ECONOMY

Taxes reshape market

Strong property sales in 2005, and their accompanying high revenues, will allow construction companies to keep prices at their current high levels next year. Many households have just spent hefty sums due to their panic over the imposition of new taxes and the increase in construction costs and in old property concessions in the exchange of new apartments. On the other hand, the gradual rise in objective values – used by tax authorities to assess a property’s value – will maintain buyer interest, combined with the fact that flats on sale in 2006, and even into the first half of 2007, will have been constructed with permits issued before January 2006, making them exempt from value-added tax. Therefore, the new year will be one for reflection in the property market. Apartment prices in the categories up to 250,000 euros have risen sharply, even in the so-called cheap areas, bringing them closer to the «expensive» ones. There was also a slight upward trend in other categories, with only big apartments and maisonettes excepted due to limited demand. The market is also expecting the final version of the town-planning bill by the Ministry of Environment and Physical Planning. The problem of parking spaces is a key factor and, depending on the solutions offered by the state, properties may receive a boost. Note here the significant impact of the new legal framework over parking areas in new buildings in Attica, where smaller properties are at a serious disadvantage. Stores and offices Besides housing, 2005 saw crucial restructuring in the stores market, particularly in commercial chains, shopping centers and theme parks which are being developed in Greece, after some delay. The opening of The Mall Athens and Media Markt in Maroussi and of Mediterranean Cosmos in Thessaloniki have underscored the new reality in the market. The well-known big chains, as well as many others arriving in Greece for the first time, are positioning themselves in shopping centers with a dynamic presence, which is changing the rules of the game. These developments clearly create problems for smaller stores in medium-sized markets. Of course, the commercial appeal of many areas is not going to wane, and some of them will continue to be hot property, having timeless value. For the office market, 2006 is expected to be another difficult year. Excessive supply is one big problem, while the emergence of new office complexes is also dampening down demand; rising trends tend to emerge in more established markets. A significant number of companies wish to be housed in more modern and «smart» spaces, although for many this remains more a dream than a reality. Most of them postpone their relocation plans, seeking offices at a lower cost or trying to lower their rents. The high rate of availability in Athens and Thessaloniki does not allow for much optimism in 2006. We may not have even reached the lowest point of the office market cycle, so we can even expect a further correction in some areas. Another interesting development expected in 2006 is the greater activity of the companies investing in real estate. In 2006 we are likely to see considerable capital coming into the office market in particular. The example of the Piraeus Bank subsidiary is but the beginning for this product in Greece. (1) Babis Charalambopoulos is president of the Hellenic Valuing Institute (ELIE) and a member of the body of chartered property valuators (SOE).