Fears of Grexit and Drachma Drives Greeks to Unload Hidden Cash in Real-estate

athens artsAs the outrage mounts in Greece over even tougher austerity measures and €5.4 billion budget cuts, the fear of a Grexit and revival of the drachma is a subject of much discussion throughout the country. In fact, according to a recent Kapa Research poll released last month, only 49.5% percent of Greeks think that over the next five years Greece should stay in the Eurozone and fulfill the bailout agreement while 44.5% say that they think Greece should seriously consider leaving the EU completely and 6% are undecided.

With this fear comes an anxiety for those who have saved their earnings in a less conventional but all too common way for Greece — they have literally stockpiled their mattresses with cash over the years. In Greece, for many people there is a distrust in placing your money banks, who monitor earnings and many times do not allow you to access money in your accounts (dating back to previous times before the capital controls, some banks would simply run out of money throughout the day). Putting your money in banks for safe keeping is also a problem when you have been paid with what Greeks call “black money,” or “under the table.” People hiding away money is a sensitive subject in Greece, but it is worth noting that many people are not given legal contracts of employment, therefore putting money earned into banks causes issues when tax time comes. Whatever the reason may be, many people now find themselves in a dilemma as Greeks are desperate to unload and invest their money just in case what looks like an inevitable Grexit really does become a reality. The solution: buy real-estate.

It seems like the prefect solution, only the cheap housing market unfortunately magnifies the deep-rooted suffering of the Greek people. Due to high property taxes, income taxes increases, social security payments going up as much as 20%, pensions being cut (in many cases halved, leaving people to live on less than €500 a month), and added tax increases on coffee, fuel, ferries, and basically everything that can be taxed, many homeowners simply cannot make ends meet and have been forced to sell. In 2016 a study conducted by the Institute of Studies and Research concluded that over a third of households were unable to meet tax obligations, and a fifth of households have over due taxes. Easy to understand why selling at rock bottom prices seems to be the only solution for many home owners.

Athens-ApartmentsGreeks and people from surrounding countries who have been living and working in Greece for years have started unloading their savings, perhaps in a bout of panic, in the very affordable housing sector. And who could blame them? According to the Bank of Greece, property values have dropped around 35% since the initial outbreak of the financial crisis in 2010. Real-estate agencies place the decline of value at closer to 50%. In some areas in Athens, basement flats are selling for as little as €5000, and you can easily find a newer 2 bedroom apartment at around 80 square meters, in the surrounding suburbs of Athens, for around €150,000.

The yo-yo buying culture in Greece tends to fluctuate with the various stages of the economic crisis. However, so far in 2016 sales are on the rise compared to the past couple previous years. Real-estate agencies are cautiously hopeful that the trend will continue as fear and anger over a possible Grexit continues to circulate, although they do not expect to reach the euphoric peak of sales in 2005 that saw over 250,000 sales in Athens. However, anything is better than what they were faced with just a few years later, when in 2014, that number had dropped drastically to under 5000 sales.

The prospect of buying a house in cash might seem a little strange to those living outside of Athens, but as the old saying goes in Greece, “cash is king.” Of course, with the sales prices slashed in half, many people are finding themselves able to unload their secret stash of euros in multiple investments, becoming landlords by subletting their flats. They pay all cash and the title and deeds change over to them, without the involvement of banks.