Explore how Greeks are shifting from bank deposits to high-yield investments in real estate and mutual funds amid changing financial landscapes in 2024.
In the realm of Greece’s real estate and investment strategies, 2024 has unveiled a fascinating shift in the financial landscape, as Greeks increasingly eschew traditional bank deposits in favor of more lucrative alternatives. This trend is not merely anecdotal; it is substantiated by compelling data that reveals a burgeoning appetite for various financial products.
As the allure of low bank interest rates continues to diminish, Greeks are gravitating towards both new and time-honored investment vehicles, seeking to optimize the value of their assets. Recent analyses conducted by the OT indicate a pronounced demand for bond mutual funds, alongside a resurgence of interest in “popular” Greek treasury bills. This pivot towards alternative investments is further catalyzed by the quest for higher returns, as savers endeavor to navigate the complexities of a fluctuating economic environment.
In the past year alone, the wealth of Greeks allocated to deposits and financial instruments—such as mutual funds and treasury bills—has surged by approximately €10 billion. The latest data from the Bank of Greece, as of November 2024, reveals that household deposits have reached an impressive €147.78 billion, a notable increase from €144.65 billion recorded in January 2024. This upward trajectory, amounting to an increment of €3.1 billion, is likely to be further amplified, as historical trends suggest a positive seasonal effect each December.
The mutual fund sector has experienced a remarkable inflow of capital, with investments totaling €6.32 billion from January 1 to December 31, 2024. The assets of UCITS (Undertakings for Collective Investment in Transferable Securities) have escalated from €15.786 billion at the beginning of the year to €22.108 billion by year-end, reflecting a staggering growth rate of 40.4%. This shift underscores the propensity of depositors to pivot towards UCITS mutual funds in response to persistently low deposit rates. A closer examination of mutual fund asset distribution reveals that 51.65% is allocated to bonds, 16.08% to alternative investments, 12.81% to equities, and 10.75% to Funds of Funds, with the remainder diversified across other products.
Moreover, the inflow of retail investments into Greek treasury bills is estimated to approach €1 billion, with the current regulatory framework permitting individuals to acquire treasury bills up to €15,000 per VAT number. The appeal of these treasury bills lies in their significantly higher yields compared to traditional time deposits, coupled with the advantageous tax treatment of the resulting coupon, which remains exempt from taxation, unlike interest earned on deposits.
The bond mutual fund sector has similarly witnessed a renaissance, as Greeks increasingly turn away from conventional bank deposits. In response to this demand for enhanced yields, banks have introduced a plethora of new bond funds over the past two years. These offerings include specific duration programs, such as 18 or 24 months, as well as bond mutual funds with maturities extending up to five years, which distribute annual dividends to investors. The allure of these investment vehicles is further accentuated by their accessibility, allowing participation with minimal initial investments, even as low as €1,000—an amount that would yield negligible returns if placed in a standard deposit account.
However, it is imperative to acknowledge the inherent risks associated with mutual funds, as returns are not guaranteed and fluctuate based on market dynamics. Nevertheless, data indicates that in 2024, a significant portion of new inflows—approximately €4 billion out of the total €6.32 billion directed towards mutual funds—was allocated to bond products, including international bonds. Notably, bond offerings with maturities of 18 or 24 months have yielded cumulative returns nearing 3%, while certain corporate and bank-issued dollar-denominated bonds have surpassed 10% yields in 2024. In contrast, bond funds based in Greece have reported cumulative yields of approximately 1% for the year.
The evolving investment landscape in Greece reflects a strategic pivot towards higher-yielding alternatives, as individuals seek to navigate the complexities of a low-interest-rate environment. This trend not only underscores the resilience of Greek investors but also highlights the dynamic nature of the financial markets in which they operate.
