Buying investment property on Santorini
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There's a very good reason why the jewel of Greece's Cyclades Islands is splashed ubiquitously across brochures, posters and postcards: this unique, upmarket island's natural beauty lives up to the hype and has recently been enticing more and more Brits to buy their very own slice of Santorini.
Officially known as Thira, it's a peaceful, welcoming island steeped in history. Its unusual horseshoe shape is a result of the sheer power of nature - it was formed following a violent volcanic eruption around 3,600 years ago, when the blast caused the island's centre to collapse, creating the famous Caldera (large crater), leading to speculation that it is the legendary lost city of Atlantis.
Encompassing most people's typical Greek island idyll, Santorini is a sight to behold and every picture-postcard photographer's dream: whitewashed villages of twisting, cobble-stoned alleyways cling precipitously to imposing cliff-tops resembling snow-capped mountains, affording stunning views of the lagoon, dotted with luxury yachts bobbing in bays and prestigious cruise-ships at anchor.
According to Nick Dinos from Santorini Selection, the mix of sun, sea, history and food is a large part of the appeal: "This all makes Greece an attractive place for a second home. Santorini's added 'plus' is the mystical Caldera basin - truly a sight that stays in your memory forever."
Ruben Garcia of Iberian International agrees: "The island has a lot to offer: a relaxed lifestyle, low crime rate, cheap cost of living, beautiful beaches and a healthy diet."
Not surprisingly, painters, potters and jewellers have been inspired by the idyllic surroundings to set up studios and shops here. Culture lovers can explore a wealth of monuments and ancient sites, there are beach and water sports galore for the adventurous, and a wide selection of traditional authentic tavernas and bars for night owls, especially in the capital, Fira.
The Santorini property market is another aspect that appeals to all ages and many of Dinos' British clients, especially young couples, have been so impressed that they've made the move permanently: "I've seen some prices rise by as much as 300 per cent in five years - sometimes even 100 per cent in one year."
However, he warns that prices can be high: "I'm always shocked to hear of purchase prices and it seems that there's plenty of room for this trend to continue. Just when I think I've seen the peak, I hear of someone [usually Greek, who understand the local real estate environment and is bullish] paying an unheard of amount for something. Foreigners who don't understand the local environment sometimes feel that Santorini's overpriced."
The type of property is also an issue. "There really isn't too much for sale," Dinos continues. "When something shows up, it's usually scooped up quickly. Much of the land and many homes are kept for children and grandchildren and are rarely put on the market."
Luckily, a couple of projects by both local and foreign developers are providing solutions for eager would-be homebuyers. Dinos represents a couple of these developments, and says new homes start at around €2,500 (£1,600) per square metre of structure, reaching €9,000 (£6,000) or more per square metre on the cliffs. The most popular properties according to him are traditional cave homes located in the desirable cliff towns of Imerovigli, Fira, Firostefani and Oia, a honeymoon hotspot famous for its sunset views, which are nothing less than spectacular - but they don't come cheap: "Prices in these areas can run from €6,000 to €9,000 [£4,000 to £6,000] per square metre - unless you find a bargain."
Property developments on Santorini tend to be in harmony with their natural surroundings. Cliff properties are often unfinished caves or pre-1956 earthquake ruins, and while renovation costs can run higher than average due to the 'man-and-mule' hours required to transfer building materials to the site, the end result can be fantastic - a traditional-style cave home with all the modern amenities, plus magnificent views.
Inland, the most popular area is picturesque Pirgos. Close to the port, airport and Fira, and home to the famous blue-domed church with its white bell-tower - Agios Minas - the symbol of Santorini, Pirgos is a stone's throw away from the beautiful black-sand beaches of Kamari and Perivolos.
According to Garcia, two-bedroom villas, available at around €185,000 (£123,000), are currently the most popular properties, especially in the Kamari area. "Although prices have increased recently, there are still properties that represent exceptional value for money and a sound investment," he says. "Whether you're planning to live here permanently or use your property as a holiday home and rent it out, there are still lots of bargains to be had."
Dinos says that the island's popularity means buying something at market prices today is usually a bargain next year. "Sometimes you can find things below market-value," he explains. "I constantly see people's investments quickly rise between 20 and 50 per cent. This yield usually comes from lack of supply but also arises due to strong demand, mostly from locals trying to reinvest corporate income back into tangible assets, especially after a good tourist season."
Over the last three years, prices have appreciated by ten to 15 per cent according to Garcia, who puts predicted capital growth at around 15 per cent. "I've seen capital growth at around 25 per cent in the last five years," says Dinos "Rental income's a different matter because renting to tourists requires marketing expenses and perhaps a management contract - individual property managers are hard to come by. If you can rent your property to tourists, the return would be much higher than the four per cent you'd get from renting to locals."
Accessibility is also much easier these days. Santorini's international airport receives direct, low-cost charter-flights from the UK; along with regular ferry services and daily high-speed ferries to and from Athens and high-speed catamarans from Crete.
"In the last ten years, the communications and infrastructure have improved remarkably, with the construction of high-standard roads, good transport systems, clean drinking water, new sewage and electrical systems, hospitals and a university," says Garcia. "It's accessible all-year-round, but remember, it's a very small island that slows downs in winter."
Planning laws are tight in some cliff areas and restricted slightly on rural land. Referred to as the 'red zone', 10,000 square metres of land on the cliffs is required to build only a 150-square-metre home with a basement. "The 'red line' determining the start of the cliff-zone was created to protect the aesthetics of the Caldera cliffs," explains Dinos. "Theoretically, basements cannot be used as living space, but everyone does it. Rural land requires 4000 square metres (soon to become 6000) to build 200 square metres of home plus basements."
However, Dinos goes on to warn that if you plan on building multiple units on agricultural or cliff land, homes must have either adjoining basements, cisterns or an arch connecting the properties. And when buying or selling one of two or more homes built on agricultural or cliff land, bear in mind that land cannot be divided into individual plots - only property in town-zoned land can be subdivided.
An established democracy, Greece is a fully-fledged member of the EU, which means that for Europeans the purchasing process is quick and simple. It is also giving Spain a run for its money these days on the British package-holidaymaker front, which is good news for anyone planning to rent out their property. "There's great demand during the summer season and many tour operators put properties on their books after they meet government-regulated requirements for short-term rental," says Garcia.
"The rental process is simple," adds Dinos, "involving only a personal agreement stamped by the local tax office."
He believes that developers can definitely make a profit - if they do their maths properly: "The high-price, zoned-land can minimise yield. Careful consultation with a broker and civil engineer and patience is required to find the perfect property. Supply is low, especially for building plots, meaning you sometimes have to wait for something to pop up," he warns. "When you find your opportunity, grab it quickly or there's a good chance you'll lose it."
First published in Homes Overseas Magazine April 2007.
Some information contained within this article may have changed since it was first published. Homes Overseas strongly advises you to seek current legal and financial advise from a qualified professional.