Luxury fly to let properties in the Greek islands are being marked down by as much as 45 percent as the country’s continuing debt crisis causes higher real estate taxes.

A half built villa on Mykonos, an island in the Aegean Sea known for its all beach parties, is being offered by brokers at Athens-based Ploumis Sotiropoulos for €2 million, a reduction of €500,000.

Meanwhile the same firm has a three-bedroom property based on the island of Corfu for €750,000, which is down from an original asking price of €1.4 million.

Mike Braunholtz, a broker at Prestige Property Group, which markets properties on the Greek islands, said: “It’s a scary place to invest right now. Things aren’t going to improve until the economic picture becomes clearer.”

The Government has imposed these higher taxes on luxury properties in an effort to show it is not just ordinary people facing tax rises and wage cuts as the country introduces various austerity packages to combat its debt problems.

Owners of properties worth more than €400,000 face higher real estate taxes and a further levy is put on those valued at €5 million and more.

It means developers and sellers will need to consider lowering prices to attract buyers, according to Ioannis Kaligiannakis, an Athens-based property analyst at Colliers International Hellas.

Greece plans to increase the so-called objective value it places on real estate for tax purposes next year.

The system depends on an assessment of a property’s value based on the area and amenities, rather than on the actual market value, which is usually higher.

“The tax overhaul is certainly a concern for property investors in Greece,” said Liam Bailey, head of residential research at Knight Frank. “These measures specifically target the rich, higher end buyer.”

House prices on the mainland are also falling. Sotiropoulos has a 4,800 square foot villa in Ekali, a wealthy suburb of Athens, where the asking prices have dropped a whopping 48 percent to €2 million.

And according to estimates from the Greek Finance Ministry the economy will contract by about four percent this year and by 2.6 percent in 2011.

According to Bailey buyers are looking elsewhere, especially to countries like France. But in Spain, which is also introducing austerity measures, the real estate market is still in the doldrums despite record low prices.

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