The image of real estate in Greece has improved so much that it now figures among investors’ choices for a decent placement in the European property markets. It wasn’t always this way. Greece had long been a no-man’s land for foreign institutional investors because of the unclear legal, tax and town-planning framework and the lack of an appropriate or attractive product to persuade investors. Now many things have change for the better. The law about property investment companies has improved. Value-added tax has been introduced on newly built constructions. The local market’s transparency has improved, as has the information flow. These changes have created an attractive product for investors, say market professionals and consulting company expert. «It is true that the Greek property market has recently changed regarding its investment dimension and slowly but steadily it is obtaining the characteristics of a mature market,» said Dika Agapitidou, general director of the Athinaiki Economiki firm that represents Jones Lang LaSalle in the Greek market. «The main points that make today’s situation different to the recent past is that gradually the market offers products that attract the interest of local and mainly foreign institutional investors,» she said. «At the same time changes in the tax system create a much more rational environment for the entry of foreign funds in the Greek real estate market, while returns are considered particularly competitive compared to other Mediterranean countries.» Foreign institutionals are entering the Greek market both directly and indirectly. In the first instance, cases include the acquisitions of Village Park in Rendi by the Pradera fund and the Development Ministry building by Rockspring. In the second instance, examples include foreigners’ participation in the share capital of Babis Vovos and the acquisition of a stake at Eurobank Properties by Deutsche Bank. Market professionals note that the creation of shopping and entertainment centers promotes the domestic market internationally through the attraction of global retail chains. The advent and involvement of internationally recognized brands persuades investors that this market deserves their attention. The entry of major retailers is followed by that of big investors, according to international experience in emerging markets. The Mall Athens, created by Lamda Development, is a good example: The company’s president and CEO, Apostolos Tamvakakis, recently noted that the shopping center’s operation has brought 12 new retail chains to the Greek market. The interest of foreign investors was then expressed just eight months after the opening of The Mall, with HSBC Property Investments spending 135 million euros for the purchase of 50 percent of the shopping center – the biggest deal ever in the Greek real estate market. It was an agreement similar to those made in the strong and mature emerging markets of Western Europe, in a period when the interest of foreign institutionals is constantly increasing. This offers plenty of optimism to the local market that soon there will be new announcements from foreign investors, as funds from Germany, the UK, Australia and to a lesser extent the US are scanning the opportunities emerging in the local market. Already the Pradera fund, following its acquisition of the Florida 1 business park, is searching for another investment in the Greek market, namely in Larissa, while one more fund that is not active in Greece yet has approached Babis Vovos International Technical SA to acquire the latter’s development on Syngrou Avenue. The fact that Media Markt is the main leaser in both cases is not a coincidence. Besides Pradera, another foreign fund with intensive activity is UKA, including British and American investors. Late last year the fund made its first move in Greece with the purchase of 16 properties from the Eurobank Properties-Deutsche Bank portfolio. Those properties, spread around various Greek cities, are leased by the Champion supermarket chain of French retailer Carrefour. The second investment concerns the purchase of the building of the Carrefour supermarket in Ambelokipi by a Greek institutional investor. European property sector is red-hot Investment activity in the European real estate market continues unabated, breaking one record after another in turnover, as many investment funds with strong cash flow seek out the few good opportunities. The great demand from institutionals for office space and commercial properties in the emerging Balkans markets has made the volume of capital invested in the year’s first half soar to 95 billion euros across Europe, according to Jones Lang LaSalle, the international real estate consulting firm. This is 30 percent higher than the first half of 2005, while for the whole of 2006 the funds to be invested will range between 180 and 200 billion euros. Cross-border activity stood out in particular in January-June 2006: Property acquisitions by foreign investors covered 68 percent of the whole, rising from 59 percent during 2005. Crucially, investors from outside Europe accounted for 58 percent of cross-border investments, highlighting the attraction of the European real estate market. The office sector grew to 56 percent of all institutionals’ invested capital in H1, up from 46 percent throughout last year, exceeding 50 percent for the first time since the World Trade Center in New York was attacked in 2001. The rise in the office sector made the retail domain shrink in H1 from 29 percent to 24 percent. Investors are also turning to the housing market, although this has never been a major target for investments. The great cash flow stemming from the previous decline in interest rates, the need for a greater dispersion in investors’ portfolios, the increased transparency in markets and the revision of the sense of investment risk have given a new dimension to the European housing market, according to the Knight Frank consulting firm. In the long run the yields of this sector are on a par with the best years of stock markets if the risk factor is also considered. For the 2001-2005 period, the returns of the European housing market are estimated at 52.3 percent.