Greece and Euro

A natural evaluation connected to purchase of property in Greece these days, is whether the country will stay inside the European monetary system or not. European leaders have shown great political will to keep Greece inside the Euro. We therefore believe that it is unlikely that Greece will apart. Anyway we would like to share some views on the impact a return to the old currency, Drakmer, could have on the value of the kind of property we own, develop and sell on the island of Crete. The process of reimplementation of the Drakmer will be long and very expensive, some experts are talking about 2 years transition period. The Drakmer will naturally be devaluated immediately, as that is a major part of the intention in order to stimulate production and exports. The devaluation is likely to continue over a period of time until a sort of stabilisation is achieved, if ever so. How much would be wild guessing. One certain impact will be inflation and demand for rise in wages, due to high degree of import of consumer goods and specially fuel and energy. In our business it starts with the cost of land, and so on with cost of construction. We believe that the prices for land suited for developments for tourism and the foreign property market will at least be held at today’s level, which is 20-40 % down from 2008. Most likely we will see an increase in prices due to the fact that many people would like to buy a property in Greece, but have been waiting due to the financial uncertainty around the Euro/Drakmer issue. With the implementation of the Drakmer, this uncertainty is seized, and there is no reason to wait anymore. On the contrary, there might be a good reason to hurry. Against the number of potential buyers, the number of unsold properties in Greece are few, and in Crete in particular. Crete is also the most popular destination in Europe and the winter tourism is steadily increasing. This naturally results in a stabile flow of property buyers and tenants for the house owners. Cost of construction is to a large degree based on so called “commodities” such as cement (concrete) and steel, which are international priced. In addition many other building materials and items are imported. And the salaries will, as mentioned above, be driven by inflation, so there is not much more that can indicate any drop in building costs. Therefore we believe for good reason that even if Greece unlikely should return to Drakmer, the value of property will take a good stand, maybe we even will see an increase in prices due to increasing demand.