Optimism Returns and who’s afraid of the Big “Bad” Greek State?

Under a climate of a somehow promoted, and highly advertised, general optimism, Greek real estate is starting gradually to pop its head up – still afraid of another haircut. Some experts even dare to forecast a new beginning for the, until recently, dead Greek real estate market, before the end of 2013.

Panagiotis-Dimitrios Tsachageas - PhD Researcher in Urban Studies
Panagiotis-Dimitrios Tsachageas – PhD Researcher in Urban Studies

In view of the apparent turn in favor of Greek economy’s reliability and market confidence recovery, a number of initiatives are now attempting to cash out something qualitative and fluid such as “confidence”. Some of these attempts seem rather bold and maybe irrelevant, like the Greek PM “flirting” with the sleeping dragon after sending some messages from Russia with love. However, some remain skeptical, and many Real Estate professionals and academics are very hesitant when discussing the Greek economy’s recovery.

In no case optimism is enough to fuel a full-scale recovery on its own. That being said, optimism has an important role in Real Estate market recovery as it can limit fear, such as the fear of high, unexpected and uncontrollable investment risks

ULI Greece and Cyprus had an event last week in Athens in which Joe Montgomery, CEO of ULI Europe, presented the emerging trends in Real Estate: Europe 2013 based on the same-named annual report. He expressed his strong belief that the European real estate market will follow the United States’ recovery with a 2-3 year time lag. He explained the US real estate market recovery was faster due to the advantage of cheap oil, money and a healthier banking system. Plus, the US real estate market is not significantly dependent on banks. He also noted that despite the report showing expectancy for EU market remaining frozen for another year, US and Asian capitals are now out and about looking for EU core investing bastions. In any case many things will be rerouted after, and according to, the result of the German elections.

Speaking about the Greek case, J. Montgomery expects the investment opportunities and relevant initiatives to come out of the shadow “when the price will be right”. He also underlined the apparent insufficiency of indigenous capital to fuel and fully carrying an economic recovery, emphasizing on the need for Foreign Direct Investment (FDI) and other kinds of foreign capital import. His question was on how – and if – the Greek policy makers plan on attracting foreign direct investment, and how they are handling the terms of the relevant agreements. For this, he proposed the coordinated efforts of real estate market leaders and policy makers.

It was agreed by everyone that the basic conditions for Greece to regain mainstream investors’ confidence, and thus for  recovery are:

  • The establishment of a stable tax system in general, and especially on real estate with lower taxation but in larger numbers able to offer larger revenue in the middle and long-term as well as collateral benefits like employment opportunities and infrastructure development
  • The establishment of a stable general (macro)economic framework and climate in which prospective investors will be able to credibly calculate expected risks and fixed costs, and will have the opportunity to resort to liquidity if needed
  • Transactions with the Greek state, like the selling and leasing of public assets, should be done under specific and transparent conditions, with a stable and determined state and within a mature political environment

These points of course have been analyzed and discussed time and time again, even by politicians. Unfortunately, politics is… also about advertisement and marketing. Academics on the other hand is – or at least should be – about the hard truth. And the truth is that up to this moment the Greek state appears not only “Big” but also “Bad” both to the Greek people and to foreign mainstream investors.

“Big” (and intricate) refers to the civil administration’s inflexibility, bureaucratic monomania, clientelistic orientation, instability and other “virtues’ of the kind that make entrance to the Greek market in general appear impossible – or at least unprofitable – to tackle with. As money is about flows, it prefers easier, safer and more transparent routes and the potential profit is highly uncertain even to exist. It is also considered “Big” by the other EU member states – even though never openly and widely admitted – concerning the domino-effect impacts of a most feared Greek economy default. Nevertheless, this issue seems to have been dealt with, whatever the social cost (e.g. welfare system).

“Bad” refers to the Greek governments’ failure to establish an homogenous, stable, transparent and competitive financial framework in order to attract foreign investment. Truth being told, Greece never was a legitimate investor’s paradise. The extended financial crisis has to do with a series of governments failing – on purpose or due to incompetency – repeatedly for at least 50 years; it’s surely not something like a political and economical surprise. It’s just that with the current situation and the unbearable austerity measures, errors of the past now return to take their toll and cannot be covered anymore.

Despite all this and the absence of a rigorous institutional framework, Greek political system seems attracted to the idea and practice of just letting the “Deus Ex Machina” market somehow auto and self-regulate. Well… markets may regulate things but when, how and for whom? In any case, this will be analyzed in another post, as well as why some international players and investors may actually prefer and help sustain selected and location specific immature-emergent markets.

Crisis, from the ancient Greek word Κρίσις (judgment) is etymologically also related to change. Change can be for the worse or for the best. Thus, financial crisis poses as an opportunity to demand and get rid of old and repeatedly failed practices adopting a new mentality able to lead us to a new era of thinking and doing.

Tsachageas P. Dimitrios is a PhD Researcher in Urban Studies, under the supervision of Professors Mark Stephens and Glen Bramley. His research is focused on affordable and social housing systems and relevant policy issues in South-Southeastern Europe. Among other things, he is also keen on science journalism, writing articles  for Greek journals and newspapers like naftemporiki from time to time.