including tax breaks for retirees from Northern Europe, as well as the abolition of 24% VAT on property purchases.
"Greece offers exceptional value, and investors are becoming more and more convinced of this. The built-up coasts in countries like Spain and the very high prices in other Mediterranean countries encourage buyers to look for other high-quality alternatives and turn to our country," says Giorgos Gavriilidis, CEO of Elxis, a leading real estate provider specializing in luxury vacation properties.
German investors prefer real estate in Greece due to banking uncertainty
According to Elxis, home sales to German citizens have tripled in recent years, and the average purchase price has reached about 350,000 euros.
Western European citizens, especially Germans, are increasingly turning their attention to real estate in Greece after the European Central Bank (ECB) introduced negative interest rates on deposits.
During the pandemic and the subsequent economic recovery, the bank account turned into a source of diminishing returns. The Central Bank's monetary policy aimed at stimulating a weak economy has inadvertently undermined the value of available funds. The banks, in turn, shifted these negative rates onto their customers, effectively charging depositors for the privilege of saving their
In contrast to this unstable financial landscape, the sun-drenched streets of Athens were (and still are) a beacon of opportunity. Between 2018 and 2022, property prices in the Greek capital increased by about 32%, which confirms the growing attractiveness of the city. Despite the slowdown in growth, house prices increased by 7.66% year-on-year in the third quarter of 2024, indicating the resilience of the Athens real estate market.
The logic is clear: while euros remain at the same level in German banks, bringing minimal profits or even incurring losses, the same funds can be redirected to real estate investments in Athens. It is worth noting that this asset is not only growing in value, but also generating rental income. The Greek real estate market is expected to grow at a rate of 3.2% per year, with the total volume of transactions projected to reach $9.39 billion by 2029.
Unexpectedly, the European Central Bank (ECB) has become one of the key driving forces behind the growth of German investments in Greek real estate. For most EU citizens, this institution is just a distant and mysterious structure hidden in the glass towers of Frankfurt.
In fact, their decisions affect every European, regardless of whether he is an entrepreneur, an investor, or just a person who keeps his money in a bank.
⦁ ECB and Savings: A Bank That (Doesn’t) Generate Returns
In an ideal world, you deposit money into an account, receive interest, and watch your capital grow steadily. However, in Germany, the reality in recent years has been different — interest rates have been zero or even negative, which meant that depositors were essentially paying banks to keep their money.
The ECB controls monetary policy throughout the eurozone. To stimulate the economy, they lowered interest rates to negative levels, which meant that banks were losing money by storing their funds at the central bank.
To compensate for these losses, banks shifted this burden onto their customers by introducing sort of a “tax” on savings in the form of fees for large deposits.
Yes, interest rates have now become positive (up to 3.5% on deposits), but the effects of the previous policy are still there. People do not trust traditional bank deposits anymore and are now looking for alternative investment options such as real estate.
If you have a business, the ECB can be both friend and foe, depending on its policies.
● When interest rates are low (for example, during a pandemic), it is easier for companies to borrow money, invest in economic growth and hiring, and help the economy expand.
● When rates are high (as they are now, they reach 3-4%), loans become more expensive, companies spend less, reduce staff, and growth slows down.
The ECB, in fact, controls the “accelerator pedal” and the “brakes" of the economy — when it lowers interest rates, business accelerates, and when it raises them, everything slows down.
The European Central Bank (ECB) controls inflation to prevent skyrocketing prices. However, maintaining balance is a difficult task:
● With low interest rates, money becomes cheaper, which leads to an increase in consumer and business spending → inflation increases.
● With high interest rates, money becomes more expensive, expenses decrease → inflation slows down, but there is a risk of an economic downturn.
In 2021-2022, inflation in the eurozone rose to 10%, which forced the ECB to raise interest rates to bring it under control. While this measure has helped, it has also slowed economic growth, especially in Germany and Italy.
The ECB is not just a financial institution; it is a mechanism that affects all aspects of life, from deposit interest rates to rental prices and business operations. They are currently trying to find a balance between reducing inflation and maintaining economic growth. This means that investing in real assets (real estate, stocks, gold) remains a key survival strategy.
Let's analyze two possible investment scenarios, both of which are based on an initial amount of 120,000 euros. The investor has two options:
1. Deposit money in a German bank.
2. Invest in real estate in the Koukaki area of Athens and rent it out for a long-term.
Currently, the interest rates on savings accounts in German banks vary. Some banks offer up to 3.5% per annum.
● Annual income:
With an interest rate of 3.5%, the yield for the first year will be: €120,000 × 0.035 = €4,200
● Five-year forecast:
If the interest rate remains stable:
■ €120,000 × (1 + 0.035)^5 ≈ €143,000
o Net profit:
■ €143,000 – €120,000 = €23,000
However, it is important to keep in mind that interest rates may change depending on ECB policy, which makes long-term forecasts uncertain.
Expected total profit in five years: ~23,000 euros, subject to a stable interest rate.
The Koukaki area is known for its popularity among tourists and proximity to the historical sights of Athens. The average price of real estate in this area ranges from 1,500 to 2,000 euros per square meter.
● Purchase of real estate: You can buy an apartment of around 60-80 sqm for €120,000.
● Rental income: The average rental yield in Athens is about 4.3% per year.
📌 Annual rental income:
● €120,000 × 0.043 = €5,160
Increasing the value of real estate
In recent years, property prices in Athens have been showing steady growth. For example, in 2019, prices increased by about 8.4%.
Assuming annual growth of 3%, the investment prospects will be as follows:
● After 1 year: 120,000 euros × 1.03 = 123,600 euros
● After 5 years: €120,000 × (1.03)^5 ≈ €139,000
● The total value of the property over 5 years: €139 000 – €120 000 = €19 000
Total profit for 5 years
● Rental income for 5 years: €5 160 × 5 = €25 800
● Property value increase: €19,000
● Total projected profit: €25 800 + €19 000 = €44 800
The expected total income will be approximately 44,800 euros, including both rental income and property appreciation.
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