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Greece 2011 Real Estate Review
 

Greece 2011 Real Estate Review

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2011 Real Estate Review for Greece

2011 Real Estate Review for Greece

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    Greece 2011 Real Estate Review Greece 2011 Real Estate Review Document Transcript

    • COLLIERS INTERNATIONAL2011 GREECE REAL ESTATE REVIEWAlbania Bulgaria Croatia Czech Republic Greece Hungary Poland Romania Russia Serbia Slovakia UkraineAccelerating success.
    • 2011 ColliERs REal EstatE REviEw » CoUNtRYGreece Dear Colleagues and Friends, the liquidity shortage and conservative views of investors become more apparent during 2010, showing through in a lack of large transactions. there is a great deal of uncertainty in terms of what to expect in the Greek market in 2011. land owners are holding on to their assets until finance and market conditions improve, or until they are forced to sell by the banks. Ana Vukovic the credit standards for lending to enterprises and households in general manager anticipation of an increase in non-performing loans have tightened. Business colliers international greece and household confidence have declined. Discounts of fees may continue toAddress 70 Syngrou Ave. & 2 Drakou Str. be the case in order to attract and secure clients. this creates an 117 42 Koukaki, Athens, Greece opportunity for those willing to enter into property transactions before banksPhone +30 210 683 2440 withdraw credit facilities.Email Ana.Vukovic@Colliers.com Despite these structural improvements and opportunities, we believe that it could get worse before it gets better as volatility dominates the market before it can stabilize. We believe that stabilisation may take place sometime during the second half of 2011. those yet to invest and awaiting future opportunities, may very well benefit as values are expected to decrease once banks are forced to take measures against those not servicing loans. Colliers must maintain its reputation and its quality of services in order to attract the most reliable clients in order to increase its market share. Colliers team, which is focussed on gearing for growth in 2010, is well placed to take advantage of the opportunities that the Greek crisis will bring in 2011. We look forward to working with you in 2011. Best regards, Ana VukovicP. 54 | CollieRS inteRnAtionAl Research: Firstname.Lastname@Colliers.com
    • 2011 ColliERs REal EstatE REviEw » GREECE ECONOMIC OVERVIEW KEY ECONOMIC FIGURES SUMMARY The annual rate of inflation (based on Metric % Change the Harmonized Index of Consumer Currently Greece is under a GDP Growth -4.6% Q3 2009 y-o-y restructuring program with financial Prices) reached 5.2% by year end, which Unemployment 12.4% Q3 2009 y-o-y is high for EU standards, but lower than support from the EU and International Inflation 5.2% as of December 2010 the 6.6% average for surrounding south Monetary Fund. Public Deficit 15.4% (end of 2009) east European nations. The rate of Source: Hellenic Statistical Authority By the end of 2009, the general growth, however, is a concern increasing public deficit had reached 15.4 percent of by 4.8% in November 2010 compared to GDP and public debt had increased to November 2009 (it had already risen by 126.8 percent of GDP. Public debt as a 2.1% between November 2008 – 2009). GDP, UNEMPLOYMENT & HCPI 15% share of GDP is forecast to peak at 10% almost 150% of GDP in 2013 before PROGNOSIS 5% declining thereafter. According to the Ministry of Finance, 0% the recession in Greece will be more During the past few years, Greece shallow than in 2010 at -3% compared to -5% Source: Hellenic Statistical Authority, Eurostat has lost a lot of its competiveness. Public -4.2%, but larger than initially expected -10% sector spending has increased beyond at the beginning of the year (-2.6%). | | | 2008 2009 2010 ▬ GDP Growth ▬ Unemployment ▬ HCPI sustainable levels, while unemployment and CPI have also increased to unhealthy GDP growth is, however, forecast by rates. the Ministry for 2012 and is then expected to continue to grow steadily GOVERNMENT BOND & PUBLIC DEFICIT 120% To combat this, the Greek following the restructuring of the 100% Source: Hellenic Government states within their update of economy and increasing 80% Statistical Authority, the “Hellenic Stability and Growth competitiveness. 