Monday, 28 January 2019

Market correction

I like to post photos on social media showing my renovations, and this has had, as a consequence, people asking me if my property is available for rent, and how much rent I am asking for. Most people don't look at the wider picture: my renovations are clearly not finished, so I can't very well work out the rent. I'm also considering all my options, because I've spent a massive amount of money renovating an old, badly maintained property which was empty for the last 5 years (at least) before I bought it. In other words, do I rent it out long-term or short-term (airbnb style)?

A recent article on a news site tells us that short-term rentals have raised people's incomes in Greece, at the same time as making it difficult for potential tenants to find a suitable home:
(Title: Blessing for landlords, a curse for renters)

While this is mostly true, I'm finding that it's also misleading. What's more true in the case of rental prices in Greece is that there has been a market correction in this field in the last two years. Most people have completely forgotten the situation during the crisis period when rents dropped to below-market values. During the crisis, landlords dropped rent prices for existing tenants: in other words, they preferred to keep a good-paying tenant in their property by dropping the price in order to keep them in it. This is why rents seem 'expensive' now: they have returned to pre-crisis levels.

Another reason why some rents seem more expensive nowadays has to do with the airbnb effect. When landlords started to realise that their property could command a higher rental on the short-term rental market, they began to upgrade their properties specifically for this market. This mainly meant that landlords began renovating their properties and also furnishing them, something they didn't often do before the crisis (most tenants brought their own furniture). In other words, landlords were asking for more rent because they were in fact offering more to tenants; tenants on the other hand aren't always ready to let go of their old furniture.

Most people are also very ignorant of the fact that in Greece, tenants are highly protected by the law, while landlords are on the complete opposite side of the spectrum. The legal process protects the tenant to such an extent that a landlord who wants to evict a bad payer (or someone who simply does not pay the rent at all) will find the eviction process to be extremely costly. I've been through it once and I don't regret it; in my case, I was faced with a 'strategic' bad payer, so I regarded the eviction process as necessary in order to protect my private property, something the state will never do for me. This is where airbnb has been slightly helpful for landlords: these days, bad payers will have limited choices to find another cheap place to rent if they are served an eviction notice, making it more worthwhile to stay where they are.

A bad paying tenant was once very common in Greece. Most landlords have been through this experience. Five years ago, airbnb was a novelty in Greece. Four years ago, more and more Greek landlords began renting out their properties as short term rentals. Last year airbnb saturated the market all over the country, with the consequence that there are now very many players in the field, lowering individual profits. This has had the effect of making landlords re-think the airbnb idea and turn (back) to long term rentals. But they have already furnished their property, hence rents are higher because the properties now available on the rental market are in fact better than what used to be on offer.

A look at the property market in Greece shows how it is currently moving in it. There are a remarkably high number of Greek properties for sale, but few buyers. This is not surprising if one considers that Greeks have always been high on the list of property owners. Greeks often pass property onto the next generation, so a lot of property is inherited. The high number of properties up for sale means that Greeks are selling their 'extra' properties, not their primary homes. Ever since property tax was imposed on owners of any kind of property in their possession, it's become more expensive to own property.

Finally, the Greek rental market is showing us something about Greek society. Greeks are no longer looking for a large house away from the central city, which they would drive into with their cars. They are now looking for small easy to maintain homes. People want to live in their own independent spaces. That's what's driving up prices: space comes with a high cost. This has been discussed just recently: people are searching for homes with 1-2 rooms (ie studio flats or 1-bedroom flats. These are the most popular properties on the market, hence the higher prices being asked for them: when demand outstrips supply, prices rise.

So what has really happened in the Greek rental market is that a market correction has taken place. Rents are at more normal levels, and they take into consideration things like location (the nearer to the city centre, the more expensive), furniture provided (a fully furnished home is more expensive to rent than an empty one), size of property and renovation levels (most landlords have invested a modest amount of money to upgrade their property). Landlords are now starting to value their properties according to their own opinion of what they are worth, aka the free market. The wider picture: Greece is now operating on western norms. It took a crisis to get us there.

