Analysts in the short-term lease sector are drawing their attention to those who want to invest in this particular market at this time. Although the market continues to grow with double-digit rates of more than 20%, according to Airbnb and HomeAway statistics, property listings in our country exceeded 72,000, showing signs of “fatigue.” More specifically, there is a fall in daily rental rates and owner income, according to official data.
It has to be noted that the nature of the market has changed. Until recently, the market for short-term leases was a solution during the crisis to many homeowners, with the help of the “grey” tax framework that prevailed to meet their tax obligations. The same market is now more “professional” in nature, with multiple listings per owner, even on properties that do not really meet the basic requirements. This phenomenon raises concerns for those who are already active in this sector but also for those who are thinking of investing, buying a property to take advantage of the rise of this market and, by extension, of Greek tourism.
Proper attention is needed
According to market analysts, taking into account these facts, it is important that alternative investment scenarios are planned for future investments so that when a property does not perform well as a short-term lease, it can be changed at a low cost.
Short-term rental of real estate has been a good investment opportunity for many investors in a country that does not offer many alternatives. In addition, many homeowners have found a way out via a short-term lease from a situation where their real estate only produced costs, exploiting to some extent the up till now lack of legal and fiscal framework.
Estimates of tourist traffic in our country are positive, predicting an increase, but at the same time, it cannot be predicted to what extent short-term leases will be affected. If there is a shortage of available real estate in the core sectors, the short-term lease will be extended to contiguous areas as long as there is a connection with public transport. Therefore, future investors should thoroughly analyse the needs and prospects of the particular area that they are thinking of investing before they start anything.
In general, it is difficult to predict further developments in short-term leases. Several experts believe that the market has been saturated. In particular, in large cities, this sector also depends on other important factors, such as low-cost airlines. In any case, it is necessary to provide alternative scenarios for real estate under a short-term lease at the least cost. Also, something very important is the existence of elements of differentiation of the property in question from the increasing competition so that it stands out.
What do the numbers say
According to the figures published during the BnBGuest conference, AirDNA, currently the most specialised short-term data analysis company, at the end of 2018, compared to 2017, there was an increase of 21% in house rents for short-term holiday rentals in Greece, exceeding 72,000 from 59,400 in 2017. The average price in Greece has dropped by 17% based on the figures in December 2018, reaching 126 euros from 153 euros at the end of 2017, while a similar decline, mainly due to increased competition, has been noted on the average occupancy to 46.1% from 52.7% at the end of 2017. The aggregate data on average rental income per property available for lease is also of interest and reaches 58 euros in 2017 from 81 euros in 2018, a decrease of 28% compared to the previous year.
In the recent past, many short-term leasing companies have entered the market, either as investors or as service providers to owners, and thanks to the short-term lease sector in 2018, growth has also been reported in the construction sector, mainly through repairs and renovations.
As far as the tax framework is concerned, it is estimated that there will be further regulation on the tax treatment of its activity and revenues and the legal framework as further needs arise. These are very likely to have a significant impact on the activity and in some cases may even prohibit it, in the light of how things happen at the same time abroad. We must not forget, of course, that in Greece its heavy industry (and perhaps the only one) is tourism with what this entails. In any case, the institutional framework is already changing.
In the real estate market, the existence and rapid growth of short-term lease has changed the data radically. Especially in the central locations of major cities and well-known tourist destinations, the increased demand for suitable real estate for short-term rental and exploitation results in higher prices and a shortage of available properties. In addition, long-term rental rates have reached prohibitive levels, with the result that long-term tenants are also declining. More specifically, rents up to 30% are recorded in the centre of Athens. The rise in prices is expected to continue in 2019 as the real estate market recovers.
Advantages and disadvantages
The positive effects of the short-term lease model are the existence of new housing units that bring in our country – and due to lower costs – tourists who have so far not been able to come to Greece with what it implies on revenue for individuals and the state. Here, it should be noted that the available housing for short-term lease is not necessarily chosen by just ‘low-budget’ tourists; simply for many, it is the ideal holiday model compared to hotels. Also, new jobs are created, as for many owners the management and maintenance of real estate has become their new main activity and by extension, the real estate market, the construction industry, as well as supplementary or auxiliary branches are generally beneficial.
Looking at the other side of the coin, the distortion that has been created in the real estate market with the corresponding increase in prices must be taken into account. More specifically in Athens, there have been increases in sales prices of up to 35% in Athens and in Thessaloniki up to 20%. In central cities, there are no available properties either for purchase or rent, for residential or business use. This, of course, means that the use of entire neighbourhoods may change gradually. For example, Metaxourgeio can be transformed in a few years in an immense centre of short-term rental housing. All these should also take into account the legal problems that may arise with co-owners of real estate residing in buildings.