Residential Real Estate Market in Thessaloniki 2019
- Nick Vosniakos
- Oct 12, 2019
- 8 min read
Updated: Mar 19, 2024
As we head into the last quarter of 2019 we can draw some conclusions about the course of the real estate market in Thessaloniki. There are several factors that affect property prices such as size, location, renovation, furnishings, elevator and other new ones such as the subway. Rental rates generally continued to rise, turning the city of Thessaloniki into one of the most expensive cities in the country to rent. On the other hand, buying an apartment is still affordable with several renovated apartments coming on the market.
Real estate rentals
For the fourth consecutive year, housing prices in Thessaloniki have kept rising. Monthly rents were up 10% year-over-year, surpassing 2010 levels. In downtown Thessaloniki, in the areas such as Agia Sophia, Aristotelous Square, White Tower, Palia Paralia and Ladadika, studios are priced at 200 – 300 € per month while the one-bedroom and two-bedroom apartments range from 400 – 700 € per month. The center of Thessaloniki has high rental rates due to its proximity to the market and the high networking it has with other areas. Also, the lack of apartments due to the many business premises, shops and offices in the area reduces the supply of available real estate, pushing prices up. The effect of short-term rentals as tourist accommodation is, in turn, a catalyst in the rise in prices, which further reduces the already reduced long-term rental apartments.
At the same price levels, there are areas around the Universities that are affected by the city's university students because of their proximity to them. These areas are Faliro - Agia Triada, Ippokratio, Doxa and Papafi. As for Ano Tuba, Kato Tuba, Triandria and the 40 Eklisies are equally student areas, however, students need to move to universities and the city center using a bus. If tenants want to find a cheaper house to rent, they should move further east to areas like Botsari, Analipsi, Petrou Syndika, and Martiou. There they will be able to find homes that will save them 50 – 70 € in monthly rent compared to the above-mentioned prices in other areas. This is because there is less competition from students in those areas and a bus is required to travel to Universities and downtown. Last but not least are the areas of Rotonda, Kamara and Agios Dimitrios, which are in the center of the city but have cheaper rents as they have a higher crime rate than the other areas.
In the summer of 2019, Passas Real Estate conducted a survey of rental prices in the city of Thessaloniki and created the following map that shows in detail the average rental rates and their standard deviations for each area.
Real Estate Sales
In terms of sales, there is a severe shortage of apartments for sale which is starting to affect prices upwards. The general picture of the market shows that for non-renovated properties that need renovation to be occupied they are priced at 600 - 1000 € / sqm., depending on the area they are in, while the recently renovated and luxurious apartments are priced at 1300 - 2000 € / sqm., in the Municipality of Thessaloniki. The remaining properties are estimated to be at intermediate prices. This year was the second year, after a period of stagnation, in which property prices started to rise, according to Spitogatos Price Index (SPI).
This was caused by the massive purchases of old apartments for the purpose of refurbishing them, at improved prices, and subsequently reselling or renting them. Also, many of the renovations of the old apartments have completed and they have been marketed and positioned for renovated condos at higher prices, offering more benefits. Over time we can see in Thessaloniki that the recovery in real estate prices started in 2018 and it is estimated that it will take another 3 years to reach 2010 prices. This increase in house sales combined with recent tax incentives will initiate construction activity in Thessaloniki with larger projects and complete construction of new buildings.
It is worth noting that the sharp rise in rental prices in housing alone is not enough to trigger construction activity, as construction companies typically build new buildings and sell directly the resulting products, the apartments, to proceed with sufficient liquidity in the next project they undertake. It is not economically viable for such companies to develop buildings and create apartments for rent in the short or long term, as the investment duration is very long and ranges from 20-30 years. This activity, buying for rent, is usually done by investment companies, committing large funds to long-term high annual returns over a longer time horizon, as safe investments.
Property size
The size of a property in square meters affects its commerciality. The market this year has shown that the most popular type of apartment to rent is the one-bedroom apartment, while two-bedroom apartments are preferred for purchase. Usually, when people choose to buy a home to live in they prefer larger spaces and more square meters. Usually, such a purchase can be accompanied by a mortgage loan that allows the purchase of larger spaces. In terms of an apartment purchase as an investment, investors prefer smaller real estate, studios or 1 bedroom apartments, because of their high marketability. Thus, apartments from 25 to 65 square meters are those which have the fastest rental time and are available on the market usually less than 1 month. These apartments are more in quantity and more convenient for renters, who are mainly students and employees looking for something to keep them connected with both the city center and the universities.