I'm renovating a property that was once a large family-size apartment, abut was transformed into two smaller units (a studio, and a 1-bedroom flat) by a subsequent owner. Each place has its own fully fitted kitchen and bathroom. The apartments are located in the middle of the town, withing easy reach of... everything: shops, bakeries, groceries, cafes, restaurants, doctors, dentists, supermarkets, boutique stores, high street fashion, farmer's markets, bus terminals, etc, not to mention the most popular entertainment spots in the town. I've decided to furnish them completely, and most of the furniture is inbuilt: moving furniture around causes damage. The idea of inbuilt furniture has given a unique touch to my renovations: they are considered original by everyone who has seen them.  Despite the tight spaces, I've ensured at least three comfortable sleeping spaces in each unit (one will eventually be able to accommodate up to five people). I've also decided to add little comforts, eg television, air-conditioning, spa shower and outdoor (balcony) furniture. One might even have a small plunge-style pool.

These apartments are in the middle of town. In other words, they are literally close to everything. They are completely renovated - I've rewired everything, laid new pipes, added a lot of safety features, introduced some aspects that will make them very comfortable, and the work hasn't finished yet. They will be completely furnished.  I also intend to decorate them in my own way. I've been approached by interior designers, but i don't think I need them - I have my own style and i know what I want to do (thanks to the internet). My interior decoration will not be expensive - I've spent a lot of money making the construction safe (we've always prioritised on safety, my own house is simply decorated too).

I dont want to rent them out unfurnished. I have specific tenants in mind. Someone who prefers to bring in their own furniture will not be able to stay in my apartments. This is my idea of how to live in the middle of town in a home that you dont own - you find something suitably furnished, and after work/study/travel, you come home to sleep, shower and occasionally cook a meal because the choices for cheap ready food in the middle of town make it cheaper to eat out. I call this kind of lifestyle luxurious. I dont live like this myself. I believe that living in the middle of town is a luxury. I cant afford to live like this with my whole family. (I need transportation to get into town, if I use my car i have to find a place to park it, the closest source of ready meals for me is the supermarket, I dont have the luxury of being able to pop out of the house and walk to the local business that services my need at the time). And because the flats are small, the people who stay in them will have a lot of time to spend on themselves because they won't have a family. They are designed for 1-2 people on a regular basis, and one more can be accommodated temporarily (if someone has a friend over for the night, or something like that).

I designed the layout of each apartment, something i found difficult to admit for a long time in public, but YES! I have fans of my style and I dont mind people seeing what I'm doing, because there is nothing wrong with being copied, and that;s how people get ideas. I tell people how i looked things up on the internet - I hope I've inspired them to do the same. I am usually not in the flats when a worker is doing something in them, but they tell me who comes in and out, to have a look at what's going on, and I think that's really quite OK. The people who live in the block are actually very pleasant, and I've never felt uncomfortable around them, which says a lot about the locals. They seem to like me, in the same way that i like them. I dont want to bother them, and I expect not to be bothered.

We took the decision to do them up in such a way that they will be suitable for people who want to stay in Chania for a short period, eg students and public servants on transfer, as well as vacation rentals. I would consider long-term rentals too ... but I don't think people will be very willing to pay the price I will be asking. I don't want to rent them out in any other way The rental situation all over Greece is now (finally) following western trends: you get what you pay for, and if you want to live in the middle of town, close to all amenities facilities and entertainment, in a modern furnished apartment, then it's not going to be cheap. If you want something cheap, you will still be able to find something - but not in the middle of town. You will have to do what we do (wait for a bus, drive your own car, take a taxi, etc), and your R&R choices will be limited.

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A quick look through the local paper lists a number of properties similar to my own. There also seem to be quite a few properties available for long term rent. It doesn't seem to be that difficult for potential tenants to find something appropriate to rent in my town, and the same seems to be true in Athens too, where airbnb made inroads in its early stages in Greece. According to the latest report on cheap housing:, there is something available for everyone's pockets, but you have to pay more to get more: a small fully furnished 1-bedroom apartment in the most popular parts of inner-city Athens will cost you more than a 2-3 bedroom home in an old apartment block in a less popular suburb where you will need public transport to get in and out of the city centre.

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All good things come to an end. I started this blog in 2007, with the aim of covering the changes in the 20th century diet of the Greeks. The Greek Crisis led to the opportunity to cover more changes in Greek society. The present state of the Greek economy, society and politics has showed us that Greece has indeed changed - for good. Greece is now at the end of the beginning stages in her life as a fully Westernised country.

Καλή μας τύχη.

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