Real Estate Report 2014 Holiday Home and Hospitality Markets

Central : “INFINITE OPPORTUNITIES”

Photography: Konstantinos Mavroudis Central Aegean Sea

Overview

The Central Aegean Sea is comprised of a complex of more than 150 islands and islets called the .

According to Greek Mythology, Poseidon, god of the Sea, turned the Cyclades nymphs into islands. Alternatively, the name refers to the islands forming an imaginary circle around the sacred island of .

The Cyclades are one of the 52 prefectures of and are subdivided into 19 municipalities. Ermoupolis, the capital of , is the administrative capital of the Cyclades. The whole region has 2 a land area of 2,572 km with a population of 118,027. The Giaros complex consists of 25 inhabited islands, the major ones being Syros Dilos , Andros, , Tinos, ,

Naxos Kea, , Mykonos, Syros, Paros and . Sifnos

The Cycladic islands were formed Antimilos Ios by a number of successive Milos geological changes which included everything from floods and Santorini earthquakes to volcanic eruptions and the subsidence of the African CYCLADES plate 2 to 5 million years ago. The ancient Greeks believed that the Cyclades were formed during the Antiparos. Most of these islands waters, renowned Greek Gigantomachy from the giant rocks are not fertile, excluding Naxos. hospitality, the Cycladic that giants and gods threw at each architecture, whitened other. The geological history of the The Cyclades are recognised cobblestone alleys, white region explains the uniqueness of worldwide as a holiday isolated chapels and major the landscape and the geological, destination, with around five archaeological, historical, paleontological, archaeological and million visitors every year. It is religious and natural sights. historical interest of the area. estimated that the proportion of However, each island has certain Greek to foreign visitors is 60% to characteristics that make it The Cycladic islands are mainly 40% respectively. All the Cycladic unique. mountainous with the exception islands offer similar distinctive of the four volcanic ones – Milos, features; traditional villages, Santorini, Kimolos and part of sandy beaches with blue-green

2 Central Aegean Sea

Economy

The economy of the Cycladic is produced, with 21 of them mountainous areas of the islands. islands was traditionally based categorised as PDO (protected Tourism has been the key factor on agriculture, livestock farming destination of origin) such as the in the economy of the Cyclades and fishery. Although the soil for cheese «San Michali» of Syros and over the last decade as more than cultivating is limited, the Cyclades the Gruyere of Naxos. 70% of production depends on the produce fruit, wheat, potatoes, Fishing remains a primary source tourism industry. olive oil and tobacco and the of income for several islands. There Taking into consideration the latest production of wine is significant to are many mines (marble, bentonite, elections (regional & European), some islands. emery, etc) in the Cyclades as most the political situation has stabilised Livestock farming of sheep is of the islands are rich in minerals. and the projection for tourism in the widespread compared to the limited The renewable energy industry is region is more than promising for number of cattle. A variety of growing fast due to strong daily the coming years. exceptionally high quality cheese sunshine and strong winds in the Tourism has been the key factor in the economy of the Cyclades over the last decade

