Greece to crack down on overtourism and short-term rentals

(Bloomberg) — Greek Prime Minister Kyriakos Mitsotakis announced measures aimed at addressing the negative impact of overtourism as visitors continue to arrive in record numbers in the post-pandemic era.

The government is “very concerned” about the influx of cruise passengers during certain months of the year and will start charging fees, Mitsotakis said Saturday during his annual speech at the Thessaloniki International Fair. It will also raise a climate crisis-related tax on accommodation.

Greece welcomed a record 36.1 million visitors in 2023, while arrivals rose 16% to 11.6 million in the first half of 2024, according to the latest data from the Bank of Greece. The tourism sector contributes around 20% to the economy, making it vital for the nation’s health.

The country will also extend its so-called “Golden Visa” program to investors willing to invest at least 250,000 euros ($277,000) in local startups. Previously, foreigners had to buy a property to obtain the visa.

All passengers arriving at Greek ports will be required to pay a tax, which will be higher on the most popular tourist islands of Santorini and Mykonos. The tax on accommodation will also be increased for the period from April to October, with the proceeds benefiting local communities.

Mitsotakis reiterated his concern about the problem of “overtourism” in some parts of Greece. In an interview with Bloomberg in June, he announced plans to restrict cruise ships visiting the country’s most popular islands starting in 2025.

Short-term rentals have been blamed for fueling the country’s housing crisis, which along with high consumer prices has been at the center of recent political debate.

The government will ban any new short-term rental contracts for at least a year in three main areas of Athens, Mitsotakis said. Homeowners who change their short-term rental contracts to long-term ones will not have to pay rental taxes for three years, as will landlords who decide to rent out their homes instead of keeping them off the market, he said.

Vacation rentals rose by an average of 28% annually between 2019 and 2023, while available short-term rentals doubled over the same period. Meanwhile, hotel accommodations rose by just 3.5% over that period, according to data published in a Grant Thornton report for the country’s Chamber of Hotels released this week.

The government will also launch a new €2 billion programme to be used to reduce the cost of mortgage lending.

Mitsotakis also unveiled a raft of measures on Saturday aimed at easing the cost of living, including a reduction in social security contributions by 1 percentage point in 2025 instead of an earlier plan for a 0.5-point cut.

The Prime Minister also announced, among other things:

“I don’t have a single pocket of reckless spending today,” he said. “Our spending for 2025 is well balanced.”

Greece has already committed to achieving a primary budget surplus — a ratio showing revenues minus expenditure excluding interest payments — of 2.1% of GDP for both 2024 and 2025, up from 1.9% in 2023.

Fiscal discipline is one of the most important criteria for financial markets, and the country’s recent prudent budgetary trajectory was one of the drivers for rating companies to return Greece to investment grade status in 2023, after 13 years in junk status.

“Healthy and rising primary surpluses, coupled with solid nominal growth, will facilitate a further significant reduction in public debt-to-GDP, which is expected to fall below 140% in 2027, from 161.9% in 2023,” DBRS Morningstar said on Friday.

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