By Marcel Cremer
Greece has become a favorable investment destination in the last few years, mainly because of its natural beauty, mild climate and geographical position, but also because of a significant drop in prices following the financial crisis that emerged after 2010. Investors from all over the world are now looking at Greece as the new “hot” investment destination and rushing to benefit from the abundance of quality real estate available at affordable pricing. Many buy as end users and others with the aim of letting.
Greece is a European Union member-state governed by the rule of law. It is also a member of the eurozone, enjoying all the benefits that derive from sharing the common currency without risks of devaluation or inflation volatility. The laws pertaining to the acquisition and ownership of real estate are provided by the Hellenic Constitution and the Civil Code. Most properties in Greece are freehold.
2. Legal framework
A. Rights in real estate
Real estate owners in Greece may have different rights.
- Full ownership (absolute or joint)
- Bare ownership (absolute or joint)
- Usufruct (absolute or joint)
It is essential that the buyer establishes which (among the aforementioned) is the right of the seller to be transferred in every transaction, in order to ensure that the value of the real estate is reflected in the rights that come along with the sale.
B. Acquisition of real estate in Greece
There are various ways of acquiring real estate in Greece. For investors, these mainly concern the two following:
– Acquisition by contract: The buyer and seller appear before a notary public and sign a deed which is subsequently registered at the local cadaster or land registry.
– Acquisition of property through public auction: As of 2017, the Greek State has conducted electronic auctions. Greeks and foreigners (whether natural persons or legal entities) can subscribe online. The procedure is open to the public and the properties offered are easily accessible via a weekly journal.
3. The process of acquiring real estate in Greece:
1. After selection of the property, the buyer appoints a lawyer to perform all the necessary legal searches. The title search takes place at the Land Registry and ensures that the asset in question indeed belongs to the seller and that it is clear of any encumbrances (such as mortgages, liens, foreclosures etc). The lawyer also checks the suitability of the asset and if this is located in an area where prohibitions or restrictions apply.
2. Issuance of a tax number. It is a requirement of the Greek State that every transacting party (natural person or legal entity) has its unique tax number before acquiring real estate.
3. Technical survey of the property. This is not a compulsory stage, but it is highly recommended as planning and or structural issues may occur that could render the sale invalid or the investment poor.
4. Payment of stamp duty (transfer tax). Currently at 3% of the value of the transaction.
5. Completion of the acquisition contract before a notary public. The buyer gets the title deed, which is the first step to ownership of the property.
6. The registration of the title deed takes place at the local Land Registry and is the absolute proof of ownership.
7. Registration of the property online with the tax authorities.
A. Ownership of real estate in Greece is subject to an annual tax (ENFIA) which is calculated based on the value of each property and in conjunction with the total value of the assets one may have in their portfolio. Currently the annual tax is payable in 5 installments and it is applicable in all types of real estate assets – including cases of rights on properties (as mentioned in 1. above). This kind of tax applies to both natural persons and legal entities regardless of whether they are resident and/or have their registered seat in Greece.
B. Property-based income (short or long-term rentals, Airbnb, long-term leases etc) are subject to taxation. Natural persons who benefit from rental income are taxed at various rates (thresholds are in place depending on the amount of revenue produced). Legal entities owning real estate assets are taxed differently as the rental income is regarded as revenue and is subject to 29% corporate tax.
5. Important parameters for consideration prior to the acquisition
As in every country, certain restrictions apply to investors who buy real estate in Greece:
A. Acquisitions in forest areas: Subject to the Hellenic Constitution, land uses in areas regarded as forest cannot be changed.
B. Acquisitions of real estate in regions close to the border: There are specific prerequisites for acquisitions in areas close to the borders. In these areas, foreign investors can acquire real estate upon receipt of special permission by joint ministerial approval. A publicly available list identifies such areas. Strict restrictions apply and investors should conduct thorough research into such plots prior to purchase.
C. Acquisitions outside urban zoning: Special attention must be paid to plots which happen to be outside urban or residential areas as they often have limitations with regard to the development capacity they offer and in most cases plots cannot be divided in smaller segments.
D. Acquisitions on the coastline: Development of real estate that is situated close to the coast may be prohibited or allowed under very specific terms set by the State.
E. Acquisitions in areas where antiquities are located: Development may be prohibited or allowed under very specific terms in areas where historic monuments may be located. In most cases, special permission is required by the Ministry of Culture’s competent directorate.
F. Acquisitions in areas of outstanding natural beauty (Natura) or under a special environmental protection regime. Both acquisition and development of real estate in such areas may be blocked by the Ministry of Environment due to restrictions that may apply.
This article was first published by Kathimerini English Edition (31/03).