Source: ELSTAT, Algean Property Research

3 Central Aegean Sea

Tourism

The Cycladic islands are a versatile 177,500 and Santorini: 244,500. airports. They are expected to holiday destination. One can enjoy This was a 24% increase compared serve more than 1.2 million and the cosmopolitan atmosphere, to 2012. Approximately 40% of 1.4 million passengers respectively lively nightlife, local culinary the flights were charter or private in 2014. The tourism potential experiences, romantic sunsets, flights. Additionally, millions of of the region will be unlimited innumerable sandy beaches, people visit the Cycladic islands if some essential conditions are historical sights, water sports and either by boat and yacht or by air met and actions performed. On relaxation. Alternatively, there is via the national airports of Milos, a national level, political stability agro tourism, religious, geological Naxos, Paros and Syros. There and the implementation of reforms as well as medical and therapeutic is an array of well serviced ferry are necessary. Such reforms tourism. connections and an adequate include the improvement of the number of local and international investment procedure and the grant The Cyclades are among the top flights. of a Schengen visa in less than choices for millions of foreign and The forecast for 2014 is 48 hours. On a local level, the Greek visitors for their holidays. favorable. A 62% increase has improvement of tourist infrastructure In 2013, the tourism sector in been recorded in the scheduled - airports, roads, ports, marinas, Greece recorded an increase airline seats on the international integrated resorts and hotel units - of 18% and 15.5% in tourism flights; Mykonos and Santorini and the development of integrated receipts and arrivals respectively, recorded a 85% and 46% increase resorts are essential. These actions hence becoming the key driver for respectively, since a number will attract additional visitors, the deceleration of the economic of airline companies including increase the average stay and recession. Along the same lines, British Airways, Aegean, EasyJet, prolong the holiday season. There the tourism performance of the Transavia, Air Berlin, Condor and is room for improvement in the Cyclades was very positive in Germanwings increased their quality of the region’s hotel units, 2013. scheduled flights to the region. since at present only 5% of the More specifically, 422,000 During the peak season - from upper two categories of country’s international tourists arrived in June to September - two flights per hotel beds are available in the the two airports that welcome hour are planned to arrive and region. international flights -Mykonos: depart from Mykonos and Santorini Country's hotel Beds per Category per Prefecture (%) Country’s hotel Beds per Category in the Cyclades (%) The tourism

1* potential of 8,4%

2* 8,3% the region will

3* 5,9% be unlimited if 4* 5,8% some essential 5* 3,1% Cyclades actions are performed

Source: SETE, Hellenic Chamber of Hotels, Algean Property Research

4 Holiday Home Market

Overview

The Cycladic islands are a crucial –Economy and Real Estate interest in holiday homes in the segment of the Greek holiday home Report, for H2 2013: ‘Phoenix region has been noted since the market as some of the most sought time for Greece?’ source: www. second half of 2013. This revival after locations and residences are algeanproperty.com. Already there is due to the improvement of the found here. Greek and international are some Cycladic islands such Greek economy and the new celebrities and business people as Mykonos, Santorini and Paros legislative framework that provides have bought holiday homes in with an established holiday home a transparent and less bureaucratic the region including Tom Hanks market. The holiday home market investment environment with in Antiparos and Rowan Atkinson in the Cyclades was considerably additional incentives to foreign in Andros. The Greek holiday influenced by the lingering financial investors. home market is a new emerging crisis in Greece during the last six market with outstanding potential years. Nevertheless, a growing

Demand

Interest in the Cycladic holiday 2013 with the strengthening of and Australia. Nevertheless an home market had declined since overseas interest. A revival of the increase in demand from Israeli, the beginning of the Greek market is expected by the end of Lebanese and Egyptian investors is financial crisis. Local demand has 2014. anticipated as they are looking to dwindled due to the tightening of The buyer’s profile is truly diverse benefit from a residence permit for the domestic financial situation. – different nationalities and investments in excess of €250,000. On the other hand, foreign buyers different interests. In the past years had a “wait and see” approach a large number of transactions as they were wary of a further have been completed by a variety drop in property prices or political of international buyers mainly instability furthering the financial coming from Germany, Italy, the crisis. The first encouraging signs Nordic countries and Israel as appeared in the second half of well as Greek emigrants from USA

The buyer’s Steps for buying property in Greece profile is truly diverse 1. Appointing a real estate advisory firm - different 2. Legal and technical due diligence nationalities 3. Preliminary contract and different 4. Deposit of Transfer Tax interests 5. Final contract & registration of property transfer

5 Holiday Home Market

Supply

During the last four years there has rise of property taxes led a number not been any new development of of individuals, mainly Greeks, The existing holiday homes in the region. New to place their properties on the development is not expected to be market. Therefore, the holiday holiday home launched before the second half of homes for sale increased during the 2014. The existing holiday home last year even though the existing market mainly market mainly consists of private stock is still limited especially in residences instead of organised the less developed islands. In consists residential developments; as many the next few years, an increase Greeks had built their holiday in investment activity for holiday of private home in the Cyclades. Residence homes is anticipated, mainly from complexes can be found only in the international buyers. residences more tourism-focused islands such as Mykonos and Paros. Some of the most exclusive holiday homes in terms of quality, location, building, architecture and on-site amenities are located on the Cycladic islands. The lasting financial crisis and the

