Greek Villas Are Going Begging

A sunny clime, an ocean view, some ancient ruins out back, and the chance to bump into Tom Hanks at your local taverna. If that sounds good, you're in luck. Greek island villas are being marked down by nearly half as the country's debt crisis curbs demand for holiday getaways.

On Mykonos, an Aegean island famed for its all-night beach parties, a three-story, eight-bedroom villa with a swimming pool is listed at $5.3 million, down from the original asking price of $7.2 million. A three-bedroom home on the island of Corfu has been marked down to $975,000, from about $1.8 million. The price tag on a 4,800-square-foot home in Ekali, a wealthy suburb of Athens, has been cut to $2.6 million, a 48 percent discount. "It's tough this year," says Giannis Ploumis, chief executive officer of real estate broker Ploumis Sotiropoulos, which has the Corfu listing. "More properties are on the market and fewer buyers are willing to invest their money."

Greece is in its first recession since 1993 and is counting on a $143 billion bailout from the European Union and the International Monetary Fund to avert a default. Prime Minister George Papandreou, having raised taxes and cut wages for civil servants, is imposing new levies on luxury properties to show voters that the wealthy are helping foot the bill. As part of its austerity program, the government has proposed applying a 2 percent levy on the amount by which a home's value exceeds €5 million ($6.5 million). Owners of homes worth more than €400,000 ($520,000) also face higher property taxes. Such moves are putting pressure on developers and those selling their homes to mark down prices. "It's a scary place to invest in right now," says Mike Braunholtz of Prestige Property Group, a U.K.-based broker that sells real estate in Greece. "Things aren't going to improve until the economic picture becomes clearer."

Prospective buyers are staying on the sidelines for fear that home values could keep falling. It's a reasonable concern, given that the economy is expected to contract by about 4 percent this year and 2.6 percent the next, according to government projections.

With its many islands and ample oceanfront acreage, Greece for years has been a playground for millionaires. Actor Hanks and his wife Rita Wilson, who together produced the film My Big Fat Greek Wedding, own property on the island of Antiparos, according to a spokeswoman for the island's Community Council. The country isn't as fashionable as it used to be, though, says Liam Bailey, head of residential research at Knight Frank in London: "People who have a significant amount of money to invest are simply looking at other places."

Prices for luxury homes elsewhere in southern Europe have held up better than in Greece. They've fallen 8 percent to 10 percent in Spain and are more or less flat in Portugal, while in Italy home prices are actually increasing in some cities.

Athens' drive to boost tax revenues, meanwhile, is driving wealthy Greeks to shop abroad for homes. In April, Greek buyers accounted for 6 percent of all purchases in London for properties costing more than $3 million, according to data compiled by Knight Frank. That is double the average of the past three years.

The Bottom Line: The crisis is driving down property values in Greece. But buyer beware: The government is hiking property taxes to boost revenues.

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