Government plans to reduce VAT – apartment prices going down?

napi.hu: There is no info regarding either the rate or the date of such reduction. Apartment developments are on the back burner not because of a lack of demand but because developers can’t make profits at current price and VAT levels. If they pay 27 per cent VAT at current market prices they can’t even reach the break-even point, developers said to napi.hu. The smaller the rate of VAT reduction, the less its effect on apartment prices will be. A new VAT of 18 per cent would only result in a modest increase of supply while a reduction to 5 per cent would trigger a mere 8-10 per cent decrease of prices – provided that demand starts to increase again.

Apartment renovation is a lucrative business

Napi.hu: Ingatlan.com compared the physical repair and the asking price of almost 300 thousand properties advertised at the end of September. The national average of the price per sq. m. for apartments in a “good”, “average” and “poor” physical repair was HUF 348,000; 281,000 and 258,000, respectively.

Prices are of course stipulated subjectively by the sellers but the results are a good indication of the trends. The data show that apart from the general boom on the property market another good idea is to buy an apartment in a less pristine physical repair and renovate it. One must, of course, consider the costs involved: a fresh coat of paint new flooring cost significantly less than the removal of walls and the renewal of the entire pipeline and electricity system.

VAT of apartment renewal should also be reduced

napi.hu: The Minister for National Economy announced today that the Ministry is looking into the details of a potential reduction of rate of VAT levied for the construction of new apartments. This is an issue of national economic and social interest because a reduction of the currently 27 per cent VAT levied on residential constructions could at last boost the residential market and the number of newly constructed apartments could soon reach 20 thousand units per year.

At the same time, the Association for Residential Construction (TLE) declared that the new VAT rate should, apart from the sales of new apartments, be applied to the contractors’ fees paid by private persons for the construction of new apartments and to apartment renewals contracted by retail clients. The reason for this is that family homes (detached houses) are mainly built under a construction contract and that lawfully contracted apartment renewals are an important contribution to the improvement of the physical repair of the pool of residential properties – and also of the whitening of the construction industry.