Insights for Buyers

A. Prior to completion of the agreement the buyer must have obtained a Greek Tax Identification Number (AFM)

B. The importation of funds used to acquire real estate needs to be documented and requires the permission of the Bank of Greece

C. The average transaction cost of purchasing property in Greece ranges between 7-12.5% of the property value. The transaction cost will be higher for new constructions (after 2006), which are subject to VAT

D. The minimum estimated time for the completion of any transaction varies from 1 to 3 months

E. According to the new legal framework, any non-EU investor who spends in excess of €250,000 on Greek real estate is granted a residence permit for him and his family. This is automatically renewable every five years

F. Major banks are willing to offer mortgages to foreign buyers that fulfill the banks requirements

Source: Algean Property Research

6 Holiday Home Market

Prices - Transactions

Holiday home prices in the such as high quality construction, There has been a reluctance of Cyclades have fallen substantially sea views, on-site amenities, short owners to sell in a “buyers’ market“ mainly due to the contraction of distances from the airport and - this keeps down the number of the Greek households’ financial proximity to the beach hold on to transactions despite the increase position. A 30% drop has been their prices even at €10,000/m2. It in interest. Transactions will pick recorded since the beginning of the is worth noting that these high end up during 2014, driven by the crisis. Prices for high-end holiday holiday homes are let at a €30,000 enhanced investment sentiment. It is homes however, have proven to be weekly rate during the summer noteworthy that all the transactions more resilient and in many cases peak season. in 2014 in the region were have held on to the pre-crisis price. According to our research, the completed by foreign buyers. The average asking sale price in average gross yield in the Cyclades the Cyclades ranges from €2,000- ranges between 4-7%. This is 5,000/m2. As the market has not expected to attract buyers who, as recovered yet, outstanding bargains well as a holiday home, are looking even below this price can be for an investment providing them found. On the other hand, unique with a high return through the rental residences with exclusive features of the property in their absence.

The market is Average askingAverage prices asking ofprices high-end of high-end holidayholiday homes homesin the Cyclades in the Cyclades expected to €/ m2 €/week 8.000 12.000 attract buyers 6.000 8.000 who, as well as 4.000

4.000 a holiday home, 2.000

0 0 are looking for an Mykonos Santorini Paros Kea Ios The Cyclades investment Sales Price - left axis Rental Price -right axis Source: Algean Property Research, Seez Travel

Outlook

The Cyclades play an important a retirement home, an investment, framework. The Cycladic holiday role in the Greek holiday home a holiday home or all of the above home market offers numerous market. The unique features combined. Although there are some opportunities to investors from all of the region, and a variety of developed markets in the region, around the world, being that it is a holiday options: ideal climate, the total Cycladic holiday home rising tourist destination. easy accessibility and exclusive market has only recently become residences, prove the region ideal appealing to foreign investors for all types of holiday home looking to benefit from the new buyers; they could be searching for investment - friendly legislative

7 Hospitality Market

Overview

The hospitality business in the growing demand. The hospitality investment friendly framework, offer Cyclades is an emerging market market is based on local brands the opportunity to change from the with untapped capabilities. with only a few international brands “rooms to let” style of tourism to Excluding Mykonos and Santorini, operating in the region. The “rooms attracting millions of visitors who there is a major lack of upper to let” tourism still has a large share prefer more organised vacations in category hotel units in the other of the market. The growing tourism integrated resorts. Cycladic islands. Even in these two potential and the special features of islands the stock does not meet the the region combined with the new Supply

Evolution of Hotel Units and Occupancy Rate in the Cyclades The hotel capacity in the Evolution of Hotel Units and Occupancy Rate in the Cyclades Cyclades has remained almost 1.100 60% constant in the last five years, showing a slight increase of 50% 8.3%. 79 hotel units with nearly 1.000 6,050 beds have been added 40% to the current hotel stock of the 900 region since 2008. It is worth 30% noting that 70.9% of the new hotel units were in the top two 800 20% 2008 2009 2010 2011 2012 2013e categories – 42 four star and 14 Hotel Units - left axis Occupancy Rate - right axis five star new hotel units. The total Source: SETE, Hellenic Chamber of Hotels, Algean Property Research hotel capacity in the Cyclades amounts to 1,033 hotel units with growing tourism demand in sector in the region is the yearly 25,240 rooms and 48,962 beds. these two islands partially low occupancy rate influenced by An interesting conclusion is that justify the above figures and the seasonal operation of many only 3.6% - 37 hotel units - of the underline the opportunity for hotel units. There is a lot of room total hotel capacity belongs to the further development of quality for improvement and expansion upper category, whereas 75% supply units in the other Cycladic in this market, if more activities - 28 hotel units - are located in islands. A substantial part of the are integrated in these resorts, Mykonos and Santorini. 45% of current stock is of old or poor leading to an extension of the the total hotel units of the region quality so a renovation or even season. are located in these two islands. reconstruction is required. The The existing track record and the only drawback for the hospitality