60% Eurostat Programme 2008 – 2011” dated January 40% 2010 that it will take all the necessary The extent to which this scenario is 20% steps for the reduction of general realized will greatly depend upon the 0% government deficit. Managing this will be ability of the Greek government to retain | | | | 2009 2008 2007 2006 ▄ Government Debt ▄ Public De�cit difficult amidst a background of negative and build the confidence of international economic growth. investors and the money markets, as it reigns in government debt and deficits. According to the latest publication by the Hellenic Statistical Authority, GDP This could prove to be positive for the had decreased by 4.6% y-o-y by Q3 real estate industry, with the government 2010 (compared to Q3 2009). Despite recently announcing ‘renewed’ plans to significant declines in the external trade sell government owned and occupied deficit – falling by 42.2% and thus real estate and land holdings to raise contributing positively to GDP – declines capital. How true this is remains to be in consumption, investment and seen. government spending continue to place negative pressure on economic output. As a result, the unemployment rate rose again, reaching 12.4% by the end of Q3 2010 compared with 11.8% in the Q2 2010 and 9.3% in Q3 2009. This represents a 33% increase over a year.Research: Ana.Vukovic@Colliers.com CollieRS inteRnAtionAl | P. 55
    • 2011 ColliERs REal EstatE REviEw » GREECE OFFICE MARKET KEY OFFICE FIGURES GENERAL OVERVIEW DEMAND Metric Measure A fall in supply of new office premises Demand deteriorated in 2010 as the Total Stock 6,500,000 Sqm in Athens and a slow- down in leasing recession impacted on international Take-Up 5,700,000 Sqm activity were key trends during 2010. companies entering the Athenian market. Vacancy 12% Prime Headline Rent €21/Sqm/month Relocation to smaller sized offices in Demand was mainly driven by the Source: Colliers International Hellas Research order to reduce operating expenses was relocations of multinational and local also common and lease renegotiations companies trying to consolidate their have become more widespread, resulting facilities and achieve smaller and better in higher vacancy rates. quality space at a lower cost. Renegotiations of existing lease CHANGE IN STOCK OVER TIME & PIPELINE350.00 The amount of office space under agreements accounted for 40% of300.00 Source: Colliers International Hellas construction has fallen significantly due take–up in 2010250.00200.00 to the lack of funding; pre–lets have also150.00 dropped significantly. Traditionally demanded areas in100.00 Athens, like Kifissias Avenue, Attiki Odos 50.00 0.00 | | | A large differentiation in rents has and Athens/CBD have monopolised the H2 2009 H1 2010 H2 2010 been noticed between Class A space and interest of tenants, but the requests were lower quality office space. for lower rentals and more efficient use of space, i.e. less Sqm. Changes in the commercial law TAKE-UP STRUCTURE concerning the termination of lease A number of landlords proceeded 10% Expansion agreements, reducing the compensation with offering other incentives such as 11% 42% owed to the landlord by shortening the stepped rents and leasehold New leases Relocation from B class binding duration period from two years improvements in order to attract tenants. to one year resulted in strengthening the volumes of leasing market activity. A significant number of lease 37% Renewal & transactions during 2010 in Athens renegociations SUPPLY surpassed 1,500 Sqm of office space. During 2010 leasing activity in Athens slowed down as development activity significantly decreased and supply edgedKEY LEASE TRANSACTIONS upwards.Tenant Size Area DeveloperSiemens 5,500 Marousi Lamda Developments The supply of Class A office space inNew DemocracyParty 5,500 Syngroy Av. BVIC Athens, however, remains limited. TheProton Bank 6,000 Syngrou Av. Shipping Company total office inventory in Athens is estimated to be at around 6,500,000 Sqm, of which only 20% or 1,500,000 Sqm is of a high-quality. Approximately 1,500,000 Sqm of space is occupied by the public sector. Combined with the public sector downsizing, this will further increase vacancy. The volume of planned developments during 2010 was relatively low and pre-letting was the order of the day. Therefore, the majority of office buildings constructed were either pre-leased or built for a specific client, as many developers did not want to risk having their building sit vacant.P. 56 | CollieRS inteRnAtionAl Research: Ana.Vukovic@Colliers.com
