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New real estate taxes in Greece putting off buyers at top end of market, experts claim

A half built villa on Mykonos, an island in the Aegean Sea known for its all beach parties, is being offered by brokers at Athens based Ploumis Sotiropoulos for €2 million, a reduction of €500,000. The same firm has a three bedroom property on Corfu for €750,000, down from an original asking price of €1.4 million.
‘It’s a scary place to invest right now. Things aren’t going to improve until the economic picture becomes clearer,’ said Mike Braunholtz, a broker at Prestige Property Group which markets properties on the Greek islands.
One problem is that the government has imposed higher taxes on luxury properties to show that it is not just ordinary people who are facing tax rises and wage cuts as the country introduces various austerity packages to combat its debt problems.
Owners of properties worth more than €400,000 faced higher real estate taxes and a further levy is put on those valued at €5 million and more. It means that developers and sellers will need to consider lowering prices to attract buyers, according to Ioannis Kaligiannakis, an Athens based property analyst at Colliers International Hellas.
Greece plans to increase the so-called objective value it places on real estate for tax purposes next year. The system depends on an assessment of a property’s value based on the area and amenities, rather than on the actual market value, which is usually higher.
‘The tax overhaul is certainly a concern for property investors in Greece. These measures specifically target the rich, higher end buyer,’ said Liam Bailey, head of residential research at Knight Frank.
House prices on the mainland are also falling. Ploumis Sotiropoulos has 4,800 square foot villa in Ekali, a wealthy suburb of Athens, where the asking prices has dropped 48% to €2 million. ‘It’s tough this year. More properties are on the market and fewer buyers are willing to invest,’ said Giannis Ploumis, the chief executive officer of Ploumis Sotiropoulos.
According to estimates from the Greek Finance Ministry the economy will contract by about 4% this year and by 2.6% in 2011.
According to Bailey buyers are looking elsewhere especially to countries like France. But Spain, which is also introducing austerity measures, the real estate market is still in the doldrums despite record low prices.
London is profiting from Greece’s financial turmoil. In April, Greek buyers accounted for about 6% of all property purchases above £2 million pounds, doublethe average of the past three years.