ECONOMY

Foreign developers maintain interest, in spite of problems

A growing number of foreign property development companies have been considering setting up shop in Greece in the last three years, particularly after the country’s accession to the eurozone in January and despite an array of problems. Stelios Pikis, head of the foreign relations department of Danos & Partners, says, «A relatively undeveloped market like the Greek one offers many opportunities on the way to maturity.» He notes that large shopping malls outside urban centers, factory outlets, hypermarkets and small complexes combining commerce with entertainment are new for Greece and likely to succeed, after being successful in similar market cultures. «In the future, supermarkets will be gradually replaced by hypermarkets, just like they replaced smaller shops in the past,» he says. Also positive are the prospects for the office space market in both Athens and Thessaloniki, despite the continuing recession. There are attractive opportunities in developing storage facilities, with higher returns than in other countries, as available space is taken up by old buildings or lightly converted old factories. Nevertheless, a series of factors makes the establishment of a foreign developer in Greece a particularly complex affair, as evidenced by the cases of Australia’s Lend Lease and some top European firms such as Portugal’s Sonae Imobiliaria and, more recently, of Holland’s MDC Corporation. For over two years, MDC had a partnership with the municipal authority of the Athens suburb of Maroussi for the development of the press village of the Olympic Games of 2004, and had gone so far as to announce the project on its website after conducting extensive studies. But, suddenly, it had to participate in a tender for the project which was issued out of the blue and which it lost. Lend Lease has been trying unsuccessfully for years to develop the Kambas estate in Kantza, Attica, in partnership with the Helleniki Technodomiki construction firm. Sonae Imobiliaria set up a joint venture for the development of shopping malls with the Haragionis group in 1999, but does not appear to have achieved anything despite intensive efforts. Apart from specific problems such as those above, a number of factors hamper property development. «The lack of adequate and reliable information and the shortage of appropriate sites» are the most important, says Pikis. In particular, «there are only a few agencies conducting statistical research with a proper methodology and large samples, the result being a lack of accurate data on price changes, absorption and availability. Also, the lack of a national land register leaves questions unanswered as to the ownership status of many real estate items.» Many foreign developers appear concerned over the high risk resulting from their inadequate knowledge of the local market and insufficient connections, which acquire greater significance in an undeveloped market. For instance, any problems with suppliers may result in higher construction costs or longer completion time, says Pikis. One of the most important problems, he continues, is the failure of administration to establish modern and simple rules regarding taxation and ownership in real estate investment. Moreover, changes are so frequent that even local businessmen are bewildered by them. It proposed last month new minimum tax rates for certain products and guidelines on how the system should work. The plan includes the principle, which EU ministers have agreed on, that businesses should be taxed at a lower rate than private energy consumers.