Over Christmas, Athina Drakopoulou shut down the arts and crafts shop she had run for 13 years in Koukaki, a gentrified neighbourhood near the Acropolis. Her landlords were doubling the rent, and Drakopoulou wasn’t able to compete with the investors going all in on trendy coffee shops and Airbnbs.
The situation would have been unthinkable even a decade ago. Greece’s economy has made a remarkable recovery since 2010, when the Greek debt crisis started. Last year, economic growth outperformed European peers, and the country was granted investment-grade status by rating companies. But the rebound has been accompanied by a housing crisis in the biggest cities and in popular island destinations, where rents rose more than 40% between 2018 and 2022. In Athens, they jumped 23% last year alone.
With affordable housing becoming harder to find, politicians have been casting about for any opportunities to ease pressure on the market. One target has been Greece’s “golden visa” program, which since 2014 has offered residency to foreigners who invest at least €250,000 in property in the country — a relative bargain compared to countries like Spain and the Netherlands, where similar programs cost multiples more.
In recent years, however, Greece’s government has also been raising the bar to entry. Last August, it lifted the minimum investment threshold for golden visas to €500,000 in popular areas including Thessaloniki, parts of Athens and the island destinations Mykonos and Santorini.
Now, it’s doing so again. Under new regulations unveiled on Thursday, investors will now need to invest a minimum of €800,000 ($873,280) in the areas listed above, as well as on islands with populations above 3,100 inhabitants, according to the country’s Finance Ministry. The changes will go into effect on March 31, and the golden visa threshold will also increase from €250,000 to €400,000 for the rest of the country. In all cases, investors are required to buy a property with a surface area larger than 120 square meters (1291.7 square feet) which may not be used for short-term rentals.
While the government says the plan will discourage foreign investors from buying up desirable areas, many argue that the changes won’t do much to rein in housing costs.
“The golden visa program has absolutely nothing to do with prices going up,” Drakopoulou said, blaming the trend on short-term rentals and what she referred to as the “Greek mentality.” “Greeks go for the fast buck, whatever they can grab,” Drakopoulou said.
The real culprit, according to many analysts, is lack of supply. The financial crisis put a halt on new construction for almost a decade, and while Greece’s population has stayed more or less stable, the number of available housing units has shrunk. At the same time, platforms such as Airbnb have converted long-term housing into short-term rentals, and owners dissatisfied with tax incentives have left homes uninhabited instead of putting them on the market.
About 200,000 units are needed to meet demand across the country, according to Piraeus Bank.
Stratos Paradias, head of the Hellenic Property Federation, an association of private property owners, worries that prices won’t budge unless the government incentivizes homeowners to offer long-term rentals. One way to do so, Paradias offered, is to excuse owners with vacant properties from paying income tax for the next three years, provided that they rent the properties. This could also be extended to short-term rentals, a third of which are currently not profitable and could easily be adapted to long-term leasing, he said.
Read More: Athens Home Prices Are Surging Faster Than Other European Cities
While the country’s housing crisis is being driven by different factors, golden visas represent a “drop in the ocean compared to increased demand,” according to Ilias Lekkos, Chief Economist of Economic Research & Investment Strategy at Piraeus Bank. Around 18,000 people have participated in the program since it launched, and only a small number of houses have been taken off the market. “What is truly needed is incentives for the construction of new houses,” he said.
Against a backdrop of heated political debate, Greece’s government is taking steps to ease the crisis. Starting this year, owners are obliged to set up a business and pay a tax rate of 13%, the same as hotels, if they rent at least three properties short-term. And as of February, Greece’s government will pay 40% of renovation costs, or up to €10,000, on apartments whose owners are willing to rent them long-term. But with Airbnbs commanding an average of €100 per night in a country where minimum wage works out to €780 a month, the initiative may prove a hard sell.
Meanwhile, some analysts believe that skyrocketing housing prices may soon hit a ceiling. In a report published in January, Piraeus noted that the overheated market had pushed up residential real estate prices beyond what could be justified, and observed that “obvious signs of fatigue” were starting to set in. This could give way to the “next phase of the cycle,” analysts wrote, “where higher prices will be accompanied by a fall in trades/purchases.”
In Athens, Koukaki has gone through the full lifecycle of Greece’s housing explosion. It went from being a neighborhood that once attracted small businesses with cheap rent to a hyped destination for young, artistic Greeks before becoming what it is now: a ghost neighbourhood full of short-term visitors that come and go depending on seasonality.
“The first of us to set up shop in Koukaki practically set up the neighbourhood,” Drakopoulou reflected. For years, her shop, Tintinnabulum, was a landmark and tourist attraction, sharing space with her studio in a neoclassical building.
“It was a place full of young people starting something on their own to deal with the financial crisis,” she said. That ended when ten-year leases began expiring, and rents started to climb.
Then, there was the final blow: “AirBnb came,” she lamented, and everyone was forced out.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.
