Time To Buy In Greece?
My wife was interviewed on Fox Business News yesterday morning. The host Charles Payne asked if she thinks this is a good time to buy property in Greece. He’s not the only one wondering. We’re getting that question a lot.
Is the ongoing crisis in Greece creating an opportunity?
The dollar has more buying power versus the euro than it has had since 2003. If you’re a U.S. dollar holder, this is the best time in 12 years to be shopping for property in much of Europe, including, yes, in Greece, which uses the euro (at least as of this writing).
Does Greece make sense as an investment market? That’s a different question. As my wife explained to Mr. Payne yesterday, the answer to that question is no. While property values are depressed and Greece is among one of the cheapest places to buy real estate in Europe right now (you can buy for about US$2,100 per square meter on average in Athens), this is not a place to invest capital with the hope of return in the form of appreciation. I’d say property prices in this country have a ways to go downward still before we’ll see anything like recovery. Meantime, will the euro continue to devalue versus the dollar? Will Greece continue using the euro or revert to its own currency?
Neither is this a time to invest in Greece for yield. Rental returns are low and falling. The official rate of unemployment is 25%; youth (under 25) unemployment is nearly 50%. Kids are moving back home, families are huddling together, and the local demand for housing is almost nonexistent.
Meantime, tourism rentals likely will suffer this season, as would-be tourists are scared off by liquidity concerns. I’ll digress here to say that I wouldn’t let the ongoing Greek collapse keep you from enjoying a visit to this country. In fact, this could be a great time to be a tourist in Greece. Prices are down, vendors are hungry for your business, and you’d have limited competition from other tourists (a huge plus in my book). If I had time in my schedule, I’d consider planning a visit myself (remembering to pack plenty of cash).
This is a blood-in-the-streets moment in this country, but it is not the time (yet) to be investing. You want to invest as near the bottom of a market in crisis as possible. We are maybe nowhere near the bottom in Greece.
The line was clearer in Argentina in 2001. When the Argentine government de-pegged its peso from the U.S. dollar, the ensuing economic collapse followed directly and property values hit a clear bottom six or seven months later. As soon as the economy showed signs of settling, property values began moving back up. It was textbook.
The situation in Greece is messier. Unlike in 2001 in Argentina, the Greek economy hasn’t taken a quick, sharp hit. It is, rather, suffering through a slow and painful death. The bottom may be a long time coming.
That is not to say this is not a moment of opportunity. It is. Not for the investor but for the would-be expat or retiree with an interest in a new life in the Greek isles. If you’ve dreamt of owning a little piece of sunny, romantic Greece, this is perhaps the best chance of your lifetime to make that dream come true.
If you’re shopping not for a lifestyle but an investment, consider Portugal, Spain, or Ireland, where we are post-bottom of the downturns these countries have suffered in recent years and the weak euro means you’ve got added buying power.
You’re not shopping for appreciation but for rental yield. Invest to net 5% to 8% per year for the long term.
Kathleen and I fly from New York to Portugal tomorrow, where we’ll be looking at a possible rental investment purchase ourselves. I’ll let you know what we find.
Happy Fourth of July weekend, my first Stateside in 17 years.
Lief Simon
Continue Reading: Top Retirement And Property Investment Options In Europe
