With the market awaiting the implementation of the three-year 24% VAT suspension on property licensed from 1/1/2006, the demand is for sellers-contractors not to tax, which means that there will be no significant discounts on sale prices, with the stock of unsold properties at around 100,000.
What is certain, however, is that the suspension of VAT until 2023 (including land pledged) relieves the real estate market of a burden, as today the buyer of a house with a building permit of 1/1 / 2006, which is not the main one, is subject to VAT. Conversely, the purchase and sale of immovable property until 31 December 2005 is not subject to VAT. And given that VAT applies to properties that have neither been sold nor rented – in this case the contractor pays self-delivery VAT – the different speeds in the real estate market are increasing because second-hand properties are not subject to VAT. And taking into account that even the auctioned houses do not charge VAT, the tax treatment of the properties for sale is further diversified.
That’s why, according to George Litsas, head of GLP Values, “the suspension of VAT makes the real estate market uniform and stops the developer facing a series of bureaucratic hurdles.”
As the President of the TEE, George Stasinos, has noted, the suspension of 24% VAT on all new real estate is a useful and necessary measure to re-energize the economy and immediately re-launch the construction industry, in particular for small and medium-sized businesses dealing with construction of houses. “The government’s decision, as announced by Prime Minister Kyriakos Mitsotakis, is the product of substantiated proposals designed by the government in collaboration with the market and the TEE. The measure, as announced, has a real impact on society and the economy, not just a small part of it, ”he said.
It is not excluded that rebuilding can be resumed in the last decades, as developers prefer to buy the land rather than build it for consideration, ”says SOLUM Property Solutions Scientific Adviser Bababalos Charalambos.
The introduction of VAT in 2005 by George Alogoskoufis aimed at combating both tax and income tax evasion. However, in the end, due to the crisis, the measure acted as a torpedo for the real estate market. Indicatively, in the five-year period 2003-2007, in Greece the share of housing investment as a percentage of GDP was one of the highest in the European Union and averaged 10%, according to Bank of Greece data. However, since 2007, the second year of VAT on newcomers, since then investment in housing has begun to decline to 3.9% of GDP in 2011 and to fall to 0.6% of GDP in 2017.
However, for a property with a asking price of 100,000 euros, the buyer will only pay a 3% transfer tax, ie the additional cost is 3,000 euros, instead of 24,000 euros, ie the benefit will be 21,000 euros. However, according to real estate market players, the issue is that there will be no … revaluation of the asking prices. This is because it is impossible to compare the asking price of an apartment before and after the measure enters into force. VAT, moreover, as market players report, is a tax resulting from inputs (invoices for materials and subcontractors) and outputs from a contractor resulting from the final value.
In any case, a 24% VAT suspension, coupled with up to a 40% discount on routing costs, is expected to significantly increase the number of building permits. In addition, in a scenario to reduce the VAT to 11%, which had previously been run by the Institute for Economic and Industrial Research (IOBE), over a three-year period:
– the State will have additional tax revenue from EUR 18 million to EUR 72 million,
– the value of GDP will rise to EUR 265 million,
– additional jobs will increase from 912 to 3,650.
According to experts, the benefits will be greater because of the nullification of VAT, and prices on older real estate may decline before 2006.
Author: Dimitris Develegkos