Hotel Capacity in the Cyclades Only 3.6% -37 Hotel Units Hotel Rooms Hotel Beds Number % Number % Number % hotel units- of 1* 161 15,6% 2.330 9,2% 4.575 9,3% 2* 446 43,2% 9.685 38,4% 18.657 38,1% the total hotel 3* 205 19,8% 5.548 22,0% 10.808 22,1% 4* 184 17,8% 5.886 23,3% 11.298 23,1% capacity belong 5* 37 3,6% 1.791 7,1% 3.624 7,4% to the upper Total 1.033 100,0% 25.240 100,0% 48.962 100,0%

Source: SETE, Hellenic Chamber of Hotels, Algean Property Research category

8 Hospitality Market

Perspective - Transactions

Percentage Distribution of Hotel Beds by island The Cycladic hospitality market Percentage Distribution of Hotel Beds by Island is very promising, due to the Amorgos, 0.8% Anafi, 0.05% fact that it offers natural beauty, Andros, 2.9% Antiparos, 0.7% moderate climate, historical, religious and geological , 0.1% Thirasia, 0.05% interests. A few actions should Ios, 4.2% Kea, 0.6% be implemented in order to Kimolos, 0.05% Koufonisi, 0.7% encourage these prospects: Kythnos, 0.4% Milos, 2.6%

A. The improvement of tourist Mykonos, 22.2% Naxos, 12.0% infrastructure; renovation Paros, 12.9% Santorini, 25.7% and/or construction of new airports, ports and roads. Serifos, 0.8% Sikinos, 0.1% B. The development of high Sifnos, 2.0% Sxoinousa, 0.2% quality integrated resorts that Syros, 4.7% Tinos, 4.5% aim to attract tourists with Folegandros, 2.0%

high incomes and to prolong Source: SETE, Hellenic Chamber of Hotels, Algean Property Research the vacation period. It is still common for many hotel To this end, a number of Ammoudaraki, Milos. units to operate only for 3-6 investments by funds have been 3. 105 Tourist and Technical months per year. announced. Some of the most Real Estate Company – C. The enhancement of the important are: development of a 5 star hotel, classic “Sun & Beach” 1. Dolphin Capital Investors – bungalows, spa centre and model with alternative development of an integrated marina in Ios. The budget types of tourism i.e. agro- resort including a 5 star Aman is estimated at €50 million. tourism, religious, historical, resort, 136 holiday homes, Furthermore, COCO-MAT geological, therapeutic thalassotherapy centre and a Hotels and Resorts are and medical and yachting. diving centre in Vroskopos, negotiating the acquisition In these areas, the region Kea. The development cost is of two hotel units while has many advantages and estimated at €60 million. Intercontinental intends to opportunities. 2. Taurus Investment Holdings undertake the management –investment of €100 million of a new integrated resort in for a 5 star hotel with holiday Santorini. homes and spa centre in Outlook

The Cyclades are already necessity for improving the tourist recognised as a tourist destination infrastructure and are working The with great potential. This trend in this direction. The announced together with improved investor developments are expected to combination of sentiment in Greece is expected to attract the interest of investors and increase interest in the hospitality lead to new investments in the growing demand sector in the region. The limited hospitality market of the Cyclades supply of quality hospitality -Further information regarding and limited developments and the demand the Greek Hospitality sector in for new integrated resorts reveal our Economy and Real Estate supply offers a real opportunities in the Cycladic Report, for H2 2013: ‘Phoenix islands that should not be time for Greece?; source: www. real opportunity overlooked. In many cases, the algeanproperty.com authorities have recognised the