The renovation/furnishing factor
It is well known that in the center of Thessaloniki old buildings are dominated by old architecture and landscaping. Lack of elevator, mosaic floor, old windows, and narrow balconies are some of the features of the city center apartment buildings which were built between 1960 and 1980 in their majority. However, in recent years many of these apartments have been completely renovated and have modern features with very high-quality materials. This was due to the new trend of short-term renting of houses through electronic applications/platforms, as well as for flip and resale properties at higher prices.
The same thing is happening in the areas around the universities. There you can find more modern buildings, than those of the center, built 1970 – 1990. They are relatively improved compared to those in the center, but they have also undergone a radical renovation. This means that in the center of Thessaloniki and the Universities the exterior of the buildings may be old, but in the interior, many apartments are radically renovated and many of them are luxurious and furnished. Of course, in these areas, there are more modern buildings, built 1990 – 2010 but these are few and they cause admiration to anyone who passes below as they emerge and stand out for their modern architecture amid the monotony of old.
The above rental rates are for non-refurbished or slightly refurbished apartments, without furniture. If one wants to rent a house that has undergone radical renovations and wants to be fully furnished with electrical appliances, he should be ready to raise his budget around 100 – 150 €. Thus, the factor of renovation and furnishing increases the cost of renting the property for the tenants, as it offers additional benefits and convenience while increasing the annual yield of the property to the owners. However, this year has shown that such properties - depending on the area - are not very commercial and require more time to find a prospective tenant than the cheaper but less affordable properties.
The same is true of buying real estate. Many investors want to buy old real estate and make the apartment the way they want to use it later with the best return they can get. On the other hand, those who buy apartments to live in as residents want to be completely refurbished to modern standards so that they do not have to incur additional costs and work. However, this increases the selling price of real estate. Of course, this year due to the oversupply of renovated apartments some of them are for sale at more affordable prices.
The elevator factor
Whether or not the elevator plays an important role in rental housing. Buildings in Thessaloniki that were built before 1970 had no elevator provision, resulting from their construction and their design a lift cannot be added later to help the tenants climb to the floors. However, some buildings built after 1970 did not include the elevator in construction but provisions were made for it, leaving some space for later installation. After all, one can easily understand that when they go into an elevator that is very modern in comparison with building construction!
Whether or not the lift is capable of affecting both rental and sale prices. In rentals, if we are talking about apartments from the 2nd floor and above, the lack of an elevator can drop the monthly rental price up to 100 € compared to the average market prices of the vicinity where the property is located. This summer the prospective tenants seemed interested in the existence of this provision but its absence did not make them change their decision and not close the apartment they wanted. They have come to terms with this idea as they would gain a reduction in the monthly rent compared to the rented square meters. Of course, the lack of an elevator is not a problem for 1st-floor apartments and does not affect their price. However, apartments on higher floors lose in returns as they cannot compete with other similar apartments in their area as they can be rented at a lower price due to the lack of an elevator.
In sales, the lack of an elevator plays a major role. Buying a property is clearly a more important decision than a rental, with a long-term horizon, as it relates to the right to property and the investment of a large sum of money. If the purchase is for residence, then the lack of an elevator is likely to nullify all interest in buying the apartment and the potential buyer to dismiss the property without a second thought. If it is an investment, then the buyer will buy at a lower price than the average in the area, as he knows that the apartment will not perform well when rented below market prices. So if you want to rent a house in Thessaloniki a good way to reduce the rent, is to compromise and find an apartment without an elevator.
The subway factor
Undoubtedly the Thessaloniki subway, once completed and put into circulation, will significantly affect various sectors of the economy. In addition to facilitating the movement of people and improving traffic conditions, property prices will also be affected. Any property close to subway stops will see its value rise. The effect of this phenomenon on real estate sales has already begun and is slowly affecting rentals. Apartments that are closer to metro stops - within a 5-minute walk - are sold at significantly higher prices than the area's average.
However, the construction of the subway will act as a repressive factor in rising apartment rental prices in downtown Thessaloniki and in areas around universities. This will happen as more remote areas from downtown come into play and will be preferred by prospective tenants who will start looking for something more affordable in other areas. The distance to other downtown areas will not be as great as you can reach the center very quickly by using the metro. Thus, these areas will operate competitively with those of downtown and universities and prevent further increases in apartment rental rates. Apartments that are now rejected in other areas by students - which is the key demographic group that influences rental rates - will be within their reach and not considered to be far away. This phenomenon will start to take effect after the subway is operational. We can say that the subway will redesign the real estate map of the city and change the real estate standards in Thessaloniki.