With Greece facing continued liquidity pressure, what happens to its famed islands and real estate? Since the credit crisis found its way to European shores, non-exporting nations participating in the Eurozone like Greece have had difficult times. Many chose austerity to bring their bottom line in phase with GDP growth and tax revenues. Greece’s current Prime Minister, Alexis Tsipras, gained his position through unwavering support of the referendum of those austerity measures. His move forced the hand of the Eurozone to provide easing of capital controls. The fortune of Greece rests vitally on the return to normality in its real estate sector, a sector with a large volume of luxury rental and vacation property. 13% of Greece’s GDP comprised of tourism in 2013, and that number has been forecasted to jump to more than 19% by 2024 per the World Travel and Tourism Council.
The escalation of Greece’s financial trouble over the first two quarters of 2015 led to a surge in interest from foreign buyers. Investors hailed from Europe, the Middle East, and Asia. However, there has been one interesting party: Russia. Ekaterina Rybolovleva, the 24-year-old daughter of billionaire Dmitry Rybolovlev purchased the Greek Islands of Skorpios and Sparti in 2013 for £100 Million. Her discounted purchase price has only led the way for Russian wealth to make its way to the Grecian island shores in search for distressed bargain investments. The number of Greek vacation villas purchased by wealthy Russian investors has doubled in 2015 over previous years according to the German magazine Bild.
With the aforementioned Greek desires to forego austerity measures from the Eurozone, Russia has increased its influence in Greece through a negotiation to build a £2 Billion gas pipeline. The interest of wealthy Russians in luxury real estate surfaced simultaneously with Russia’s own currency crisis, and the devaluing of the rouble. With the reduction of Greek luxury real estate by as much as 50%, Russians have seen Greek real estate providing healthy yields based on their limited investments. However, what does this investment and alignment with Russia mean for Greece in the greater landscape of the Eurozone? Does Greece force the Eurozone’s hand further to increase the liquidity in its capital markets? Does Greece fully abandon the Euro and fully partner with Russia? If the latter is the case, how will this affect its tourism numbers, considering the West’s continued fractured relationship with Russia over Syria and the Ukraine affair? Only time will tell, but for now it appears that Greece’s luxury real estate, although devalued, has found support from Russia in the short term.