9 Central Aegean Sea

Key Locations

Kea Paros Santorini Ios Mykonos

Population 2,446 13,715 15,550 2,024 10,110

Weather Av. Temp: 18 Co 20 Co 20 Co 21 Co 18 Co

Av. Wind: 6 kts 10 kts 12 kts 2 kts 13 kts

1 hour 2.5-5 hours 5-8 hours 4.5-9 hours 3-5 hours Accessibility (from Athens) 45 mins 45 mins 40 mins Athens (ATH) Paros (PAS) Santorini (JTR) Santorini (JTR) Mykonos (JMK) Nearest Airport 1 hour boat ride 35min. fast boat ride Season March - November May - September April - November May - September April - November

Healthcare Regional Clinic Health Center Health Center Regional Clinic Health Center

Culture Historical, Religious Historical, Religious Historical, Geopolitical Historical, Religious International, Local, International, Local, International, Local, International, Local, Social International Quiet Quiet Quiet Quiet Wineries, Dining, Wineries, Nightlife, Dining, Nightlife, Lifestyle Dining, Nightlife Nightlife, Dining Nightlife, Shopping Dining, Shopping Shopping Windsurfing, Windsurfing, Waterskiing, Sailing, Windsurfing, Sports Sailing, Scuba diving Scuba diving, Hiking, Kite Surfing, Windurfing, Cycling Horseback Riding Rock Climbing Kite Surfing

Source: Algean Property Research, Seez Travel

10 Central Aegean Sea

Key Locations

Kea Paros Santorini Ios Mykonos

The next property Has a long established investment destination. A mature market with market; The financial Undiscovered, with Prices are high due outstanding bargains for Established market. instability of the last great potential and Investment to close proximity of actual buyers. A real drop Sale prices for exclusive few years has opened excellent opportunities Athens. Attracts Athe- of prices due to substantial properties remain high. a window of can be found. nian and international existing stock. opportunity for crowds. investment.

Hotel Units 6 136 286 44 170

5* Hotel Units 0 2 16 0 12

4* Hotel Units 1 15 83 2 51

Sale Price1 €2,500-4,500/m2 €2,000-4,500/m2 €3,000-7,000/m2 €2,000-4,000/m2 €3,500-7,500/m2

Rental Price1 €3,000-7,000/week €2,000-6,500/week €5,000-8,000/week €3,000-5,000/week €6,000-11,000/week

Expected Gross Yield1 6,9% 6,3% 6,2% 6,4% 7,4%

1. The above analysis based on 200 comparable properties, gathered from Algean Property research team. The main features of each property are minimum 3 2 bedrooms, a private pool, and high quality fittings in a total area of 150 to 350m

Source: Algean Property Research, Seez Travel

Contact Info

George Eliades Athens Managing Partner of Algean Group 78,Kifisias Avenue, Marousi Skype: george.elias.eliades 15125, Athens, Greece [email protected] T : +30 210 6833 304

London Konstantinos Sideris 19,Portland Place Senior Analyst W1B1PX, London, UK M: +30 697 4118 279 T : +44 (0)20 3608 6917 Skype: ksideris.algeanproperty [email protected] www.algeanproperty.com

This report has been produced by Algean Property for general information purposes only and nothing contained in the material constitutes a recommendation for the purchase or sale of any property, any project or investments related thereto. Information on this report is not intended to provide investment, financial, legal, accounting, medical or tax advice and should not be relied upon in that regard. The intention of this report is not a complete description of the markets or developments to which it refers. Although the report uses information obtained from sources that Algean Property considers reliable, Algean Property does not guarantee their accuracy and any such informa- tion may be incomplete or condensed and Algean Property is under no obligation to issue a correction or clarification should this be the case. Any information of special interest should be obtained through independent verification. Views are subject to change without notice on the basis of additional or new research, new facts or developments. All expressions of opinion herein are subject to change without notice. Algean Property accepts no responsibility or liability for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. The prior written consent of Algean Property is required before this report can be reproduced/ distributed or otherwise referred to in whole or in part. Algean Property, All Rights Reserved.

Cover photograph: sunset reflection by Konstantinos Mavroudis, under a Attribution-ShareAlike 2.0 Generic license 11