    • 2011 ColliERs REal EstatE REviEw » GREECE OFFICE MARKET DISTRIBUTION OF TRANSACTIONS, 2010 100% VACANCY / AVAILABILITY Athens/CBD prime office buildings 90% Expansionary occupiers in all sectors competing for premier office users can 80% 70% were few and far between and the even reach as high as €30/Sqm/pcm 60% 50% number of leasing deals has fallen although this is rare and most buildings 40% significantly. The problem that office of good quality offer space at €24 – 27/ 30% 20% markets have to deal with is not only the Sqm/pcm. 10% self-evident crunch, but also the 0% exceeding availability of free office space In the less attractive sub-markets, | | | | | Under 500 Sqm 500-1,000 1,000-2,000 2,000-5,000 Over 5,000 Sqm ▬ Renewal ▬ New in all major locations. office rents currently stand at around €12 – 15/Sqm/pcm (Athinon Avenue, The northern and southern National road Athens-Lamia). submarkets of Athens comprise almost RENTS €25.0 70% of total office stock. Vacancy rates PROGNOSIS in these submarkets for grade A We expect lease renegotiations to €20.0 buildings stand at 15%. dominate the market in 2011, while €15.0 uncertainty will lead to a “hold” on any €10.0 Vacancy rates for grade A office expansion projects. buildings are estimated at 7% for CBD €5.0 and at 9 – 11% for Kifisias Avenue. The driver of relocations will mainly | | | | H1 2009 H2 2009 H1 2010 H2 2010 ▬ Prime Office Headline Rent ▬ Average Office Headline Rent focus on ‘downsizing’ of occupancy in RENTS newly leased premises in order to As demand falls and the supply of reduce the operation costs of occupiers. disposable office space increases, prime rental values in Attica have consequently The upcoming year will also be been dropping. dominated by strong sub-leasing activity. Kifisias Avenue is expected to be the The decrease of rental levels in the focus of most sub-lease activity in the last 12 months has reached up to 10% market. for new build office complexes in the main office avenues. Vacancy rates should remain stable for prime office locations as demand is On Kifissias Avenue - often renowned concentrated in these areas. This should as the benchmark location for office also create stable prime rents. prices – the prime rental levels are near an average of €20/Sqm/pcm for new Vacancy and rents in secondary built properties, whereas for older sub-markets, however, are expected to properties the prices vary around reflect a drop estimated to be around €15 – 17/Sqm/pcm. 10%. On Syngrou Avenue rental values for The limited construction of new office office space range from €15/Sqm/pcm to premises will continue in 2011, given the €18/Sqm/pcm. Along the Attiki Odos necessity of new developments to be motorway, the construction of which pre-leased. radically changed the real estate map of the area, depicts office space rents that range from €12/Sqm/pcm to €16/Sqm/ pcm.Research: Ana.Vukovic@Colliers.com CollieRS inteRnAtionAl | P. 57
    • 2011 ColliERs REal EstatE REviEw » GREECE RETAIL MARKET KEY RETAIL FIGURES GENERAL OVERVIEW According to market data, up to 25% Metric Measure The decrease in commercial sales of middle and small store owners have Prime High Street Rents €180/Sqm/month activity in various retail sectors, such as their properties available to lease and as Prime SC Rents €50/Sqm/month clothes and shoes, reached over 50% in it is estimated that this percentage is SC Stock 34,000 Sqm 2010. Nevertheless, the request for going to grow up to 35% within the next SC Vacancy 30% stores of 1,000 Sqm and above in the few months of 2011. Source: Colliers International Hellas Research central markets of large cities, e.g. Athens, Thessaloniki, Patras, Larissa, DEMAND Heraklion remained stable. Demand is now mainly for large stores in central market locations. CHANGE IN SC STOCK OVER TIME (SQM, 000) 250 Furthermore, new requests from Shopping Centers have become the Source: Colliers International Hellas 200 large space users such us Hennes & preferred format of foreign retailers as Maurittz, Zara and Koton for space in well as local retailers. Fashion and home 150 smaller cities (40,000 – 80,000 wear stores, restaurants, bars and 100 inhabitants) such as Trikala, Volos, supermarkets are all looking for 50 Alexandroupolis, Ioannina and others opportunities to expand in these 0 | | | | | | | | | was also noticeable in 2010. attractive developments. Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2009 2009 2009 2010 2010 2010 2010 High demand for shopping malls Subsequently, demand for space on remained, giving limited opportunities to prime high street locations is less than in retailers to lease space as only two new 2009. RENTS€90.00 developments opened in Greece in 2010€80.00 (Metro Mall and Capitol). RENTS€70.00€60.00 There was a decrease in High Street€50.00€40.00 Rental prices in central high street rents by 20 – 30% in 2010, down to€30.00 areas witnessed a decrease of 20 – 30%. €80/Sqm. Prime SC rents are now €50/€20.00€10.00 Sqm, and Prime Retail Outlet rents are €0.00 | | | SUPPLY €40/Sqm. Prime SC Prime High Prime Retail Street Outlets Only two new shopping centre developments opened in Athens in 2010. PROGNOSIS These openings had limited negative The market is expecting the opening impact on the market, as demand for of 2 – 3 retail developments in 2011. TheNEW MARKET ENTRANTS OR DEVELOPMENTS these and existing shopping centres large shopping mall — retail outlets to beTenant Size Project Developer remained constant. The same cannot be delivered include: “River West Mall” byShopping center 12,000 Capitol Charagionis said for the high-street. Viohalko in Athens, Mac Artur Glen outletShopping center 22,000 Metro Mall Talima in Spata (Attica).Blanco 1,300 Ermou strore Despite the fact that Ermou Street isSource: Colliers International Hellas Research still one of the worlds most expensive These large scale commercial high streets, retailers continue to express developments will increase the volume their desire to secure their presence in of available space by approximately this prestigious retail market. 80,000 Sqm, although the timing of delivery is vague given the large delays This aside, Ermou had many empty in planning and construction. stores by end 2010, which are not expected to be leased during 2011. Whilst large retail chains will continue Vacancy in high-streets stores was a their expansion in both the Athens growing trend in the centre of Athens in market and in other major Greek cities, 2010. this may not keep pace with new supply. Traditional high streets look set to suffer the most, where a large drop in rents is expected as vacancy rises over the course of 2011.P. 58 | CollieRS inteRnAtionAl Research: Ana.Vukovic@Colliers.com
    • 2011 ColliERs REal EstatE REviEw » GREECE INVESTMENT MARKET KEY INVESTMENT FIGURES SUMMARY PROGNOSIS Metric Measure The investment market in Athens 2011 is expected to be a challenging Investment Turnover €121,000,000 slowed down in 2010 compared to 2009. year with limited equity being available in Prime Office Yield 7.25% the market to finance large projects, Prime Retail Yield 7.00% The Greek investment market was resulting in smaller transaction sizes. Prime Industrial Yield 8.75% characterised by an imbalance between Source: Colliers International demand-side requirements and supply- The general belief is that yields will side expectations. A combination of move out significantly during 2011, driven these factors resulted in a limited by the cost of money. This will provide amount of deals being made. cash rich/equity investors with INVESTMENT VOLUMES (€ MLN) 600 opportunities. The bulk of investors will 500 Source: Colliers International Hellas On the supply-side, the majority of continue to be dependent on debt, which 400 vendors in Athens, who had their may take some time to materialise. 300 properties on the market before the 200 100 crisis, withdrew their offers, continuing Yields are anticipated to rise more 0 | | | | to wait for the investment market to pick significantly for secondary properties in 2007 2008 2009 2010 up again in order to be able to achieve submarkets, also evident from the ‘yesterday’s prices’. For some, this may decreasing of the rental figures. not happen, but they have been able to afford to wait as their properties The most sought after assets will PRIME YIELDS 9% continue to generate income. continue to be core office properties in prime locations in Athens with long 8% On the demand side, the buyer leases and strong tenant covenants. 