Buy and Sell Property in Agios Nikolaos, owned by the Michaelidis family and a supporter of the BritsinCrete.Net web site, was approached by TheMoveChannel in London ahead of the June 17 Greek General Election in Greece to give their insight as to how current economic woes impact on the foreign home owner in Crete. Ross Michaelidis did the talking on behalf of the family. Some views expressed may surprise you if you happen to be one of the Brits (or other foreign nationals) who have bought a home on the Greek island.
(Note: if you follow the link to BUY and SELL's website above: scroll down the landing page to the cat and the daffodils!)
The transcript of the interview is below, while the podcast can be heard at Property Inspector: The Great Greece Debate.
How is Crete’s property market faring in the recession?
“Crete and especially the area we operate in (#Agios_Nikolaos - Eastern #Crete) is affected by the current Greek recession to far less an extent than other areas in the country. The local economy depends on high quality tourist services and agriculture and is not as dependent on the state economics as other areas. “
How would Greece’s exit from the Eurozone affect the market?
“In my opinion it will be good for overseas homeowners. People who have incomes in Sterling or Euro and live in a country that has Drachmas will enjoy a better lifestyle for less money. Services and goods are bound to be cheaper and foreign home owners who live and work in our area will also see an increase in business as a return to the Drachma will affect tourism positively.”
What would happen to house prices on the island?
“House prices in our area would not be influenced by this change as much as they will in the rest of the country. The reason is that property is owned by people of various nationalities who tend to price their properties according to the currency and economic situation back home rather than the situation in the local market. For example, properties owned by British citizens in our area that have been put on the market for sale are cheaper than properties owned by Greeks or other Europeans as the British will benefit from the drop of the pound to the Euro in the last 5 years.
“There will be quite a few bargains on the market nonetheless but this is already happening as a result of the austerity measures currently taking place in the country.”
You mention bargains – if Greece adopts the Drachma and the currency weakens, will that make the property market more attractive?
“I believe it will. One of the discouraging factors for potential overseas home buyers in our area has been the high cost of living – caused to a high extent by the expensive Euro. A return to the Drachma will be a blow to the quality of living for the majority of Greeks and for many companies doing business here but for a homeowner or potential homeowner this could prove a blessing. “
The investigation then led to Mike Saunders, Marketing Director of Greek building company Snobby Homes. The Property Inspector interrogates him on the likelihood of Greece’s decision to depart from the single currency.
Mike, what is the chance of this actually happening? Could Greece leave the Eurozone?
“Greece leaving the EU may be a possibility, but it is most definitely NOT a probability - no more than Spain and Italy going back to the Peseta and Lira. Polls show 77% of Greeks want to remain in the EU and have endured three years of extreme austerity. However, during all this time there has been no strategy implemented for growth and consequently the population has been void of all hope. The recent election was a wake-up call for the two main parties to get their act together.”
What kind of effect would Greece leaving the euro have upon foreign property buyers?
“The consensus in Europe now seems to be that growth and austerity measures should be considered in tandem, rather than just total focus on cuts and the EU are gradually working to that effect. Thus, the question of what COULD happen is purely scaremongering and does nothing at all to promote buying property overseas. Where is the sense in putting off potential purchasers from buying property in Greece or anywhere else in Europe?”
While speculation may not help market confidence, there is still the wider financial impact the situation could have upon the continent’s property markets. The Property Inspector quizzes Robin Haynes, Managing Director of Currency Index, to determine the state of the single currency.
If – and this is a big if – Greece does leave the Euro, what happens?
“Who knows? It’s an unprecedented situation. There’s no way that’s been worked out yet for them to leave, but there’s still a month before the Greece elections and I’m sure the European authorities are putting contingency plans in place in case an anti-austerity government is elected, which is when you could possibly be looking at the scenario. “
How could it affect other countries?
“For the rest of the eurozone, it’s hard to know. There is an argument that says like a pack of animals, if the weakest is killed off the rest will become stronger. We have seen the euro strengthen a little bit just after these rumours started to become more realistic, but it depends on how the markets see the Greek withdrawal and how it could affect the rest of the currency zone.”
There are already signs in the UK that mortgage lending is down as well as home buying, both of which are being attributed to the lack of confidence as a result of the eurozone economic climate. How much would Greece leaving the single currency affect the UK?
“Our financial system is exposed to European debt and European banks, but again it depends on how well contained it is within Greece. If it looks like it could spread and Spain may be the new Greece and Portugal may be the new Spain, it could start to affect our economy more than if there’s a managed exit and the problems in other, weaker countries are more contained.”
Could it be good news for property buyers – or would it just be bad news for sellers?
“It could be. You could see very cheap property and holidays and so on in Greece for buyers in the coming months. If you hold assets there, they would devalue relative to the pound but would still have a value in the Greek system. Of course, if you’re selling a property that might be a big concern. There are ways you can hedge your bets a little bit – for example, you can fix your exchange rates in advance with a currency broker, so if you have got money or assets in Greece you’re thinking of bringing them back, it may be worth talking to a broker in advance of the elections to work out your options and protect yourself from any potential devaluation.”
What about those who have money saved in Greek banks?
“The banking system won’t be allowed to collapse. Throughout all the eurozone problems and the financial crisis, no depositor has lost any money in the banks as yet, so I’m sure that will continue to be the case. It’s also worth knowing that if you’re holding money in a British bank, even euros, they’re also covered by the FSA Financial Services Compensation Scheme so there’s no need to panic about money disappearing in the banking system – it’s just a case of making sure you’re not exposed to exchange rates moving against you.”
As the euro has weakened in recent months, British property buyers have already been able to save several per cent on the price of a house in, say, Spain. If the single currency keeps getting weaker as the Greece situation plays out, does any of this benefit UK investors?
“If the euro were to weaken in the coming weeks, you would assume that would be a temporary movement, but if you were thinking of buying a property within a year, you could fix an exchange rate based on what the market does in the next couple of weeks and secure a really good rate that could make your property cheaper when you do buy it in the coming months.”
I recall when Greece changed over from the Drachma to the Euro, there was an immediate jump in the cost of living in Greece by about 20 per cent. While it is true that anyone who will need to remit funds to Greece in any Drachma era will benefit from the inevitable devaluation in the Drachma's buying power against other currencies (some economists estimate an immediate 60% depreciation against the Euro and Sterling), I cannot see how the cost of basic necessities will not rise substantially, even Greek products, after any return to the Drachma. There is one caveat, some things are likely to be cheaper if we can buy directly from the source (i.e. the farmer), as we do on Crete for fresh produce now. In any event, according to the Buy and Sell Property Agency it looks as though there is some positive thinking where house prices are concerned. As foreign residents we may as well sit tight and enjoy the weather, fresh air, good food and local wine . We have no control over events anyway. As for any Greek default we are in the lap of the Greek Gods. Please add any of your own reactions to what you heard in the podcast, especially as they may apply to other parts of Crete (for instance in Chania, more than 150kms west of Agios Nikolaos).