3rd Academic Conference in Property Management, Valuation and Development

Citation

Ganos, I.C. (2014), "3rd Academic Conference in Property Management, Valuation and Development", Journal of Property Investment & Finance, Vol. 32 No. 1. https://doi.org/10.1108/JPIF-11-2013-0066

3rd Academic Conference in Property Management, Valuation and Development

Article Type: Editorial From: Journal of Property Investment & Finance, Volume 32, Issue 1

The Greek real estate market has experienced significant growth rates and investment activity since 1996 and until 2007. Prices moved broadly and were supported by the fundamentals of Greek economy. The Greek economy was experiencing high growth, interest rates were low, the credit expansion was aggressive and the convergence with the euro zone accelerated. This resulted in making the ownership rate one of the highest in Europe.

The financial crisis that began in the USA in 2007 with a focus on real estate and sub-prime mortgages, rapidly expanded and acquired international dimensions. Meanwhile, the weaknesses and imbalances in international finance were revealed and the whole international system was threatened with collapse. Particular events that followed the bankruptcy of Lehman Brothers in September 2008 were critical and intuitive about the dangers posed by the deregulation of markets and the devaluation of the supervisory authorities and international rating agencies, and the accumulated risk on the balance sheets of the overleveraged banks. The crisis progressed by shrinking credit and declining international trade which turned into a global recession.

In Greece, with the start of the global recession, the upcoming domestic recession was then relatively predictable. Weaknesses and imbalances of the Greek economy were known among experts and some policy makers, since they were deep and chronic. These structural problems were ultimately revealed in the Greek and international audience after the global crisis and gradually led to the current constraints. Not only did the large and longstanding budget deficits not allow the decrease of the government debt, but also the lack of competitiveness, was never dealt decisively and with the necessary structural reforms. On the contrary, the country’s participation in the euro zone with low interest rates and the ignorance of Greek problems by the participants in foreign markets, allowed the Greek Governments to borrow recklessly and caused complacency bliss to citizens and politicians. Consequently, the roots of the Greek crisis and the recession were not detected in the real estate market or the financial system, as were in the other countries like the USA. Both these sectors of the economy are primarily victims of Greek recession and crisis, despite the operative cause.

The Greek economy is currently experiencing a phenomenal impasse due to chronic macroeconomic imbalances and the inadequacy of applied economic policy for decades. The deficits of the Greek economy are the largest in the euro zone. Respectively public and external debt is high and unsustainable, as they are continuously accumulated by annual deficits. Of course, these are not the only structural weaknesses of the Greek economy. For example, unemployment in Greece remains high, particularly among youth and women, since long before the crisis and despite high growth rates. High unemployment and low employment are backed with great inequality in the wealth distribution. The need for structural reforms in the public sector is evident from the fact that the effect of the social benefits is marginal on the poverty rates.

The outlook for the real estate market is mainly dependent on removing uncertainty and restoring a stable macroeconomic environment. The supply side is not optimistic about the future, as well as the demand side. The income strength of Greek households is currently low, while investors are reluctant to assume more or any Greek risk.

Even in today’s extremely challenging macroeconomic conditions, tapping the potential of the property market, but this time in an integrated way, could significantly help the Greek economy to reverse the recessionary phase. For example, benefits could be derived from the appropriate use and exploitation of the State property and from the coordinated development of the tourism sector and vacation homes. In these areas, rapid progress is possible, mainly because today almost all stakeholders understand the events better than ever before.

In economic terms, there is an ongoing downward reprising process across all asset classes and within all sectors of the Greek economy. At the same time, production cost is decreasing and the banking sector is stabilizing following the recapitalization of the Greek banks. The competitiveness of the Greek economy is gaining ground, however the increasing taxation sets a significant barrier for new investments.

RICS Hellas has undertaken specific initiatives, during the past three years, aiming to contribute to a better understanding of the happenings in the Greek real estate market. Since 2010, RICS Hellas in collaboration with the Regional Development Institute of the Panteion University is organizing the Academic Conference in Property Management, Valuation and Development. The aim of the Organizing Committee of the conference is to reveal and discuss recent developments of the Greek real estate market and try to offer policy indications by bringing together distinguished academics and professionals.

During the 3rd Academic Conference in Property Management, Valuation and Development, academic papers and professional presentations focused on the prospects of Greek real estate market in times of crisis. In this special issue six papers are presented.

In the first paper, “Evaluating the impact of economic factors on REITS’ capital structure around the world”, the authors Andreas Feidakis and Antonios Rovolis examine the determinants of the capital structure of Real Estate Investment Trusts across the world, and explore whether this structure is characterized by any common factors. Static panel data regression analysis, as well as dynamic panel data techniques are applied to a panel of listed real estate firms from 2005 to 2010. The results showed that factors such as tangibility, size of the company, growth opportunities and assets turnover affect positively the financial leverage of REITs; conversely, other determinants, being debit’s cost, GDP, and long term interest rates, are negatively correlated with the financial gearing of the REITs.

In the second paper, “Greek fiscal crisis and repercussions for the property market”, the author Prodromos Vlamis aims to present a review of the fiscal imbalances and debt crisis in Greece and identify the possible links with the recent developments in the Greek property market by following a non-technical approach to discuss a number of factors that have contributed to the fiscal crisis, that Greece has been experiencing since October 2009. The analysis indicates that the current fiscal stance of the Greek economy and the crisis that the Greek property market is now experiencing are intertwined.

In the third paper, “Non-residential real estate and economic activity: the case of Greece”, the authors Ilias Lekkos et al., discuss and analyze the stylized facts of non-residential real estate activity in Greece. The results indicate that:

* the structure of non-residential sector is highly fragmented; and that

* at the initial stages of its developments it was strongly affected by the preparations for the 2004 Athens Olympic Games.

In the fourth paper, “Commercial property whole-life costing and the taxation environment”, the authors Konstantinos Liapis et al., discuss the incorporation of life-cycle costs and whole-life costing method and the taxation environment into the investment appraisal procedure for commercial real property projects. These methods are incorporated into a decision-making model using mathematical approaches. The outcome is that time, cost, the tax regime, the financial variables of funding and the monetary and fiscal environment in a commercial real property project are the main variables of Net Present Value of the investment.

In the fifth paper, “The development of municipalities property management as a financial tool: an empirical investigation”, the authors Christos Pallis and Petros Pallis, attempt to identify the degree of familiarity of the municipalities with the concept of property management as a new and modern financial tool. The research involved the study of financial instruments used by the Greek municipalities and funding schemes from various sources. This paper presents the literature review of the property management and the methodology of an empirical research through a structured questionnaire that was sent to the entire population of Greek municipalities.

In the last paper, “A prolonged financial crisis: adjustments and prospects in Eurozone’s southern markets”, the author Sotiris Tsolacos, assesses the outlook for the Southern member states of the Eurozone markets as the crisis continues and analyses the conditions which are a prerequisite to restore investment activity and a healthy occupier market. Within a portfolio allocation framework, the paper examines the conditions for the revival of investor interest in these markets and the uncertainties that should be resolved. The findings indicate that the economic slump in peripheral Eurozone economies gives way to a period of slow growth and ongoing structural reforms.

Last but not least, I would like to thank all the authors and the speakers of the conference for their valuable contributions, as well as, the co-members of the Organizing Committee for their continuous efforts. Special thanks to Prof. Nick French for his support and for organizing this special issue.

Ioannis Chr. Ganos