7% interest that existed primarily came from 6% private local investors looking for bargain Source: Colliers International deals and distressed properties, to 5% provide high returns on equity. Of those | | | | H1 2009 H2 2009 H1 2010 H2 2010 ▬ Prime Office Yield ▬ Prime Retail Yield ▬ Prime Industrial Yield investors investors with equity, most were not ready to assume an all equity investment risk.KEY INVESTMENT TRANSACTIONS These investors will continue to bideDeal Value Vendor Purchaser their time, anticipating forced sales. TheQ1 €46M Interamerican Ship owner decline in the volume of European bank Sona Sierra & Acropole LamdaQ3 €38M Charagionnis & Lamda Developments (the debt and anticipated rise in debt costs Developments remaining shares) may eventually begin to force some sales onto the market over the coming year. Due to a lack of comparable evidence and the limited amount of deals in 2010, there is an uncertainty regarding yields and pricing. Prime yields are estimated to be around 7.25% - 7.50% for office, 8.75 – 9% for industrial and 7.00% - 7.25% for retail properties. Secondary property yields have increased more as these properties are seen as more risky and less desirable transactions - it is more difficult to source the necessary funding to acquire such assets.Research: Ana.Vukovic@Colliers.com CollieRS inteRnAtionAl | P. 59
    • 2011 ColliERs REal EstatE REviEw » GREECEGREECE TAX SUMMARY right to deduct the corresponding amount in the EU Interest – Royalty Directive. VAT PROVISIONS FOR SERVICES future. Land is not depreciated for both tax and CONNECTED TO IMMOVABLE PROPERTY accounting purposes. There is no withholding tax on payments made According to Law 3763/2009 effective as of 1 to Greek residents.January 2010, the place of supply of services to a Depreciation is taken on a straight-line basis ontaxable person shall be the place where the the acquisition cost of the asset plus any expenses INTERESTrecipient has his business establishment, while the incurred for improvement or extensions. Except for interest from bank deposits, which isplace of supply of services to a non-taxable person taxed by special provision, and interest from stateshall be the place where the supplier’s business is bonds or bonds issued by Greek corporations, RELIEF OF LOSSESestablished. interest remitted to non-resident entities is subject Tax losses of companies and branches of foreign companies that maintain double entry to withholding tax at a rate of 40%, or at the rate However, special provisions will apply accounting books and of entities maintaining applicable in a tax treaty for the avoidance ofregarding services connected with immovable income and expense books may be carried double taxation.property located in Greece (e.g. real estatebrokers). In particular, VAT is due in Greece for the forward and be offset against taxable income of Also reduction may be achieved of thesupply of services connected to immovable the five years following the financial year in which aforesaid rate to 5% for the period up to 30 Juneproperty located in Greece. they were incurred. Losses cannot be carried 2013 (unless the relevant treaty for the avoidance back. Greek companies having a business interest of double taxation provides for a more favorable (branch) abroad, may offset losses incurred by CORPORATE INCOME TAX rate) or to 0% from 1 July 2013 onwards, in cases their foreign interest only from profits arising from The taxable profits (or losses) of each year are where interest is paid by Greek entities to affiliated a similar business interest abroad and not fromthe profits (losses) shown in the financial entities subject to the conditions of the EU Interest profits arising from their business activity instatements, derived from the official books kept in – Royalty Directive. Greece.accordance with the Code of Books and Records Interest earned on deposits with banksafter adjusting for non-deductible expenses and THIN CAPITALIZATION operating in Greece is subject to withholding tax atnon- taxable income. Capital gains (or losses) are Based on the provisions of Law 3775/2009, as the rate of 10% (except for deposits made ingenerally regarded as ordinary business income. amended recently with Law 3842/2010, accrued foreign currency by a non resident which is The tax rate applicable to the profits of an AE interest of loans or credits which are paid or tax-free). Interest earned on Greek State bonds,or EPE or a foreign branch is 24% for fiscal years credited to affiliated enterprises (i.e. enterprises treasury bills and bonds issued by Greekstarting from 1 January 2010. Such tax rate is related to each other in a relationship of direct or corporations (including banks, insurancereduced annually by 1% until it reaches 20% for indirect substantial administrative or financial companies and foreign companies in which Greekthe profits of accounting year 2014. The