The economic crisis has hit the real estate market hard, especially the market for second homes in many European countries, but Greece has been lucky in some respects. The rush for second homes did not start at all in many local areas and in others it started late, so the impact on the vacation home market has been negative – but so far has been contained when compared to other EU countries, such as Spain. Vacation house prices in the hard-hit Greek areas have fallen up by to 25 percent compared to a year earlier, according to real estate company executives, although the drop in house prices in the most popular tourist destinations is up to 10 percent year-on-year. Rentals of the same category are estimated to be down by around 10 percent for the same period. Although there are no official statistics, real estate agents who are active in this segment of the market estimate that 1,000 to 2,000 vacation homes were sold each year in Greece the last few years. About 50 to 60 percent of these were bought by nonresidents and the rest by Greeks. Most of the foreigners came from Western Europe, but there was a notable increase in interest by nationals from Eastern Europe, mainly Russians, the last couple of years. This weak demand reflected more the market’s supply fundamentals than anything else. To be exact, it had more to do with the extremely limited supply of modern houses and related services. The lack of proper zoning and urban planning along with bureaucracy as well as the fact that there are many small holdings on stretches of land that could have been used for development have hindered further expansion. The same is true for the existence of varied building laws in different parts of the country, such as in the Cyclades and Ionian islands. This is supposed to change with the new zoning law, but it is still too early to judge. Vested local interests and others have strongly resisted the development of many units, claiming damage to the environment etc. So, many developers have settled for building a few maisonettes in areas of 4 acres or more outside of town-planning zones, which is allowed by law. Another problem that prevented foreigners from buying vacation homes in the country was an unwillingness by Greek banks to provide mortgage loans without a local guarantee. However, this has changed, according to real estate company executives, and foreigners can obtain loans by providing information about their financial situation, including their tax returns. Given that Greece is a major tourist destination in the Mediterranean, with more than 11 million people visiting every year, this sad situation in the development of second homes has deprived Greece of a potential huge inflow of capital and investments. According to pre-crisis calculations, the country could receive more than 120 billion euros from abroad in the next 10 years by selling 1 million houses at an average price of 120,000 euros to nonresidents alone. This is a 20-times-plus multiple of the more than 20 billion euros the country is expected to receive from EU funds through 2013. The economic crisis has left its mark on the industry and a major construction company on the island of Crete, Hellenic Homes, has filed for protection from creditors. Real estate executives are quick to point out that Crete is one of the few places in Greece where the vacation home market had taken off and, thus, is likely to be hit hard. The fact that more than 50 percent of nonresident buyers in Crete appear to be British seems to have played a role, as the pound sterling has slid quite a lot against the euro in the last 12 months and the economic crisis has had greater impact in the British economy than others on the continent so far. A good number of foreigners have also bought vacation houses in the Ionian Islands, such as on Corfu, Zakynthos, Cephalonia and Lefkada, over the last few years, according to real estate agents, but the impact is not expected to be the same. The impact on the Cyclades, such as Paros and Syros, remains to be seen so far. It should be noted that many Greeks who used to own second homes in Porto Rafti and other such areas in greater Athens in the past, had sold their houses years ago and bought other houses in the Cyclades and on nearby islands, such as Kea, to avoid overcrowding and noise. Under normal circumstances, Myconos could also face a tough market, but real estate agents say it may resist better due to a law that limits new construction for some time. There is no doubt that the vacation house market could become a potential El Dorado for the Greek economy. For the time being however, Greece is lucky that has not become another Spain. Still, the local areas, such as Crete, with the most developed markets, should be expected to be hit the hardest.