The Greek housing market has seen significant growth in recent years, but it has hit a major “glass ceiling” due to the immense difficulty in obtaining mortgages from Greek banks. Now, for the first time, Palmo is offering its customers mortgages to purchase property in Greece—and the potential returns are soaring as a result.
In recent years, the Athens real estate market has been identified as one of the most interesting and rapidly growing markets in Europe. Following the subprime crisis in 2008, real estate prices in Greece fell sharply (by approximately 60% to 70% by the end of 2017). Since 2017, the market has experienced average annual price increases of 8% to 10%. However, real estate prices in Athens are still about 10% below their peak, while comparable markets in Europe have already surpassed their peak by 80%.
Despite the growth and potential, price increases have so far been capped due to restrictions on mortgage lending in Greece. Buyers were required to provide 100% of the purchase price as equity, which significantly limited the market.
Now, the Greek real estate market is returning to a mature market, much like real estate markets around the world—Israel, Portugal, the United States, and others. Globally, people can take out mortgages, which fuels the housing market, along with rising demand and economic growth.
With the gradual lifting of restrictions, it is now easier to buy real estate in Greece with less money “from home,” and prices are expected to rise significantly. As soon as financing becomes available, demand increases, driving up prices. The lifting of mortgage restrictions is undoubtedly great news for foreign investors.
Palmo is opening a new door for its customers: a mortgage for purchasing property in Greece
The latest development in the world of investment in Greece is the opportunity that Palmo is offering its clients, for the first time and exclusively, to take out a mortgage from Israel, in Hebrew, within minutes—for the purpose of purchasing real estate in Greece. This is a significant step because the loan is secured by the property in Greece, rather than being an “all-purpose” loan or an increase in the mortgage on an existing property in Israel.
Palmo has signed an agreement with the Israeli financing firm LoanWise to provide mortgages in Greece, thereby opening up a unique opportunity for its customers. The Israeli financing firm, led by Eran Wolf, founder and former CEO of Direct Finance, has received backing from public entities in Israel and is the first to provide mortgages abroad.
An extra layer of peace of mind: Due diligence by the financier
One of the advantages of obtaining a mortgage to purchase a property in Palmo projects is that, prior to granting financing, the lender conducts a comprehensive due diligence review of the projects. These reviews include planning, property, structural, legal, and commercial assessments. The financing institution’s approval serves as an additional source of security for the private investor, following the thorough and professional reviews conducted by the financing entity.
Certainty and speed in obtaining a mortgage versus the slowness of Greek banks
Banks in Greece only began offering mortgages to local residents a year ago, and the process for foreign investors is still very slow. It takes Greek banks about six months to underwrite a loan and provide actual financing—a lengthy process that creates risk for investors who have committed to a developer.
The solution that Palmo offers its customers provides immediate certainty: a representative from the financing institution conducts an eligibility check and issues preliminary approval during the meeting with the buyer, making the process fast and efficient.
The financing terms change the equation
The mortgage available to Palmo customers offers several attractive terms that dramatically change the investment mix. The loan-to-value (LTV) ratio is up to 50% of the property’s value, and the repayment term is up to 20 years, similar to a standard mortgage.
One of the advantages of this loan structure is the staggered repayment and grace period. Funding is provided in stages as the project progresses, rather than all at once. The investor pays interest only on the amount actually received, which optimizes the cost. Additionally, there is the option to take a grace period during the execution phase. Another way to optimize the loan is the option to make early repayments (partial or full) at any stage.
In addition, the loan is granted only after the property has been registered in the customer's name with the Land Registry.
The Magic of Leverage: Doubling the Return on Equity
The ability to take out a mortgage opens up the Athens real estate market to two main groups: people who do not have sufficient cash on hand to purchase a property, and those who can buy one property in cash but can now purchase two properties using leverage.
The most significant advantage of leverage is a surge in the return on equity—the return calculated on the capital actually invested, rather than on the total value of the asset.
For example, in the case of a 50% mortgage and a conservative assumption of a 5% annual increase in value over five years, the annual return is approximately 21%.
Coverage of the refund by the rent
Unlike the current situation in Israel, one of the main goals of this financing product is for the projected monthly mortgage payment (principal and interest) to be lower than the rent.
For example, an apartment in Palmo’s “Nea Chalkidona” project in Athens, which is offered at a price of €138,000, including fees, with 50% financing. After calculating the monthly payment (interest and principal) and the expected income from the property in the project, there remains a positive monthly balance of approximately €50—all while repaying the principal, which reduces the loan balance each month.
Bonus Point: Tax Advantages in Greece
The combination of new leverage and tax benefits in Greece makes this investment particularly attractive to Israelis. Israel and Greece have a unique tax treaty stipulating that taxes are paid only in the source country (Greece), and investors are subject solely to Greek tax law.
The main advantages include a low, fixed purchase tax rate of 3.09%, regardless of the number of apartments or the property’s value. In addition, there is a capital gains tax exemption for up to three apartments per person. A married couple is not considered a single entity for tax purposes, which increases the opportunities for accumulating assets and claiming tax exemptions.
A historic opportunity to generate future profits
Palmo is creating a historic opportunity for Israeli investors. For the first time, Palmo clients can combine the macroeconomic benefits of the Athens real estate market with the financial leverage of a mortgage.
Looking at the Athens market as a whole, it’s important to understand that once leverage becomes accessible to a wider audience, demand is expected to surge, and prices will rise as a result. Those who enter now, at a stage where the glass ceiling is about to break and the market has not yet fully reacted, are expected to benefit from both the anticipated increase in value and the higher returns. Now is the time to leverage the benefits of leverage.