distributed dependence or control) is deductible on condition banks have the majority in the share capital) isdividends/profits are subject to 40% tax. that the relation of these loans or credits to the net subject to withholding tax at the rate of 10%. assets of the enterprise does not exceed the ratio Exemptions from tax may apply provided that On the basis of a new draft bill which has yet to of 3:1 on an average per fiscal year. The thin certain conditions are satisfied and interest frombe finalized and ratified by the Greek Parliament capitalization rules also apply to bond loans, while Greek State and corporate bonds is exempt fromthe tax rate applicable to profits of an AE or EPE is intercompany loans include also loans provided by tax if earned by a non resident.reduced to 20% for financial years starting from 1 third companies, which are guaranteed by affiliatedJanuary 2011 onwards. Distributed profits are companies. Leasing companies, factoring SERVICE FEESsubject to a 25% tax withholding. Profits derived companies, companies of Law 3156/2004 and Law In general, fees paid to foreign undertakings oron the basis of financial statements as of 31 3601/2007 seated in Greece, credit companies and individuals who have no permanent establishmentDecember 2010 are taxed at the rate of 24%, credit institutions which operate in Greece are in Greece for services rendered in Greece arewhereas distributed profits are subject to a 21% exempted from the above provisions. subject to a 25% withholding tax unless a taxtax withholding. treaty provides otherwise. Fees incurred specifically for studies, designs, research and When a company earns income from real WITHOLDING TAX scientific advice, as well as for supervision andestate, the gross income therefrom is subject to a ROYALTIES consulting services in Greece on construction3% supplementary tax, but such tax cannot exceed Royalties paid to companies or individuals with projects are also subject to a 25% withholding tax.the corporate tax corresponding thereto. no permanent establishment in Greece are subject There is no such tax in the case of a Greek to a withholding tax of 25%. However, if a treaty resident. Where a treaty for the avoidance of for the avoidance of double taxation is in force, its TAX DEPRECIATION double taxation is in force, its provisions apply. provisions will apply. Annual depreciation of fixed assets iscompulsory for years ending on or after 30 DIVIDENDS Also reduction may be achieved of theDecember 1997 at rates or range of rates According to a new draft tax bill, which has yet aforesaid rate to 5% for the period up to 30 Juneprescribed by law. Fixed assets of the same to be finalized or ratified by the Greek Parliament, 2013 (unless the relevant treaty for the avoidancecategory can be depreciated on condition that the dividends deriving from financial years starting of double taxation provides for a more favorablerate to be chosen will be used consistently. If a from 1 January 2011 onwards are subject to 23% rate) or to 0% from 1 July 2013 onwards, in casesbusiness in any accounting period does not take withholding tax. Especially for dividends deriving where royalties are paid by Greek entities todepreciation at the allowable rate, it waives its from financial statements as of 31 December 2010 affiliated entities subject to the conditions of theP. 60 | CollieRS inteRnAtionAl Contact: gstamatelou@kpmg.gr
    • 2011 ColliERs REal EstatE REviEw » GREECEGREECE TAX SUMMARYthe corresponding withholding tax is set to 21%. 1‰ applies on some other categories of buildings SPECIAL TAX ON REAL ESTATE including those used by entities on carrying out Reduction or elimination of the said withholding A special annual tax is imposed at the rate of their own activities. Any tax due on the total valuetax may be achieved on the basis of either the 15% calculated on the value of the real estate on of buildings cannot be less than €1/Sqm. with theapplicable treaty for the avoidance of double offshore legal entities, companies or legal forms of exception of semi-finished buildings. Especially fortaxation or the EU Parent – Subsidiary Directive. any type (including trusts) that own the freehold or financial years 2010, 2011 and 2012 the taxable usufruct of real estate located in Greece effective value of real estate self-used by hotel enterprises from 1 January 2010. In order to be exempt from REAL ESTATE TAX is taxed at 0.33‰ without the limitation of €1/Sqm. this tax, individuals who are the ultimate TAXES ON ACqUISITION Finally, certain categories of real estate and shareholders of Greek or EU companies must be Law 3427/2005 introduced, as of 1 January certain taxpayers (the state, public legal entities, identified and obtain a Greek Tax Registration2006, VAT on the transfer of new buildings churches, monasteries, sports clubs) are exempt Number.(construction licenses that were issued or revised from real estate tax.after 1 January 2006) at the rate of 23% (as of 1 However, further exemptions from this tax mayJuly 2010), on condition that they are to be used Real estate tax is not deductible for income tax be also provided if certain conditions are met.for the first time by the purchaser as his purposes.secondary residence or commercial property. The tax is calculated on the objective value of Real estate tax replaced real estate duty which the real estate on 1 January each year and is paid Following this first transfer, every subsequent was introduced in 2008. at the time of filing the return, which should betransfer will be subject to real estate transfer tax. filed by 20 May of the following year.Concerning the transfer of old buildings (whoseconstruction license was issued up to 31 TAXES ON OCCUPATION/RENTAL INCOMEDecember 2005) as well as land and new Income from real estate is subject to incomebuildings to be used as the purchaser’s primary tax at the rates described in the previous chapters.residence, these are not subject to VAT but to real There are special rules applicable to determine netestate transfer tax. taxable income where the income is earned by individuals and foreign entities which do not have a Real estate transfer tax is levied on the permanent establishment in Greece, and not allacquisition value of real estate. The tax is expenses (including depreciation) are necessarilycomputed on the contract price or the objective taken into account.value, whichever is higher. The objective valuesystem covers real estate situated in almost every The occupation of self-owned real estate givespart of Greece and is a method adopted for rise to imputed taxable income. The annualmitigating disputes between the tax authorities and imputed income for using a self-owned (rented orthe taxpayer as to the taxable value of real estate. granted for free) primary residence is calculatedWhere no objective values exist, the value is according to a specific scale based on its surfacedetermined by the tax authorities. Real estate and on the zone prices applicable for thetransfer tax rates are 8% for the first €20,000 and respective location. For secondary residences the10% for the remainder. A local authority surcharge, annual imputed income is reduced by half.equal to 3% of the transfer tax, is also levied. Businesses receive a deduction equal to their imputed income, thus there is no income tax effect. TAXES ON OWNERSHIP Tax on ownership is imposed in the form of Apart from income tax payable on rentalreal estate tax. Real estate tax is imposed annually income, individuals are subject to a 1.5%and applies to the total value of real estate situated supplementary tax on gross real estate income,in Greece and owned by individuals or legal which is increased to 3% if the real estate is usedentities on the 1st January of each fiscal year for residential purposes and exceeds 300 Sqm.starting from 2010. For real estate owned by This supplementary tax cannot exceed the taxindividuals, this tax is levied with progressive rates payable on this income. Corporations are subjectranging from 0.1% to 1% whereas the tax free to the same supplementary tax, however only thethreshold amounts to taxable value of €400,000 3% rate applies.per owner. Especially for financial years 2010,2011 and 2012 the tax rate on any taxable value Stamp duty is payable on rental income at aover €5 Bln amounts to 2%. rate of 3.6% for commercial leases. For real estate owned by legal entities, the Rental income is generally not subject to VAT,taxable value is based on “objective” criteria and however the rental of shopping malls under certaintaxed at 6‰ for businesses or at 3‰ for not-for- conditions, furnished units with certain addedprofit organizations which serve educational, services, and equipped industrial premises arereligious or charitable purposes. A reduced rate of subject to VAT (at the rate of 23% as per 1 July 2010).Contact: gstamatelou@kpmg.gr CollieRS inteRnAtionAl | P. 61
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